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If you are an executor or administrator handling a deceased person’s estate, there will usually be a home or other property to distribute as part of the Probate process. This article explains what happens to a deceased person’s home or property during the estate administration process.
Step 1: Determine ownership of the deceased person’s property
When dealing with a deceased person’s home or property, the first thing to do in the estate administration process is to determine how the property was owned.
If the deceased person was a tenant in a rental property and there is no spouse or dependent continuing to live in the home, it will need to be handed back to the real estate agent once the deceased’s belongings have been removed.
If the deceased person’s home is held jointly by a surviving spouse (joint tenant), the property will, in most cases, transfer to them without the need to go through the courts. A copy of the Death Certificate is generally required as proof of the death. In this case, their living arrangements will generally roll over to their spouse or dependant, who should be able to transfer real estate arrangements and utilities into their name. The deceased person’s share is not regarded as an asset of the estate to be distributed.
However, if the deceased person owned a property with a partner or someone else as ‘tenants in common’, it is different to owning the property jointly. In this case, their share of the property becomes an asset of their estate and will eventually be either sold or transferred to the appropriate beneficiaries for distribution according to the Will or state legislation. The real estate generally needs to be transferred into the executor or administrator’s name first, rather than directly to any beneficiaries. If the deceased had any investment properties, the utilities at those properties will also need to be paid and transferred to a new name also.
On the other hand, if the deceased person was the sole owner of the property, the asset usually forms part of the estate for distribution according to the Will (if one exists). An executor should check the Will to see if it includes specific instructions on the distribution of any real estate. These requests must be upheld as closely as the law permits. It’s important for an executor to ensure that the notice period requirements are met before any distribution of real estate assets. Failing to do so may result in a claim being made against the estate, to which you may be personally liable.
If the deceased person’s property is being rented out, the lease agreement will continue between the tenant and the executor or administrator. If the current lease agreements must be terminated, you will need to provide tenants with the appropriate notice period as per their lease agreement. If the lease agreement ends during the estate administration process, you or the letting agent will need to contact the relevant real estate authority in your state to request their bond to be released.
Step 2: Clear the home and keep register of assets and value
If the deceased person had no partner, spouse, or dependant living with them when they died, their home may be cleared. But before removing any personal belongings, the executor or administrator must take an inventory of the contents to determine the estate’s value.
Considerations should also be made for the mourning family’s emotional connection to the deceased person’s home. The family may want to spend some time in the home before you launch into clearing the property of its contents.
If not already in place, it may be beneficial to take out home and contents insurance on the residence to protect you and all beneficiaries during the administration process, as this can drag on for upwards of six months.
If nobody is living at the property, you should switch off any electrical equipment that is not required, and remove any perishable food from fridges, freezers and other storage areas.
When can I remove items from the deceased person’s home?
It is common for loved ones to want to take particular items of great sentimental value. Despite this, it is important to understand that removing any items from the deceased person’s home cannot be done until everything has been officially recorded and the total value of the estate is known, unless an item is specifically willed to a beneficiary. The deceased person’s items form part of the estate, so removing an item may be considered a crime if it ends up being disputed by other beneficiaries.
The only exception to removing an item from the deceased person’s home is if their Will identifies specific items that are intended for a nominated beneficiary. In this case, it may be easiest if those nominated beneficiaries are invited to collect ONLY the specific items as per the Will, as soon as possible, if they can be easily identified. If this is the case, the beneficiary doesn’t need to wait for the division of the deceased estate.
If any beneficiary collects an item earlier, it is helpful to take a photo of what has been taken and make a record of it. Keeping a record of the beneficiary’s name, date and signature can be helpful if a claim for that item is made later on.
Step 3: Value or sell the deceased real estate (if applicable)
Once you have determined the ownership of the property and cleared the contents, it is time to consider how the deceased person’s real estate will be dealt with. This will depend on the type of ownership and the Will.
If the property is not owned jointly with a surviving spouse or joint tenant, it will need to be valued regardless of whether it is being sold or not. If a property is to be distributed to a beneficiary, its value may become important to help determine an equitable and fair distribution of assets if there is more than one beneficiary.
How to value property of a deceased estate
An executor or administrator will also need to determine the property value for tax purposes, Grant of Probate application and final distribution of assets. As with all assets and liabilities, the value of any property must be determined at the date of death, not at the current date of the appraisal.
To gain an accurate value, you may arrange for a paid appraisal by an independent specialist valuer, or obtain free valuations by three different real estate agents and take the average value. Paying for a professional valuation may be the more accurate option if you anticipate that the property value could become a contentious topic among beneficiaries.
If the beneficiaries decide that the property will be sold, it may be easier to wait until the final sales price, as this will determine the exact amount that will contribute towards the estate value.
What to do with mortgaged property of deceased real estate
If the deceased person’s property is mortgaged, the bank or lender will generally expect the balance of the mortgage to be paid. For this reason, the home will most commonly be sold. The mortgage will then be repaid in full and the remaining proceeds will be distributed in accordance with the terms of the Will.
If the property is sold but the outstanding mortgage cannot be covered, then the other assets of the estate must be sold to repay the debt in full. To mitigate this, the deceased may have taken out mortgage protection insurance to cover the mortgage payments after death. If this was in place, you will need to make a claim now.
It is less common to have a situation where a beneficiary will take ownership of a deceased person’s property that is still mortgaged. If that is the case and if the beneficiary’s circumstances permit, the mortgage will also transfer to the beneficiaries.
How to sell a deceased person’s property
Most commonly, property of a deceased estate will be sold during the administration process. The final transfer of title and land can only happen after a Grant of Probate or Letters of Administration are obtained from the Supreme Court. You can read more about the Probate process in our article What is Grant of Probate and Letters of Administration here.
The executor or administrator can list the property on the market and enter into a contract for sale provided that they are listed as vendors. Special conditions must also be included in the contract to clarify the following:
- That the seller of the property is the executor or administrator of the estate;
- That the Grant of Probate or Letters of Administration must be granted by a specified date for the sale to become conditional (it can take weeks or even months for Grant of Probate applications to be processed); and
- That the Grant of Probate or Letters of Administration must first be granted before settlement of the property can happen.
The buyer has the right to exit from the contract if the Grant of Probate or Letters of Administration has not been obtained within the specified timeframes.
Step 4: How to transfer property ownership of deceased real estate
As mentioned previously, where the deceased person owned a real estate jointly with another surviving person, the property will, in most cases, transfer to the surviving joint owner and does not form part of the deceased estate.
However, if the deceased person owned a property solely or as ‘tenants in common’, it firstly needs to be transferred into the executor or administrator’s name. From there, it forms part of the deceased estate and may either be sold or transferred to the appropriate beneficiaries.
Where real estate must be sold so that the funds can be distributed, you can now sell the property. You will need to keep evidence of the valuations, advertisements and sales contracts as proof that you acted in the best interest of the estate by selling the property at the market rate.
Before any distribution of real estate assets, ensure the notice of intent to distribute has been published. This requirement may differ depending on your state or territory. It allows the opportunity for any creditors, other family members or previous spouses to make a claim if they believe they may be a beneficiary entitled to an inheritance. Failing to do so may result in a claim being made against the estate, to which you may be personally liable.
Once you have determined the deceased estate’s full value; paid all necessary debts and taxes; made the necessary applications to the relevant Supreme Court; and if the relevant notice periods have expired, you will generally be ready to distribute the deceased estate to beneficiaries.
The current property title must show the name of the executor or administrator before it can be transferred to any beneficiaries.
Before submitting your documents to the Land Registry Services, you’ll generally need to determine if stamp duty is payable. To do that, you may need to present the completed forms and documents to the Stamp Duties Division of the Office of State Revenue.
If you need some help at any stage of the estate administration process, our team of estate lawyers are here to help needs. Give us a call on (03) 9917 3388 or click the below button to make an appointment.
This article is not legal advice. You should chat with your solicitor or accountant for specific advice on your personal or financial situation.