The Importance of Probating an Estate When Real Property Is Inherited.

​We have a lot of clients who contact us to assist in estate administration whose loved one actually passed away years ago.  The reason they call after years have passed?  Real estate. 
 
In North Carolina, when you die, real property passes to your heirs automatically unless you have contrary instructions in your will.  A lot of North Carolinians pass away without a will, and their real property just naturally passes to their spouse or to their children.  There is nothing improper about this transfer.  However, for purposes of selling the property later or getting a mortgage on the property, most sellers and lenders want the property to go through probate first.  To explain the reason why, a few basics of probate administration should be explained first.
 
Unfortunately, when you die, your debts do not die with you!  Your creditors can recover monies owed to them from your estate assets.  Guess what type of asset is the largest and most valuable?  You guessed it!  Real estate.  In some instances, real property has to be sold in order to pay the deceased’s creditors.  The remaining assets are then divvied up to the deceased’s beneficiaries.  After notice is given to creditors of the deceased’s passing, the creditors only have 90 days to make a claim.  If they miss the 90-day window, they cannot collect (with few exceptions).
 
When an estate is not probated, creditors are bypassed.  They do not have an opportunity to collect monies owed to them through the sale of real property.  This is somewhat of a hanging cloud over the title to the property because creditors have the right to do so at any point.  Where notice of estate administration has not been given, the 90-day clock has not started.  In fact, a creditor has the ability to come forward and qualify as personal representative of the deceased’s estate to ensure they get paid!  A mortgage lender or buyer of real property does not want to buy the real estate if there is a chance that a creditor could come along later and force the sell of the property to satisfy the deceased’s debts. 
 
Also, probating the estate ensures that the new owners of the real property are correctly identified.  How does the mortgage lender or buyer of the real property know that the person seeking the loan/seeking to sell the property is the true owner?  Sure, they may have their father’s deed and death certificate, for example, but how do they know that the deceased father only had one kid?  Maybe he had four, which means they own the property equally (each has a 25% interest in the real estate).  One kid cannot sell or mortgage the property without the others agreeing, because only one kid owns only 25% of the property.  Since property passes naturally at death, kids may inherit property and not even know it!  This happens more often when there are grandchildren who inherit, or maybe someone who owns inherited property dies themselves without a will, and it passes outside of probate once again.  A mortgage lender or seller wants to see a piece of paper identifying the deceased property owner’s heirs, and they get that through probate.
 
Thus, the long and short of it is, if real estate is involved, you should probate the estate.  It may not be necessary now, but in a few years, when repairs need to be made on the property, or if you retire and want to downsize, you’ll end up having to probate the estate anyway.  It is a lot easier to do upon the death of the decedent than years later.