Mom and Dad are now gone, but they left the house. What is going to happen? What do you do? The answer is: “It depends.” But on what? It depends upon how the property is titled. Different titling requires different procedures.
If the home is in Mom or Dad’s sole name, then the property will need to be probated. In order to transfer the property to the beneficiaries or heirs or to sell the property, the probate court must appoint a personal representative who will have the authority to sign the deed.
If Mom or Dad has a will, the home or the proceeds of the sale of the home would get distributed in accordance with the will. If there is no will, it would get distributed in accordance with Michigan statute to Mom or Dad’s heirs which would usually be the children and the descendants of any deceased children.
In the instance of the property being in both Mom and Dad’s name, you don’t have to probate both estates. All you need to do is to probate the estate of the survivor of Mom and Dad. And when the deed is prepared to transfer the property, just attach to the deed, a certified copy of the death certificate of the parent who was first to die.
If you own the home with Mom or Dad or maybe with your siblings too, there may be a different procedure. For example, if the property is owned as joint tenants with survivorship, each of the joint owners has the right to use the property for their lifetime and then if they survive their joint owners, the survivor owns the entire property. I call this the lifetime lotto. If you survive all of your joint owners, you get it all.
With joint ownership, there is nothing that you absolutely need to do upon the death of Mom or Dad or any other joint owner. As a matter of law, all of the surviving joint owners are now owners of the property. If you want to have the tax bill in the proper name, just inform your local assessor who may require a copy of the death certificate to remove the deceased persons’ name from the tax bills.
In such an event, you do not need to “clear” Mom or Dad’s name off the title or off the deed. All you need to do is to attach a copy of the death certificate(s) to the deed when you sell or transfer the property to someone else. This will provide clear chain of title to the transferee(s).
There is a different procedure if you own the home as tenants in common with Mom and/or Dad. With tenants in common property, each of the co-owners own an undivided percentage interest in the home. For example, if Mom named you and your two siblings as tenants in common of the property with her, you all would own an undivided 25% interest in that property. You each could sell your share, transfer it or even possibly mortgage it. Upon the death of any co-owner, including Mom or Dad, his or her interest would need to be probated.
This comes as a shock to many children. I regularly see quit claim deeds drafted by Mom or Dad in an attempt to avoid probate. Unfortunately, Mom or Dad drafted the quit claim deed as tenants in common, instead of joint ownership. They used the wrong words or did not include the proper language for joint ownership. Upon Mom or Dad’s death, their estate now owns their interest in the home which has to be probated. In the example above, Mom’s 25% interest would have to go through probate.
Over the years, I have probated many fractional interests in homes when Mom or Dad had tried to save legal fees by doing their own estate planning by drafting their own Quit Claim Deed. Mom or Dad thought they had drafted a joint ownership deed when in fact the they drafted a tenants in common deed. This can be very costly to the family to go through the probate process for just part of the home. This could have been avoided had Mom or Dad spent the $100 or $200 to have a properly drafted deed and with the appropriate language.
Although many attempt to use joint ownership deeds for estate planning purposes, that may not always be the wisest move. If a joint ownership deed is recorded during your lifetime, the home may avoid probate, but it may also create a variety of other issues. With joint ownership, you always have the risks that one or more of your joint owners would get mad, get greedy, get sick, get sued or die in the wrong order, then the property would not be distributed in accordance with your wishes.
If you have a quit claim deed sitting in your dresser drawer with instructions to record it after your death, there may be some legal issues with the chain of title. In order for the deed to be legally enforceable, it needs to be delivered during your lifetime. Delivery means either handing it to another person who is named on the deed as a new owner or recording it at the register of deeds office. Without any delivery during your lifetime, there legally is no transfer in ownership of your home during your lifetime. The deed expires with you.
This could raise some difficulty when your family wants to sell the home to a third party after your death. A buyer may see the difference between the date of the deed and the date of recording and they may want some evidence or verification that that deed was in fact delivered during your lifetime. If your family does not have that verification, in spite of the deed, they may still have to probate the home to get clear title.
I rarely use quit claim deeds not only for the reasons explained above, but also because whenever you use a quit claim deed, you could cut off any title insurance that you may have on the property.
A better option would be to have a properly drafted trust based estate plan and use a warranty deed to transfer you home to your trust. You avoid probate after your death and protect your title insurance for your loved ones.
If you do not want to incur the expense of a trust and still avoid probate with the real estate, a better option than a joint ownership quit claim deed is a type of transfer on death deed called a ladybird deed. With this type of deed you are the owner and maintain control of the property during your lifetime. You can sell it, transfer it or do whatever you want. However, upon your death, all your family needs to do is record your death certificate at the county register of deeds office. This gives evidence to all the world that you are no longer an owner of the property. Your successors named in the transfer on death deed are now the owners of your home.
Whenever you do a deed, especially when you attempt to do a deed for estate planning purposes, consult with a qualified estate planning professional or you may end up with unintended results. Otherwise your property might not go to whom you want, when you want or the way you want.
By: Matthew M. Wallace, CPA, JD
Published edited September 11, 2011 in The Times Herald newspaper, Port Huron, Michigan as: Home, sweet home Properly worded deed will ensure keeping roof over your heir’s heads