Death and Taxes: Estate Sales, & Probate Issues in Massachusetts Real Estate Practice
by Rich Vetstein October 13, 2011
Benjamin Franklin once said famously that “the only certainties in life are death and taxes.” That’s certainly true in real estate practice. Today, I will go over how real estate passes when the owner dies – with a will or without a will – and how the probate process affects the real estate process.
Tenancy by the Entirety
Married couples in Massachusetts are recommended to hold real estate as “tenants by the entirety.” It’s a special form of joint tenancy for married couples. If one spouse dies, the surviving spouse succeeds to full ownership of the property, by-passing probate. By law, tenants by the entirety share equally in the control, management and rights to receive income from the property. Property cannot be “partitioned” or split in a tenancy by the entirety. A tenancy by the entirety also provides some creditor protection in case one spouse gets into financial distress as creditors cannot lien the non-debtor spouse’s interest in the property.
Death Without A Will—Intestacy Laws
Clients were often surprised to learn that when one spouse dies without a will, the law of intestacy in Massachusetts leaves a portion of the estate to the surviving spouse and a portion to the decedent’s children. This is changing as of January 2012 with Massachusetts’ adoption of the Uniform Probate Code. Under the “UPC,” if a spouse with children of the marriage dies, the surviving spouse gets the entire estate, including the marital home. If there’s no surviving “descendant,” or child, of the deceased, but a surviving parent of the deceased, the surviving spouse gets the first $200,000 of the estate, plus 75% of the balance of the estate. The laws of inheritance remains rather complicated to explain fully here. A good guide to the new Uniform Probate Code can be found here.
Death With A Will — Testate
The basic rule is that if the owner dies with a will, which includes a power to sell real estate, the executor or administrator of the estate is generally authorized to convey title without further authority from the probate court. If the will does not provide for a power of sale, the executor will have to obtain a license to sell from the probate court. If a final account has been filed and allowed, the heirs (in the case of an intestacy) or devisees (in the case of a will) are able to convey title.
If the title examination turns up an interest that is not accounted for by a probate, and the death of the interested party occurred less than 25 years ago, a probate may need to be opened to convey the property. Deaths over 25 years old where a special affidavit has been filed, may pass without probate.
Federal & Massachusetts Estate Tax Liens
A federal and state estate tax lien arises immediately upon death and attaches at the time of death to the gross estate of the decedent. The gross estate includes all property, wherever situated, that the decedent owned or in which the decedent had an interest at the time of death. The threshold for federal gross estates for 2011 and 2012 is $5 Million for an individual and $10 Million for a couple. The Massachusetts estate threshold remains at $1 Million. For estates below those amounts, the executor must merely file a simple Affidavit of No Estate Tax Due. Estates over the thresholds must file the more complicated release of lien from the Department of Revenue which requires the filing of a full estate tax return.
Bought A House? Get A Will!
After every closing, I always have a chat with my new buyers about setting up a will and other estate planning vehicles. It’s very important on all fronts. For those in the MetroWest area, I recommend Julie McQuade Ladimer, Esq. of Framingham (email: email@example.com; Tel: (508) 788-0028. For those on the South Shore, I recommend Danielle G. Van Ess, Esq. in Hingham (email: firstname.lastname@example.org; Tel: 781.740.0848. Both are very good and well regarded estate planning attorneys.
Richard D. Vetstein, Esq. is an experienced real estate attorney who’s handled over 1,000 closings. Please contact him if you need legal assistance purchasing residential or commercial real estate.