As the executor of an estate, you may have some concerns about how to handle certain situations. Rental properties can pose unique challenges, and having a knowledgeable probate attorney to guide you along is always advised. But here are five things you'll need to consider when dealing with rental property in North Carolina.
How the title was held by the decedent is one of the first things to consider with a rental property because it will affect how the property is sold or transferred. And there are a few ownership types that can make things a little tricky.
If the title was held as tenants-in-common, the decedent's interest in the rental property is subject to probate. What generally happens in this scenario is that the surviving parties who hold the title as tenants-in-common will have the opportunity to buy the remaining interest in the property.
If the surviving parties don't want to buy the remaining interest, or if there is a will that stipulates such, the property will be passed on to the beneficiaries of the deceased.
If the title was held as joint tenancy with right of survivorship, the rental property will not go through probate. The surviving parties will immediately be able to claim all interest in the property.
Location of the Property
In real estate, location really is everything, especially when it comes to probate. If the rental property was in a state different from where the deceased lived, then the executor must go through the probate of that state.
Furthermore, most states have clearly defined rules regarding out-of-state executors and what they're allowed to do and not do. For instance, in North Carolina, out-of-state executors must appoint an agent that lives in the state to accept the legal papers involved. This agent is allowed to be a relative or friend, but they should be familiar with estate laws. Most people choose an attorney or other legal professional to be an agent.
Income Received from the Property
In many situations, the rental property is producing income when the decedent dies. The executor will likely be responsible for collecting the income from the date of the death until the estate has gone through probate. And this income must be documented on a special form.
Form 1041 is required for all estates and certain trusts that earn $600 or more during the tax year. It's also required if the beneficiaries are nonresident aliens. It's crucial that this form be filled out correctly, so executors that are unfamiliar with the requirements should seek legal counsel.
Debts Associated with the Property
As with any property that passes through probate, a rental property will have debts that are associated with it, but with rentals, there may be slightly more to consider. Executors should be aware of these debts that could include the outstanding mortgage, upkeep of the property, insurance, possible liens or judgments, property tax, fees associated with managing and maintaining the property, etc.
As the executor, you'll need to consult the will to see how to handle paying these debts. Most of the time, a will won't state how to pay the mortgage or where the funds should come from. But there might be a clause on paying debts in general.
In some situations, the beneficiaries may continue making payments, especially if the mortgage is due before the executor has had the chance to open an estate checking account for paying the bills. But there could be restrictions that you're not aware of.
Once again, it's best to speak with a probate attorney from a law office like Leon J Teichner & Associates, P.C. who can guide you on paying any debts associated with the estate so the property remains in good standing until the probate proceedings are final.
Selling the Property
If the deceased was the sole owner with no beneficiaries, one option may be to sell the rental property. If there are no specific instructions in the will regarding selling the property, the executor must get permission from the Clerk of Superior Court to do so. This typically requires a filing a petition with the court.Share
14 August 2017
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