Probate Real Estate: How Probate Affects Closings

Gorringe’s Probate Valuation service explained
Gorringe’s Probate Valuation service explained

By Christina Kass

Losing a loved one is never easy and can leave you with more questions than answers. If your late relative owned a home, for example, you may be required to venture into the often-confusing world of probate. Selling a home under normal circumstances can be an exercise in patience. However, selling a home in probate may be more complicated than a traditional real estate transaction.

In the event that you lose a loved one and are appointed to make decisions regarding his or her estate, it’s important to be informed so you can avoid making costly mistakes. Each state has its own unique set of probate laws, and there are 78 probate courts in Michigan alone. Here’s a look at some of the details associated with selling a house in probate in Michigan.

What, Exactly, Is Probate?

Simply put, probate is a court-supervised legal process that may be required after someone dies. A surviving family member is given the authority to collect the deceased person’s assets, pay debts and taxes, and transfer assets to the people who inherit them.

The process is intended to carry out a deceased person’s wishes as detailed in their will. If there is no appointed heir when the owner passes, the property is turned over to the courts and then appointed to the closest relative or “executor,” who is responsible for making decisions during the process.

In Michigan, probate is necessary when someone dies while owning property or assets that are listed under their name alone. Specifically, it may be necessary to open a probate case when someone passes away without a will; the decedent had a will, but not a living trust; or the decedent had a living trust, but there are family members or creditors contesting it.

The process is handled by the probate court in which the decedent resided. To get the process started, the beneficiary must file a petition with the probate court, with most probate cases taking between several months and one year.

Before we dive into the steps involved in selling a home in probate, let’s review some common terms regarding probate in general:

  1. Estate – All money and property owned by a particular person, especially at death
  2. Decedent – The person who has passed away and whose estate needs to go through probate court
  3. Beneficiary – One or more individuals who are written in an estate plan and set to receive a certain amount of assets of an estate after someone’s death
  4. Probate Administration – Also known as estate administration, the court-supervised process of verifying and distributing someone’s assets after they pass away
  5. Probate Litigation – Also referred to as estate litigation, this deals with formal legal disputes that arise during the probate process
  6. Last Will and Testament – A legal document stating a person’s final wishes upon his or her death (a will does not avoid probate court)
  7. Personal Representative – A person who is legally appointed to oversee the administration of an individual’s estate
  8. Living Trust – A legal document established to provide funding for beneficiaries throughout the course of their life (a living trust avoids probate court)

What Are the Types of Probate in Michigan?

There are several different types of probate proceedings in Michigan, and the type for which the deceased individual’s estate qualifies depends on several factors. Here’s a breakdown of the various proceedings:

  • Formal Probate – Typically used when an estate is large, complex, or contested by multiple parties, this entails formal probate court proceedings to award the assets of an estate. The administration can be supervised or unsupervised, with supervised probate involving more steps and requiring a judge to review and approve any activities that impact the estate.
  • Informal Probate – Rather than involving a probate judge, this process is completed in front of a probate registrar. Therefore, it is a less costly option with fewer steps than formal probate proceedings. A personal representative still administers the estate and handles related paperwork. It’s often recommended to use a probate lawyer for help through this process.
  • Probate for Small Estates – This is a type of probate for which only estates valued at or below $25,000 are eligible. Due to its simplified nature, this process may bypass the probate court proceedings almost entirely.
  • Intestate Succession – When a person dies without a will, the probate court distributes their assets to the closest family members. Michigan’s intestacy laws dictate who inherits assets and the order of inheritance rights.
  • Ancillary Probate – This occurs when probate is completed outside of the decedent’s primary state of residence. It typically requires a lawyer in the state in which the probate is being executed.

What Are the Steps in the Michigan Probate Process?

While the probate process can be complex and time-consuming, knowing what to expect at each stage can help you navigate the process. In general, there are four steps to Michigan probate that you’ll need to complete:

  1. Appoint a personal representative – This person is responsible for settling the descendant’s estate. He or she is named in the will or by the probate court.
  2. Assemble the assets – The personal representative will gather, inventory, and safeguard the decedent’s assets, including real estate and bank accounts, and have them appraised if necessary.
  3. Settle the debts – All of the decedent’s outstanding debts, taxes, funeral expenses, general administration expenses, and creditors must be paid after their death.
  4. Distribute the remaining assets – The remaining assets that are left over after the descendant dies are distributed according to the will. If there’s no will, the assets are distributed according to Michigan law.

How Is a Title to Real Property Transferred in Probate?

You may be anxious to complete the sale of your loved one’s home, but keep in mind that it’s necessary to obtain approval first. If the estate requires probate, it’s illegal to do anything with the assets until you’ve been legally appointed as the executor or personal representative for the estate by the probate court. Even if you were named the executor in the will, you’ll need approval before listing the house.

Once you file a petition with the probate court, you’ll need to clear the estate’s debts before the title can be transferred to heirs. During this administrative phase, all assets, including personal belongings, real property, bank accounts, and other investments, are inventoried. Debts such as taxes, mortgages, and car loans must be paid before the judge will approve the release of the assets.

If the home is the only remaining asset that can pay the mortgage, it may need to be sold under the personal representative or the court’s supervision to satisfy the debt. When the house is sold, the transfer process is completed with court approval and the new homeowners have the title recorded in their name. The title is transferred by recording the new title with the county recorder’s office.

Is It Possible to Avoid Probate in Michigan?

Most estates need to go through probate in Michigan, but the state does allow for a simplified version of probate when the value of the estate is less than $15,000 after all funeral and burial costs are paid. If the small estate doesn’t contain any real property and is less than $15,000, probate isn’t necessary at all.

There are other instances when Michigan probate laws do not require certain assets to go through probate court. In fact, it’s possible to avoid probate with an estate if it is placed in its entirety into a Michigan revocable living trust. The trust becomes the owner of the property instead of the person, who is now the trustee, and the named beneficiaries become the new trustees once the person is deceased.

Probate may also be avoided in the case of assets that are jointly owned. For example, if a house is jointly owned by a husband and wife, the house would go directly to the wife, without the need for probate, upon the husband’s death. In addition, assets with beneficiary designations, including retirement accounts with designated beneficiaries listed, do not require probate.

How Can Vanguard Title Help You Navigate the Probate Process?

At Vanguard Title, we’ve served the Michigan real estate and lending communities for nearly three decades. Plus, we understand the complex nature of closing on a home sold in probate. Our knowledgeable attorneys, customer service, and escrow teams are ready to answer your questions and partner with you every step of the way to your successful closing.

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