Probate and the Sale of Real Property – Title Issues

By Lauren S. Josephson –

Buyer Beware – Key Title Issues to Be Aware of as a Result of the Purchase and Sale of Probate Real Property

Factual Example:  Jane Doe, the sole owner of homestead property located in Florida passes away and has three (3) living children, Adam, Benjamin and Claire.  Jane Doe also had one (1) child who predeceased her-Joan, in which Joan had one issue/child-John.  Jane left a Will but the Will has since been lost and a copy cannot be found.  Jane’s three children decide to not seek to establish Jane’s Will into probate and proceed under Florida’s intestacy statute, since the children wrongfully believe that under the intestacy statute they are the only three entitled to an interest in the estate.  The personal representative- Adam, was unaware that his sister, Joan, had a child and, therefore, John was never made aware of his grandmother’s passing and, thus, did not receive a Notice of Administration.  Time passes, and the Court determines the estate has been properly administered and orders probate to be closed.  Subsequently thereafter, the three children decide to sell Jane’s property in which each would receive a 1/3 interest in the proceeds upon sale.  Buyer Dan is successful in submitting an offer for the property and a closing is set to occur in sixty (60) days.  Title company Homes R’ Us runs a general title search and determines the probate proceedings are now closed and determines title to be clear; however, a diligent effort was not made to ensure that no heirs at law remained.  As a result, one week before closing, John became aware of his grandmother’s passing and his entitlement to a percentage of her estate.  John quickly submitted a petition to revoke and reopen probate and a notice of lis pendens.  Upon filing of the foregoing, the closing was put on hold indefinitely until the estate administration was sorted through.

In order for a potential purchaser to avoid being caught up in such a factual scenario, consider the following key points to be aware of and/or take particular note of:

1.    Prior to the sale of any real property that has “been in the family for years” or as a result of an estate sale or otherwise, that probate proceedings are complete with an original or re-established will having been admitted and ordered by the court into probate and/or ensure that no heirs at law remain.

2.    Title Company selection is crucial!  Title depends upon the probate proceedings for its confirmation and validity by virtue of being devised, the will must be admitted to probate and recorded together with a copy of the order admitting it; in the event such a careful review of the probate proceedings is overlooked, it is possible that no possible heirs or issues of heirs (in the event of intestacy) remain.

3.    Ensure that an original will or a petition to establish a lost or destroyed will is filed, and ordered to be admitted and entered into probate.

4.    In the event a will is not properly admitted to probate and recorded by Order of the Court, the probate administration will be intestate.

You may still be asking yourself, what do some of these terms mean?  What can I, as a potential purchaser, do in order to protect my interest?

Ensure Title is Good or Marketable and Consider
Potential Objections to Title.
1.    Engage an attorney to perform the title examination.  An attorney will most likely be able to identify little red herrings in the chain of title that may expose the purchaser to future adverse claims or litigation.

2.    Title Review.  Ensure that the title is examined carefully by reviewing the probate proceedings; and, determine whether the probate proceeding was testate or intestate.

3.    Testate Estate.  If the probate proceeding was testate, review the estate administration docket and contact the clerk to ensure that the following items are included in the probate file as evidence of marketable title devolving from the decedent:

a. The will (the original will and/or a properly re-established will);
b. The order admitting the will to probate;
c. Letters of administration;
d. Federal estate tax clearance; and
e. Order of the closing of the estate and discharging of the personal representative if the estate has been closed.

4.    Intestate Estate.  Ensure the following items are in the probate file:
a.    Petition for letters of administration;
b.    Letters of administration;
c.    Federal estate tax clearance; and
d.    Order of sale.  (When the decedent dies intestate or a power of sale is not provided in the will, the personal representative must secure court per-mission to sell real property.)  The failure to obtain a court order prevents the passage of title.

5.    Determine who is causing the sale of the real property.  For example, if the sale is being conducted by the personal representative of an estate, check the record to make sure notice was properly given to any intestate heirs or beneficiaries under the will in the event of a testate probate sale of property, of any order authorizing or confirming a sale under § 733.613(1), Fla. Stat.; unless the relevant heirs or beneficiaries have executed waivers or consents to the sale of the subject property.

6.    Determine whether the sale involves protected homestead property.  If the property was the decedent’s homestead property, the property will not be subject to devise if the owner is survived by a spouse or minor children.  (With exceptions).  In the event the estate is intestate and involves homestead property, the property will be deemed to be transferred at the time of the owner’s death by operation of law to all persons within the class of “heirs at law.”

7.    Sale when testator survived by spouse.  As of January 1, 1976, under the Florida Probate Code, dower was abolished, and the elective share was created.  As a result, dower rights rarely become a title issue.  However, in the event the sale of the subject real property involves clearing title to real property of a decedent who died before January 1, 1976, dower rights may then pose a title issue.

In the event there is any doubt as to whether probate was testate or intestate, proceed with caution as there may be potential heirs at law entitled to an interest in the property which may result in the property as being unmarketable.

Testate v. Intestate; What is the Difference?
1.    Testate.  A Testate estate involves property properly devised in a will and/or trust.  The distribution of the estate’s assets will be distributed in accordance with the decedent’s will and/or trust.

2.    Intestate. Under Florida law, intestate succession is per stirpes, which means any heirs, including a predeceased heir’s issue or issues, will be entitled to their lawful share stemming from the estate.

3.    Who is an “heir” under Florida’s intestacy statute?  An heir at law is a person who is subject to take under the intestacy statute or under the decedent’s will.

All in all, in the event probate was administered improperly, it is possible, in extenuating circumstances, that probate could be re-opened.  In turn, this could stall the closing of the subject real property and thus leaving all of the parties involved in a precarious situation.  In taking particular caution at the early stages of closing or even prior to executing a sales contract for real property, a purchaser may be able to guard themselves from a potentially emotional and costly outcome.

References:
1. Attorneys’ Title Insurance Fund TN 2.09.03.
2. Fla. Stat. § 733.613(1).
3. Art. X, § 4, Fla. Const. See Fla. Stat. § 732.4015.
4. Heirs, regardless of the fact that certain heirs were expressly mentioned, expressly excluded or not mentioned at all in the will of the decedent.

This Article does not constitute legal advice and may not be relied upon as such.  Each individual’s facts and circumstances are different. If you have any questions regarding your particular situation, please consult with legal counsel.

Salvatori, Wood, Buckel, Carmichael & Lottes
239.552.4100
www.swbcl.com