PBM
Patricia Bloom-McDonald • Jun 15, 2017

Selling a Home in Probate What You Need to Know

Probate proceedings in Massachusetts are governed by the Massachusetts Uniform Probate Code or MUPC. If there is real estate in the decedent’s estate, the Will may have designated that the property go to a certain heir or other beneficiary, or that the property be sold and the assets distributed equally or in whatever shares the decedent intended.

A decedent may have a Will wherein a personal representative (formerly called Executor) of the estate is designated. If there is no Will, the decedent is deemed intestate and the court will appoint a personal representative, usually a close relative, to administer the estate. In all cases, the probate process must begin within 3 years of the decedent’s date of death.

Massachusetts has a simplified procedure for estates valued at no more than $25,000.00 if the entire estate, less liens and encumbrances, does not exceed the combined value of exempt property, the family allowance, funeral expenses, last illness expenses and the costs of probate.

There is also a formal and an informal probate process. Formal is used if the heirs are disputing the property or distribution of assets, or have other issues. Actions by the personal representative are approved by the judge. Informal probate is conducted by a magistrate with little oversight over the personal representative who will eventually file a sworn statement attesting that the taxes and debts have been paid and property distributed to the heirs in accordance with the Will or the laws of intestacy, (State Statutes) if applicable.

In most cases it is best to use the Formal process for selling real estate in probate.

Power of the Personal Representative to Sell Real Estate

The personal representative may sell real estate by petitioning the court for a “License to Sell”, if the Will does not waive this requirement.  Even if the Will does waive this requirement, it may be wise to petition the Court for a License to Sell if there are disagreements amongst the heirs.  A Petition for a License to Sell allows everyone the opportunity to be heard, grievances to be aired, and protects the Personal Representative from possible personal liability if something goes wrong, by getting that “stamp” of approval from a Judge.

Buyers of Real Estate in Probate

Buyers must be aware that the Personal Representative has a fiduciary obligation under statutory law to get the highest possible price on the sale of the real estate for the heirs of the estate.  Not all real estate agents and not all real estate lawyers will admit to being unfamiliar with the probate process when it comes to selling real estate in a decedent’s estate.  It is wise to only hire a real estate broker and a real estate lawyer who is very familiar with the selling of real estate in the probate process.   Because, if a better price is offered to the Personal Representative and he/she receives a bona fide offer from a Third Party to purchase the real estate for a purchase price higher than the first offer, it must be considered.  In the event the Personal Representative receives a bona fide subsequent offer and the first Buyer cannot or will not match the new offer amount, all deposits made by the first Buyer should promptly be refunded.  Thereafter, all obligations of the Personal Representative and the first Buyer would be voided, without recourse to the parties.

Notwithstanding the foregoing, in the event the Personal Representative receives such an additional bona fide offer to purchase the real estate, he/she should immediately notify the first Buyer in writing of the terms and conditions of said bona fide offer and also forward a name-redacted copy of such bona fide offer to the first Buyer.  The first Buyer should then have five (5) business days after receipt of notice of such subsequent bona fide offer to agree, by written notice to the Personal Representative, to purchase the Property under the same terms and conditions of such subsequent bona fide offer.

Applying for the License

When applying for the License to Sell real estate, the Personal Representative must have a signed Purchase and Sales Agreement from a buyer. The purchase price forms the basis for the real estate license to be issued. If the price is modified afterwards, the personal representative must petition the court for another license. Licenses are for a fixed period of time.

When applying, the Personal Representative must do the following:

  1. 1. Submit the signed purchase and sales agreement; and
  2. 2. Provide an inventory of all the estate’s assets and obtain approval of the heirs; and
  3. 3. Include the terms of the sale, sale price, and description of the property.

The Personal Representative’s obligation to sell at the sales price should have language in the Purchase and Sales Agreement whereby it is contingent upon the Personal Representative obtaining the License to Sell from the court at the absolute highest price possible; that the Personal Representative’s License to Sell granted by the Court is still in effect as of the date of closing and that no higher or better offer comes in before conveyance of the real estate. This can protect the Personal Representative in the event a higher offer does comes in so that the Personal Representative can consider the better offer without risk of being sued by the original buyer, or the heirs at law.

Consult Real Estate Lawyer Patricia Bloom-McDonald

When selling a home in probate, consult and retain someone with experience in such matters. Patricia Bloom-McDonald has been in the legal field and advocates for the elderly in real estate, estate planning and probate matters.  She has been representing the interests of the elderly and their families throughout the Commonwealth for over 25 years. Your initial one-hour consultation is always complimentary.  You can reach her at 508-646-9888 or 781-713-4709 or through her website at www.McBloomLaw.com.

 

The post appeared first on .

Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
Share by: