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Handling Real Property in Estates
by Charles C. KellerSince real property may be the most valuable asset in many decedent's estates and trusts, the law handles its maintenance, transfer, sale, leasing and general administration with great care. The easiest scenario is when one wills realty specifically to a person (devisee). That devisee acquires legal title at the death of the person making the Will (testator). But even this transfer is subject to the powers of the personal representative named to administer the estate (executor or executrix) under the law or order of court. For example, a specific devise may be preempted if sale of the realty is necessary to pay estate debts. Joinder of the specific devisee is required. Many Wills transfer real property by general, non-specific devise, or as part of the residuary gift to children or others. If necessary, sale of such property does not require the joinder of the devisees or approval by court order. The personal representative (executor, or if no Will, the administrator) has many duties regarding realty. The first duty is to take possession, unless an heir or devisee occupies the property at the death of and with the consent of decedent. The executor must secure and protect it, and this means confirming insurance, paying taxes, etc. If rentable, a reasonable attempt to rent it should be made, although any lease beyond one year requires court approval. An executor must collect the rent and account for it. If the property is already under lease, he should notify the tenant to redirect rental payments, assure utilities are being paid, etc. A personal representative who proposes to invest estate funds in buying realty must petition the court for approval. Likewise, mortgaging estate realty requires court approval. Generally, personal representatives do not require court approval to sell real estate. Some Wills are written with a specific power to the executor to sell realty for purposes of administration. Such sale may be by public or private sale. However, the language in the Will authorizing the testator to sell and detailing his authority, even as to bonding, will ordinarily be controlling. Interestingly, the Real Estate Seller Disclosure Law, which requires sellers to disclose in writing any material defects with the property (termites, radon, lead paint, asbestos, etc.) known to him, specifically excludes sales of residential properties by a fiduciary in an estate. A trustee under a trust, whether in a Will (testamentary) or in a separate trust document, may encounter the same issues in dealing with real property. The controlling law is the Probate, Estates and Fiduciaries Code. Although it does not detail a trustee's powers, duties and liabilities, it does provide they shall be the same as those in decedent's or minor's estates. Handling real property in an estate or trust is important and complex enough that it must be done with great care. The interests of devisees and heirs, as well as creditors and claimants, may be competing. That is where the law and the special court (in Pennsylvania, the Orphans Court) steps in to protect the testator's intent and the rights of all other parties. |
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