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Sale of Real Estate, Mortgages, and Non-Publicly Traded Stock in Probate:
In most probates, real estate is transferred directly to the heirs. For example, Mom, a widow, dies and wills her house to her two adult children, Brother and Sister. Brother and Sister take title to the real estate thru the probate process and then put the house up for sale. Or, Sister decides she wants the house, makes a deal with Brother, and Sister takes title to the house through the probate process. Transferring the real estate directly to the heir in the probate process is easy.
But, occasionally, real estate must be sold during the probate process. Perhaps, in the above example, Brother and Sister don't get along and neither wants the house. They don't want to take title to the house jointly and then have to sell it. Or, perhaps, the estate had debts to pay and the house has to be sold to pay off creditors. Or, perhaps, there are several heirs and it makes more sense to sell the house during probate and distribute the cash. Then the house must be sold through the probate process.
Selling real estate through the probate process involves either jumping through various procedural hoops to obtain court approval of the sale, OR, jumping through various procedural hoops to sell the real estate without court approval if the personal representative of the estate is given full authority to administer the estate under the Independent Administration of Estates Act, N.R.S. 143.300 et. seq.
Finally, if the net value of the estate is no more than $100,000, the cheaper faster, "Set Aside Without Administration" process can be used if the real estate is passed directly to the heirs, but can NOT be used if the real estate is sold during the probate process. For example, in the case discussed above, suppose Mom's house is worth $170,000 and there is a $110,000 mortgage and Mom has $30,000 in a bank account. The net value of the estate is the $60,000 in equity in the house plus the $30,000 bank account, making the estate worth $90,000. The house can be set aside to Brother and Sister using the cheap, fast "Set Aside Without Administration" process in most cases. But if Brother and Sister want the house sold through the probate process, it will be necessary to undertake the more expensive "Summary Administration" procedure. (These two different procedures are explained on the "Probate" page of this website.
Likewise, the sale of publicly traded investments, such as stocks and bonds and mutual funds is very simple during the probate process and can even be accomplished in the "Set Aside Without Administration" in many cases. However, in the very rare situation where a decedent held non-publicly traded stock or some other non-publicly traded investment such as a mortgage in which the decedent loaned out the money, the sale of this assets will be a complicated matter during the probate process and this complication can be avoided if the asset can be given directly to the heirs in the probate process.
If your probate will involve one of these sales, our fees for doing the probate MAY be higher than the standard fees set out on our probate page. Or, they may not be higher depending on the situation.
The Independent Administration of Estates Act:
Until the 2011 passage Independent Administration of Estates Acts, the standard way to sell real estate during a probate was that the property would be put up for sale. When an acceptable offer was received, a Notice of Sale would be published and a date set for the sale during a probate court session. Any interested person could come to court and bid a higher amount. The Court would then confirm either the original sale contract or the sale to the higher bidder. The cost of publishing the Notice of Sale depends on the county. In Clark County, home to Las Vegas, the cost of publishing notice usually runs about $135. In some other counties publications costs are much higher.
From 2011 on, under the Independent Administration of Estate Act, N.R.S. 143.300 et. seq., there is a procedure under which the court approval of the sale of real estate can be avoided if all heirs consent to this. If this procedure is used, careful attention should be paid to the statute and to the statutory forms for notice, etc., as the Court is giving up traditional supervisory powers to protect heirs and the Court will insist that the unsupervised sale of real estate be done exactly according to statute.
In my experience, if all heirs are in agreement to the sale of real estate and all heirs will quickly sign any necessary consent forms, the Independent Administration of Estates Act can allow the sale of real estate as soon as a personal representative (Executor or Administrator) is appointed. This can save about a month over the traditional procedure of a Court supervised sale. However, if not all heirs are in agreement, or if not all heirs actually will quickly sign all paperwork requested of them, the Independent Administration of Estates Act procedure does not necessarily save much time. And, if any heir wants, that heir can demand that the Court approval of the sale be required.
In conclusion, the 2011 Independent Administration of Estates Act can simplify the sale of real estate when all heirs are both cooperative and willing to quickly sign documents. But without both of these conditions, the Independent Administration of Estates Act is less useful.
Details of Independent Administration of Estate Act:
Once the personal representative is appointed as Administrator or Executor with Full Authority Under the Independent Administration of Estates Act, sale can be made by having the personal representative send notice of a proposed sale to all heirs. The notice form is set out in N.R.S. 143.805 and is called a Notice of Proposed Action. Basically the notice sets forth the sales terms and contains forms for the recipient to sign indicating either consent or opposition. If no action is taken by the recipient within 15 days consent is assumed. If any heir timely objects the sale cannot go forward without court action.
Delay in Sale of Real Estate Without or Without Independent Administration of Estates Act:
To sell the real estate either with Court approval or without under the Independent Administration of Estates Act notice of sale at a particular price and time and usually involving a particular buyer is given. If that sale falls through, or if, after a home inspection the buyer demands a lower price to cover the cost of repairing discovered defects, the process of seeking Court Approval, or giving Notice to all heirs under the Independent Administration of Estates Act must be re-done.
Special Problems when the Estate Holds Real Estate:
We have encountered two types of problems when the an estate holds real estate. The first problem involves insurance coverage if there is property damage while the estate hold the real estate. Suppose a person lives in a house they own and dies. None of the heirs moves into the house and it sits empty awaiting a probate court order or a sale through the probate process. Now suppose the water heater or some pipe springs a leak. Since no one is living in the house this might not be noticed until extensive water damage has happened. At this point the heirs call the insurance company which tries to get out paying by saying things such as:
- Your claim illustrates why we charge more to insure unoccupied property, you didn't pay a higher premium so we won't pay you, or
- You didn't tell us the property owner died; the policy doesn't cover the estate, or
- The leak happened because a pipe froze and you didn't heat the house properly, or
- We cover the damage from a sudden flood, not from continual neglect of a leak.
My advice is that if you are the heir to real estate, call the insurance company as soon as the person dies, advise them of the death of the person and ask what you need to do to insure continued coverage of the real estate. Make sure you document any advice from the insurance company or agent by getting it in writing. You need something in writing from the insurance company saying that they know that the owner died and that coverage will continue. Oral promises don't work. Then, if at all possible, do a daily inspection of the property if it is vacant either by yourself or see if there is someone you can trust to do a daily inspection even if you have to pay them. Vacant property is more vulnerable to destruction whether it is by squatters or a leak which if caught in time would be no problem but if neglected can cause huge damage.