Five Things a Realtor Should Know When Representing an Executor of an Estate
1. The Will Alone Is Not Enough!
You might think that an original Will naming your client as the Executor of his or her parent’s estate would be the best evidence that you could possibly have to show that he or she has the authority to sign your Listing Agreement and to sell the family home. Unfortunately, this is not the case. In order to have legal authority to sell real estate or otherwise dispose of a decedent’s property, an Executor who is named in the decedent’s Will must also “qualify” with the Surrogate’s Office. This process cannot be completed in less than ten (10) days following the decedent’s date of death. The document which actually proves that your client has, in fact, been duly appointed to handle the Estate is not the Last Will & Testament itself, but an Executor’s Short Certificate which is issued by the Surrogate’s Court in the County where the decedent resided at the time of his or his or her death. When representing an estate always ask to see a Short Certificate with a raised seal. You should also ask for a copy of the deed to be sure that there are no other interested parties, such as owners of Life Rights, Joint Owners, Remaindermen, or surviving Tenants In Common.
2. Where There is No Will, There is Still a Way
The fact that your client’s mother passed away without a Will does not prevent her from having or obtaining authority to sell her mother’s home. If other relevant family members cooperate, she can qualify to be appointed as the Administratrix of her mother’s Estate nearly as quickly as if she had been named as Executrix in her mother’s Will. If your client is the only surviving child or the closest living blood relation to the decedent, she will merely need to demonstrate this to the County Surrogate’s Office, provide a Death Certificate, a List of Assets, and a Fiduciary Bond. If your client has siblings or if she is seeking to represent the Estate of a more distant relative, she will also need to obtain renunciations from anyone of equal or closer degree of kinship to the decedent.
3. Where There Is a Will, There Could Still be Challenges
Although the Last Will & Testament is not sufficient to prove that your client is the duly appointed Executor, you should still review it. This is because the decedent’s Last Will and Testament could impose restrictions or prohibitions which may need to be addressed before any sale can be consummated. For example, the decedent’s Will could provide a Life Estate to a surviving loved one or it could provide someone with an Option to buy the property or a Right of First Refusal. In such a case, it would be imperative to secure the relevant beneficiary’s written consent before listing the house for sale. Ultimately, the buyer’s title company will require signatures of any such beneficiary and the Executor on the deed as well as on all other closing documents.
4. The Tax Man Cometh
Most clients don’t realize it, but when a New Jersey resident dies, the State instantly and automatically holds a lien against all real estate owned by the Decedent and located in New Jersey. It is the Executor’s obligation to remove that lien even when the “Estate” is very modest and the beneficiaries are children and/or other close relatives. If this is not done before closing, the State’s lien could delay closing or require that a significant escrow to be held. Estates where the value of all assets is under $675,000.00 (for decedents who passed in 2016 or earlier) and where all of the beneficiaries are children (or other Class “A” beneficiaries), we can have the lien removed simply by filing an L-9 form. For larger estates or those with non-Class A beneficiaries, however, it is essential that we work with the client early on to prepare and file the necessary IT-R, NJ Estate Tax and/or Federal Estate Tax 706 forms.
5. Realtors Commissions and Attorney’s Fees are Generally Tax Deductible and can be Extremely Valuable
By retaining the services of a qualified realtor and attorney who will work together as a team, personal representatives (i.e., Executors or Administrators) of an Estate can greatly reduce the “troubles , pains and risks” which could otherwise jeopardize or greatly delay the house sale process. With proper representation, even insolvent estates can be sold and the Executor/Administrator can be paid a commission. For larger, taxable estates, realtor’s commissions and legal fees are deductible, thereby reducing the net tax owed to the State or Federal Government. When our firm is retained, we are happy to assist our clients regarding post closing issues such as legally mandated child support searches for any beneficiary receiving more than $2,000.00, the drafting and filing of Release & Refunding Bonds which insulate the Executor from personal liability, preparation of accountings when required or desired, preparation of Waivers of Accounting when all beneficiaries wish to expedite estate settlement, etc. In the past, we have literally saved clients tens of thousands of dollars of potential liability by simply cautioning Executors not to have house sale proceeds checks issued directly to the heirs before all essential estate “close-out” procedures have been followed. From the first CMA, which is needed to establish property value for tax purposes, to the filing of the last estate “close out” documents needed to protect the Executor from personal liability, qualified realtors and attorneys working as a “team” are truly a cost-effective resource to clients selling estate properties.