Topic: Real Estate
ESTATE PLANNING; REAL ESTATE
By Milton Babirak, JD, LLM | Babirak Carr, PC | Sterling, VA
Many people own real estate at the time of their death. It can be a substantial asset; in some cases, it can be the decedent’s largest asset. What happens to real estate when you die? How does it get transferred on death?
If the title to the real estate is held jointly, the property passes automatically and immediately by operation of law to the surviving joint tenant upon death of one of the joint owners. If real estate is titled with a transfer on death deed, the title passes automatically and immediately by operation of law at the death of the decedent to the designated beneficiary.
If the deed to the property is in the name of the decedent at the time of death and the decedent’s will gives the property to another (devisee), the real property passes directly and immediately to the devisee named in the will. (“Drops like a rock.”) The executor of the decedent’s estate has no control over the real property unless authorized by statute or the will. Frequently however, a will includes boilerplate provisions that may give the executor the power to sell the real estate.
This can create a confusing set of circumstances. Real estate passing under a will may pass directly and immediately to the devisee but the executor may retain the power pursuant to the will to sell the property without the devisee’s consent. The executor may need to sell to generate cash to pay the decedent’s debts, expenses and taxes.
What if the real estate is subject to a mortgage or home equity line of credit at the time of death? The mortgage or lien is a debt of the decedent’s estate but the real property passes immediately to the devisee. Who pays the mortgage or line of credit; the executor or the devisee? What if they don’t pay? The mortgage company can foreclose but what if the proceeds from the foreclosure are insufficient? If the devisees do not pay off the mortgage, the mortgage company can seek payment from the executor since the mortgage is a debt of the decedent. The Virginia Code (Section 64.2-531) provides some protection to the executor in this case but a discussion of this is beyond the scope of this brief article.