Probate Code Amendments and Related Real Estate Issues Code... · PROBATE CODE AMENDMENTS AND...

PROBATE CODE AMENDMENTS

AND RELATED REAL ESTATE ISSUES

Amy W. McCulloch, Probate Judge

Richland County Probate Court

NEW PROBATE CODE (TITLE 62)

As of January 1, 2014, the “new” probate code became effective along with revised probate forms.

Revised Forms (related to real property): Deed of Distribution (Form 400)/Inventory and Appraisement (Form 350)/Petition for Sale of Real Property (Form 430)

Revised Code (as it may relate to real property): 62-1-201(14): added definition of fair market value

62-3-911: partition process outlined in detail

62-3-1303: to commence an action for court authority to sell real property, the change clarifies that a petition must be filed rather than an application

62-3-1303 and 62-3-1305: clarifies who must be served with Summons and Petition to Sell Real Estate

TERMINOLOGY

Estate: includes the property of the decedent, trust, or other person whose affairs are subject to the Probate Code as originally constituted and as it exists from time to time during administration.

Fair Market Value: the price that property would sell for on the open market that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

Foreign Personal Representative: a PR of another jurisdiction (significant with ancillary administration)

Personal Representative (PR): includes executor, administrator, successor PR, special administrator, and persons who perform substantially the same function under the law governing their status

Probate Estate: decedent’s property passing under the decedent’s Will plus the decedent’s property passing by intestacy

OVERVIEW OF PROBATE COURT’S JURISDICTION

Probate Court has exclusive original jurisdiction over estates (including Will contests and determination of property) and determination of heirs and successors.

Circuit Court also has jurisdiction to determine heirs and successors as necessary to resolve real estate matters, including partition, quiet title, and other actions pending in circuit court. (§ 62-1-302(a)(1))

Probate Court has exclusive original jurisdiction over protective proceedings and guardianship proceedings (Conservatorships/Guardianships)

Probate Court has exclusive original jurisdiction over trusts, issuance of marriage licenses, and involuntary commitment

JURISDICTION

Probate Court has concurrent jurisdiction with circuit court over matters involving wrongful death or survival actions, but the jurisdiction only extends to the approval of settlements and allocation of settlement proceeds among parties involved in the estate.

Probate court has concurrent jurisdiction with family court over issues relating to paternity, common law marriage, and interpretation of marital agreements in connection with an estate, trust, or G/C matter

REMOVAL

The following matters must be removed to circuit court if a motion to remove is filed within the applicable timeframe: Formal proceedings for probate of Will and appointment of PR

Construction of Wills

Actions to try title concerning property in which the estate of a decedent or protected person asserts an interest

Trust matters

Actions concerning gifts made under the SC UGMA

(§ 62-1-302(d))

ESTATES

THE SIGNIFICANCE OF HOW PROPERTY

IS TITLED

When a decedent jointly owns property, the property is treated as a tenancy in common unless the deed or Will expressly provides for a right of survivorship.

If the Will or deed specifically uses “as joint tenants with right of survivorship and not as tenants in common,” the property is conclusively considered as joint tenants with right of survivorship. (§ 62-2-804)

How the Inventory and Appraisement is completed is contingent upon how the real property is titled.

INVENTORY & APPRAISEMENT


Schedule A: Real Estate -Address of Property -TMS# -Fair Market Value -Value of Decedent’s Interest


Schedule E: Jointly Owned Property -Reporting is OPTIONAL -Real Estate that is “Joint Tenants w/ Right of Survivorship”


Encumbrances: -Mortgages -Liens -Judgments, etc.

STATUS OF REAL PROPERTY

IMMEDIATELY FOLLOWING DEATH

Upon the decedent’s death, his/her real property devolves to the devisee or heir whom is entitled to receive the property. (§ 62-3-101)

HOWEVER, this rule is subject to the personal representative’s right and discretion to take control of the property if necessary for purposes of administration. (Ex. Satisfying creditor claims and exempt property rights). (§ 62-3-709).

If the PR takes possession, the PR is responsible for paying taxes and maintaining/managing the property. (§ 62-3-709)

STATUS OF REAL PROPERTY

IMMEDIATELY FOLLOWING DEATH

As a practical matter, title to real property should not be transferred until sufficient time has passed to determine heirs/devisees; to resolve any potential challenges to the Will; to determine creditor claims and their validity; to determine exempt property or omitted spouse/child claim; and any other potential challenges that may affect an heir’s/devisee’s interest in the real property.

POWERS OF A PERSONAL REPRESENTATIVE

Until the PR’s appointment is terminated, the PR has the same power over title to property of the estate that an absolute owner would have. However, the property is considered in trust for the benefit of creditors and other interested parties. (§ 62-3-711(a))

A PR does not have authority to sell real property of the estate unless authorized by the decedent’s Will. (§ 62-3-711(b)) Upon petitioning the court for permission, the Court may authorize the sale. (§ 62-3-1302)

OBTAINING PERMISSION TO SELL

If the PR needs to sell, he must file a Summons and Petition to Sell Real Property with the Court. The following parties must be served (§ 62-3-1303 and § 62-3-1305): (1) PR (if not the petitioner);

(2) Heirs (intestacy or time to challenge Will has not expired);

(3) Devisees (testacy)

(4) Creditor

(5) Other interested party effected by the sale and any other person the Court may require

The parties have 30 days to answer (same rules as SCRCP). (§ 62-3-1309)


Requirements in addition to Summons and Petition: Lis Pendens

Valuation of Property (Market Analysis or Formal Appraisal) (court discretion)

Proof of Service/Acceptance of Service

Consent to Sell/Consent to Sell for “No Less Than” (if able to obtain)

Contract to Sell/Listing Agreement (if available)

Appointment of a GAL (if a minor or incapacitated adult is involved; court may require the GAL to be an attorney for this type of transaction)

PETITION FOR SALE OF REAL PROPERTY


Depending on the Court, if a market analysis is provided, the parties are served, the parties waive notice of hearing, and written consents are filed by each interested person, the Court may waive the need for a hearing.

Following the issuance of an Order by the Court, the PR may sell the real property for an amount not less than the amount approved by the Court.

Following the sale of the real property (and after costs are paid), the PR will receive the funds unless the Court directed otherwise (§ 62-3-1309).

The Court may require a copy of the HUD-1 to be filed.

COMPENSATION OF PERSONAL REPRESENTATIVE

At the end of the estate administration, the PR is entitled to compensation equal to 5% of the personal property plus the sales proceeds of real property, unless the PR was the buyer of the real property. (§ 62-3-719)

DEED OF DISTRIBUTION

The PR’s execution of a Deed of Distribution constitutes a release of the PR’s power over the title to the real property. (§ 62-3-907)

The (1) purchaser for value of real property from a distributee who has received a Deed of Distribution OR (2) a purchaser from a PR who receives a Deed of Distribution takes title free of rights of any interested party to the estate and incurs no personal liability, regardless of whether the distribution was proper or authorized by the Court. (§ 62-3-910).

A creditor or interested person would potentially have recourse against the PR but not the purchaser.

DEED OF DISTRIBUTION

PRIVATE AGREEMENTS

Heirs/Devisees may agree among themselves to alter interests, shares, or amounts to which they are entitled under the Decedent’s Will or under the laws of intestacy, whichever applies. (§ 62-3-912)

The right to enter into a private agreement is subject to the rights of creditors and taxing authorities.

TO SELL OR DEED?

Probate attorneys and PR’s are often faced with making the decision to sell the real property during the estate administration or to deed out the property by way of Deed of Distribution to the heirs/devisees and let them handle the sale outside of Probate.

CONSIDERATIONS

How long until the property will be sold? The sale of real property often takes an extended amount of time and

the probate courts typically begin applying pressure to the PR to close after one year from date of death or after the creditor claim period (depending which comes later.) PRs and attorneys often get frustrated with the probate courts but they do not understand that the courts must report to SC Court Administration. If an Estate is open for longer than a year, an Interim Accounting must be filed and additional Interim Accountings must be filed for each subsequent year that the Estate is open. If the process is going to take a while, it may be easier to handle the sale outside of probate to keep the Court out of the process.

CONSIDERATIONS

How many heirs/devisees would receive the property by Deed of Distribution? If the sale occurs while the property is within the Estate, only the

PR(s) must execute the required documents. If the sale occurs outside of the probate process and a deed of distribution is filed, all grantees must execute the required documents. This may be problematic if there are going to be numerous individuals inheriting the property.

CONSIDERATIONS

Are all interested parties in agreement with the sale? If they are in agreement, it may be just as easy to Petition the Court

and file Consents as it is to Deed out the property and sell it outside of probate. However, if someone is unwilling to sell or unsure of market value, it may be easier to handle it in the Estate and let the Court settle the matter at a hearing.

PARTITION

If two or more heirs/devisees are entitled to distribution of undivided interests in real property, the PR or interested person may petition the court to make partition. Requirements: Summons, Petition, and Proof of Service

Two results: 1) Partition in kind if it can be fairly and equitably partitioned in

kind

2) If not, Court will direct PR to sell and distribute proceeds

For more details on Partition actions, see § 62-3-911.

ANCILLARY ADMINISTRATION

Two types of Ancillary Administration. The Probate Court can issue: A Certified Packet-if the Decedent owned real estate in another county in

South Carolina; or

An Exemplified Packet-if the Decedent owned real estate out of state.

In South Carolina, the certified packets will be required for ancillary administration in the county where the real property is located.


If the decedent died out of state and the estate is being probated out of state, but the decedent owned property in “X” county in South Carolina, the foreign PR may file with the SC probate court authenticated copies of his appointment and of the Will, if any. (§ 62-4-204)

If the foreign PR files authenticated copies of his appointment and the Will, if any, the PR may exercise the same power over assets (including real property) as a local PR. (§ 62-4-205) This applies if no administration or application/petition is pending

in this state.


For a nonresident decedent, a proceeding under Article 3 is the appropriate procedure for ancillary administration related to real property. Therefore, if a foreign PR has the authority of a local PR and does not have the authority to sell, a Petition to Sell Real Estate must be filed and the procedure as discussed previously must be followed. (§ 62-4-407)


Example: If foreign PR files authenticated copy of appointment, the PR has the power of a local PR. However, if the PR does not have authority to sell real estate pursuant to a Will, he would not have authority to sell without filing the Petition to Sell Real Estate because a local PR would also not have authority to sell.

PETITION TO DETERMINE HEIRS

There is a ten (10) year time limitation after a decedent’s death to commence a proceeding for appointment of a PR or to probate a Will. After ten (10) years, it is incontestable that the decedent left no Will and the estate passes by intestate succession. (§ 62-3-108)

Typically, an attorney will proceed with a Summons and Petition to Determine Heirs. The challenge is finding the heirs after the passage of such a long amount of time. If an heir predeceased the decedent, the predeceased heirs’ issue will need to be located. If an heir passed away after the decedent, the decedent’s interest passes to the heir’s estate which may not have been opened or may need to be re-opened.

CONSERVATORSHIPS

SELLING REAL PROPERTY

If a minor or an incapacitated person owns real property, a Conservator will need to be appointed to either consent to the sale or to initiate the action to sell the real estate. If the Conservator is going to initiate the action, the Conservator must get court approval by filing a Petition to Sell Real Property along with a Summons, filing fees, and Proof of Delivery. (§ 62-5-424)

If a Conservator is already appointed, the Conservator must always get permission from the Court to sell unless the Order appointing the Conservator provided authority.

SELLING REAL PROPERTY

When a Conservator is appointed, the letters of conservatorship must be filed and recorded in the office where conveyances of real estate are recorded in the county in which the protected person resides and in the counties in which the protected person owns real property. (§ 62-5-421)

Probate Courts also have jurisdiction to approve the sale of real property by an attorney-in-fact operating under a durable power of attorney if the POA document does not grant the attorney-in-fact authority to sell real property. (§ 62-5-503)


If the Conservator needs to sell, he must file a Summons and Petition to Sell Real Property with the Court. The following parties must be served : (1) Conservator (if not the petitioner);

(2) Minor or Incapacitated Person’s GAL (if applicable);

(3) Heirs/Devisees (if known and at the Court’s discretion);

(4) Other interested parties effected by the sale and any other person the Court may require

The parties have 30 days to answer (same rules as SCRCP). (§ 62-3-1309)


Requirements in addition to Summons and Petition: Lis Pendens

Valuation of Property (Market Analysis or Formal Appraisal) (court discretion)

Proof of Service/Acceptance of Service

Consent to Sell/Consent to Sell for “No Less Than” (if able to obtain)

Contract to Sell/Listing Agreement (if available)

Court may require a GAL to be appointed

CONTACT INFO

Amy W. McCulloch, Probate Judge

Richland County Probate Court

1701 Main Street, Room 207

P.O. Box 192

Columbia, SC 29202

Phone: 803-576-1961

www.rcgov.us

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