Why letters testamentary matter.

Earlier this spring Spokane with ranked the 10th hottest real estate market in the US, and Coeur d’ Alene was ranked #16. This is definitely a “Seller’s Market”.

With the lack of supply and the increase in purchase prices one may be motivated to list quickly and capture the increased value of the real property. This is especially true when dealing with the home of a loved one who recently passed away. While the intention of quickly going to market may seem like it is in the best interest of the decedent’s estate and potential beneficiaries, it may not be as simple or quick as one would think. Understanding some basic probate or administration roles and responsibilities can smooth out many potential bumps in the road.

Who sells a house on behalf of the decedent?

Let’s say a homeowner, Pam Beesly, passes away. even though Pam passed away, she is still the titled owner of the house. When it comes time to list and sell the home, Pam can no longer sign the contract to list or to sell the house, so who can? The answer: The estate Administrator or the Personal Representative. It may seem counter intuitive, but not even a surviving spouse is able to sell the entire house (they can only sell their portion of the house – in a community property state). After Pam died, everything she owned belongs to and make up “the Estate of Pam Beesly,” including her house. Unless the terms of the last vesting deed allow ownership interest in the home to pass directly after death, the only person who can sign on behalf of an estate must be given specific authorization to do so by the court, namely the Administrator (where there is no will) or the Personal Representative (where there is a will).

What are letters testamentary?

“Letters Testamentary” or “Letters of Administration” are authorization documents provided by the Court that show the appointment of the Personal Representative or Administrator and their authority to sign on behalf of the Pam’s estate. The Letters are received through the probate process, wherein one person is put in charge by the Court to gather Pam’s assets, notify creditors, pay valid debts and distribute her assets to her beneficiaries. A probate can be opened in circumstance where Pam had a will (testate) or dies without a will (intestate). Probate provide a person with authority to carry out the will or the disposition of assets under statue for the benefit of beneficiaries.

Pam has a will putting me in charge, isn’t that enough?

No. While it’s helpful that Pam executed a Last Will and Testament, simply having the Will, or even just filing the Will with the court, does not give the nominated Personal Representative any authority. In most cases, you must go through the probate process in order to have authority to sell Pam’s house. A “testate probate” is an administration where a valid Will has been executed. An “intestate probate” is an administration where the decedent died without executing a Will, and their Estate is distributed according to the laws of the State of Washington.

Who can petition the court for letters testamentary?

In this discussion, presuming Pam had a valid Will, the person Pam nominated in her Will is the appropriate person to petition the court for Letters Testamentary. If the person nominated is someone other than Pam’s spouse, there may be two Personal Representatives. If there is no Will, the state statute provides a hierarchical list of potential Administrators of the estate. In Washington, the hierarchical list is as follows:

1. The surviving spouse or state registered domestic partner, or such person as he or she may request to have appointed.
2. The next of kin in the following order: (a) child or children; (b) father or mother; (c) brothers or sisters; (d) grandchildren; (e) nephews or nieces.
3. The trustee named by the decedent in an inter vivos trust instrument, testamentary trustee named in the will, guardian of the person or estate of the decedent, or attorney-in-fact appointed by the decedent.
4. One or more of the beneficiaries or transferees of the decedent’s probate or non-probate assets.
5. (a) The director of revenue for those estates having property subject to the provisions of RCW 11.08 (b) The secretary of the department of social and health services for those estates owing debts for long-term care services as defined in RCW 74.39A.008.
6. One or more of the principal creditors.
7. If the persons so entitled shall fail for more than forty days after the death of the decedent to present a petition for Letters of Administration, or there is to the satisfaction of the court no next of kin, as above specified eligible to appointment, or they waive their right, and there are no principal creditor(s), or such creditor(s) waive their right, then the court may appoint a service provider under contract with the office of public guardianship under chapter 2.72 RCW or any suitable person to administer such estate.

How can I be sure probate is necessary?

Not every house is titled in a way that requires a probate. Some property is owned as Joint Tenants With Right of Survivorship, and the property will generally transfer on death. Some states, like Washington, also have a transfer on death deed, where the property transfers to a desired party or perron at the decedent’s death. Both of these occasions do not require a Probate to transfer the real property. That said the property must be transferred to the beneficiary prior to the sale, because all titled sellers are required to sign a valid transfer deed. If you are unsure how the property is titled, it is always best to consult with an attorney.

Bottom line…

While waiting to speak with an attorney or preparing a probate petition and presenting it to a judge may seem like extra work and a missed opportunity during this hot housing market, it is more efficient in both time and money. Going back after the fat and starting a probate and the appointment of a personal representative after the property is listed or under contract for sale, only to find the listing and the sale contract are not valid because of the failure to initiate probate can be very costly. For example, the legal process to fix an error, or worse – having to put your closing on hold in order to petition for Letters Testamentary, can be more costly and time consuming than taking the time to make sure you’re doing it correctly the first time around.