When you die, many of your assets may have to go through your state’s probate procedures before they can be distributed to your beneficiaries. Since this process can take several months or even years, it may be financially impractical for your property to remain unoccupied during that time. With an understanding of some simple rules of probate, your estate’s executor, or representative, may rent out property while the probate case is pending.
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Your estate does not automatically go into probate at the moment you die. Instead, someone must file paperwork with the appropriate state court to open your estate’s probate case. Though this process varies by state, courts typically begin by reviewing your will, if you have one, and appointing your estate’s executor or personal representative. This representative is charged by state law with managing your assets during the probate process, ensuring your creditors are properly paid and distributing remaining assets to your beneficiaries. If you leave a will, your executor must also act under its terms, including distributing assets to the beneficiaries named in your will.
The probate court may issue letters testamentary or other legal documents to your estate’s representative as proof he has authority to act on behalf of your estate. This authority allows him to seize control over your probate property, including real estate, and manage it in a manner that is best for your estate. The representative has a fiduciary duty when acting in this role, meaning he must look out for the estate’s best interests rather than his own. The court can remove his authority, replacing him with another representative, if he is caught self-dealing with your probate property.
Some states, like California and Washington, give representatives immediate authority to rent out probate property under their state’s probate laws. However, other states, like Ohio, require your personal representative to ask the court for permission to manage your real estate. If your executor decides it is in your estate’s best interests to rent out property in your probate estate and has permission to do so, he can make all the arrangements for renting it and sign the rental contract all on behalf of your estate. If you had a tenant in place at the time you passed away, he can simply continue the rental arrangement with that tenant, and if you had no tenant in place, your representative can advertise the property for rent and approve a new tenant.
If you do not want your rental real estate tied up in probate or under the management of your representative, there are ways to transfer property outside the probate process. For example, you can hold the property with someone else as joint tenants with rights of survivorship. At your death, the co-owner automatically receives all of your rights to the property without going through probate. You could also place the property in a trust in which a trustee rents it out or otherwise manages it for the benefit of a named beneficiary. Some states, like Kansas, allow you to create a transfer-on-death deed to give your property to a named beneficiary automatically upon your death without giving him property rights during your lifetime. This will allow your property to continue to be managed, including rented out, seamlessly after your death, without the potential impediment of probate.