Inheriting a home can be can be nerve-wrecking both in a good and bad way. If this is happening to you or someone you know you have reached the right destination.
Courts and probates can get confusing.. And I dislike confusing. “Simplicity is key”.
In this article we will be breaking down a step by step process in plain ENGLISH of what the probate process looks like in Florida and actionable steps to take.
Before we jump into these steps just a quick fun fact..
10% of the homes we purchase are Inherited or in the Probate Process so this is perfectly normal. Best of all there is a Legal simple way out.
I Just Inherited a Home in Florida… Now What?
After reading this article, you will be an expert on the 4 STEPS of the Miami Florida Probate Process.
- Let the court know by filing a petition or a notice
- Give a notice to all creditors. (Banks if any mortgages etc.)
- Know all the debt “If any” that the descendant had because it will need to be paid
- Reach out to all the beneficiaries and get them on the same page to sell or do something with the home
So I know that Probate involves court and stuff… But what is it?
Like I said before, feeling confused is one of the worst feelings. It is like going to school on your first day and everyone has all the right school materials but you.
Hahah He’s that man.
Anyways enough play, let’s get down to it.
PROBATE is the process of the court supervising the distribution of an asset (Home), by finding out who the correct beneficiaries are (through a will). The process also includes how they distribute the Money while making sure that everyone who is owed (credit cards, mortgages, taxes etc) is paid first.
Ok that was a long way to describe it.. Lets try a shorter way.
PROBATE is the court determining who gets the asset, money and who needs to be paid.
Now that we understand what it means.. Let’s talk about Executors.
That sounds like a scary word but an executor is actually an extremely important person in this process. So to break it down.. In Step 1 You file the petition to the court. In that petition process, you appoint an Executor.
The Executor is a person, usually a close family member, friend, or someone trustworthy. Their job is to sort out the finances of the the person who passed away, researching and seeing what debt is owed, including taxes.
I Keep Seeing the Word “Will” When it Comes to Probates.. What does it Mean?
Before I talk about it I know most of you are visual. This is what an example looks like…
Granted there are TONS of ways to write a Will.
A Will is a property protection document that allows you to protect the property when someone becomes deceased and allows you pass down to chosen Heirs.
Doing a probate with a will and without one is quite the different process.
- Probate with a will: In Step 1 of the process the Will gets presented to the court. And if there are beneficiaries and personal representative are listed accurately than the probate process is smooth. The will gets submitted to the court, Judge takes a look and approves.
- Probate Without a Will: To make it simple. Without a will the court follows the Florida laws on who is entitled to receive the assets of the deceased.
Here is a link of the the exact Florida Law.
As an example, a common scenario is that if it is a Husband and Wife situation, the house will go to the spouse upon death if no will is in place.
Another example is if there are children involved that are direct descendants of the deceased, then the house is split equally amongst them.
This process is what is called Intestacy Law. And each state has their own set of laws.
The Bottom Line is without a will the State of Florida has got you covered but on their terms. If you want your assets to be left to specific people, then you have to put it on a will.
HOW LONG DOES THIS PROBATE THING TAKE?!
The short and sweet answer is 4-6 weeks!
Now the long nerdy answer is also important to know…
There are a ton of variables that make up the speed of the process.
In Florida there is a standard that if within 3 months of the creditors being notified the process is started, there is a high chance that it can be done within 4-6 weeks.
If AFTER that, in can take up to 4-6 Months!
Don’t shoot the messenger. I’m just the informant here.
If I have the Home Can I sell it before Probate is Granted?
That’s an awesome question..
The answer is NO.
BUT what you can do is list sell it to a buyer and put it under contract. With that contract you can then present it to the judge, and once it is approved, it can close right away.
In Broward County we were able to do a probate earlier this year exactly that way. Based on experience, Broward County is typically a bit quicker than Miami.
So Let’s Say You Have a Few Siblings That Are Entitled to The Asset’s.. How does that work?
Here are a few ways that we have seen our clients get the probate done successfully:
- Buyout Option: So if one of you want to sell and the other wants to keep it, “Buying” out the sibling would be a great idea. If it is 2 siblings than it is a 50/50 split. So what you can do is get an appraisal to determine the home value, then pay 50% of that. We have some good appraisers we work with in South Florida, so if you need help with that, shoot us an email. (email@example.com)
- Promissory Note: Let’s assume you don’t have all the money to pay that 50% up front. Not everyone carries around thousands in Cash to buy an extra home. This is ninja trick by the way. What you can do is finance the 50% by getting an appraisal and make monthly payments for the rest. This is a win win. This is what one looks like…
- Sell and Split the Profits: I like this one because profits are always fun. What happens here is the siblings agree to sell at a price, find a local Miami buyer, Sell, collect money, and split it equally. I made a video of how to value your home.. You can check it out here.
- Rent and Split the Profits: So if you are looking for some passive cash-flow, renting it out might be a great option. Finding the rental value can be a little tricky, so let me show you a few screenshots on how to do it. Let’s say you have a 3 bed 2 bath home in West Miami.
Go to Zillow.com and put in the area. Click on the Purple Dots (Those are the rentals) and find the ones most similar to your home. As you can see one of them is for $2,300 and the other is for $3,000. What you have to be aware of is the condition of the property. If you are planning to rent in Miami Fl you have to make sure that you understand what is renting and in what shape it is in.
- Suit for Partition: This is the one that would be best, but never happens. If the siblings CANNOT agree on selling, renting, price etc., then this is what you do. You basically have to sue the sibling and involve the court to sell it. This includes attorney fees and broker fees, which ultimately mean less profit for you.
- Other Options: I have heard of siblings giving the home to charities, or giving it to family members in need. You can get creative here as long as you have the cooperation of everyone involved.
What about paying Uncle Sam Taxes if we Sell the house
Lucky for you, in Florida there is an Inheritance Tax law that says if you Inherit a home in Florida you don’t have to worry about paying the taxes.
I thought that is kinda neat, no need to pay to play if you inherit a home in Miami Fl 🙂
Now here is the deal there is a bit of a plot twist when it comes to paying taxes when you sell.
So there is this fancy thing called “Stepped Up Basis”.
This is a law that saves people who inherited a home a lot of money on taxes. When you sell a regular home that you have not inherited, you get what is called a “Capital Gain” tax. Nowadays Capital Gain tax is typically between 15-23% on the GAIN of the property.
Here is an example of how the Stepped Up Basis Tax Rule works.
Susan inherits a home in Westchester area of Miami Fl. Her family bought it for $120k in 1991 and Susan inherited it in 2018. She then gets an appraisal and it comes back at a value of $350k at the time of death in 2018.
Susan decides to sell the house in December 2019 at $400k.
She will only get taxed for the $50k gain. (Difference between the sale price of $400k and upon death appraisal price of $350k).
To clarify this whole tax thing….
It is a state tax and, although Florida has that wonderful rule about not paying inheritance tax, there is a minor plot twist. If the person who passed away lived in another state but the property was in Florida, then the taxes might apply for that specific state.
The six states that have that inheritance tax rule are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Gotta Love Florida 🙂
Here are some special “Tricky” cases and how to solve them
If there is a mortgage on the home, make sure to look out for these things.
Also I wrote an article that goes in depth about mortgages… Check it out here.
- Due on Sale Clause: This is a statement on the note that says the loan can be called or owed back to the bank once title transfers to a different person. Each bank has their own set of procedures, so giving them a call and asking them might help.
- Reverse Mortgage: A reverse mortgage is a program that allows homeowners age 62 or over to pull out the equity in their home and not make monthly payments. If this is the case, and it goes through probate process, then this is what you do. When there is a reverse mortgage, the title changes names automatically, triggering the loan to be due. So if you decide to sell, you must contact the bank servicer and notify them of the decision. Now the good thing is the law states that the heirs of the property can KEEP all the equity from the sale, if any. If would like to keep the property, then you must refinance or pay the bank in full of what is owed.
- Underwater Properties: If the house is underwater and it is owed more than it is worth, the best thing to do is a Short sale. This is when you or someone on the seller’s behalf negotiates with the bank to get them to accept a cash price in today’s market value. As long as the probate process has started, a short sale can still be done. It usually takes a while for bank to approve, so you can start them simultaneously and it should work out 🙂
- Mortgage Paid off by the Estate: This means that if you sell the estate and there is a mortgage, the money goes to payoff the mortgage.. Then to your pocket
ALRIGHT ALRIGHT.. I get this whole Probate thing.
But my house needs repairs should I do it?
This was a probate home that we bought in Northwest Miami this year that needed a TON of work. So when it comes to this, it all depends on how much time and money you want to put into it.
To get the most out of the home you will need to do repairs. This means hiring a contractor, getting quotes, having them do the work and making sure it is done correctly. This takes TIME, ENERGY, and MONEY. If you have that and a bit of patience then doing the work might be a good fit for you!
Selling the home as-is to a Miami Investor was what this seller chose. He was an older guy who inherited it and just wanted to get the money and live his life.
We had his back and were able to do it in about 3 months 😉
We have learned the
- 4 Step Process to successfully doing a probate in Florida in lighting speed
- What a PROBATE exactly is
- How having a Will can affect the process and what to do if you don’t have one
- How long the process ACTUALLY takes
- What to do with SIBLINGS in both worst and best case scenarios
- Tax laws for Florida probate that will save you THOUSANDS $$
- What to look out for when there is a Mortgage
Inheriting a home can be a something that might scare you. And we like to inform all of our clients that work with us about the Truth to how it actually works. Either way we encourage you to reach out to a probate attorney to get your specific questions answered.
Hope this article was helpful and gave you a simple breath a fresh air on this Topic!