Land news, Tips

How a trust can help you sell inherited land fast (and avoid probate)

Old farm barn

Disclaimer: I’m not a lawyer and this is not legal advice nor do we guarantee its accuracy. Consult a real estate attorney to talk about your own situation. 

I recently found out that my family still owns some acreage in Kentucky from part of the farm my great grandparents had up until the 1980s. The farm was in the path of progress and a big box store bought the majority of it around 1990. But they didn’t buy it all. Thankfully, my great grandparents had some good estate planning advice, and put the rest of the acreage into something called a trust. Otherwise, if they had died while still owning the land, equal ownership would have, according to their presumed will, gone to each of their eight children. And what if one of those descendants passed away? It would go to their children, and so on down the family tree. And if they ever wanted to sell? Each “interest” would have to be accounted for – typically meaning, each individual with an ownership interest would typically need to agree to sell and sign the will – more on this later.

You get the point – this can get extremely complex fast…especially with land or any real estate held in a family for a long time.

But first things first — how does the real estate “interest” pass down to the heirs upon someone’s death? It’s typically complicated, and it takes and costs some money. This is because in most cases, real estate owned by individuals who pass away has to go through something called probate.

The probate process

Probate is the legal process to administer the estate of a deceased person (also known as a decedent), meaning – this is how the state determines who inherits what. Probate involves validating decedent’s will, if they had one, and determining the legal heirs of the estate. Don’t get me wrong – this process is very good and very necessary in many cases. Why? Because it ensures that the will of the deceased person is valid and legitimate. What if they had two conflicting wills? What if someone had attempted to forge a will? Probate helps ensure the decedent’s true and documented wishes are followed. 

The standard probate process involves several steps, including:

  1. Filing a petition to open probate: This means someone (often an attorney) will submit a petition to the state probate court to initiate the probate process. The petition can be filed by the executor of the will (if there is one) or by an interested party, such as a beneficiary or a creditor.
  2. Appointing the executor: If the decedent had a will, the court will then appoint the executor named in the will to manage the estate. If there isn’t a will, the court would appoint an administrator to manage the estate.
  3. Notifying “interested” parties: The executor or administrator is responsible for identifying and contacting interested parties, such as the beneficiaries (typically descendants) and creditors, and providing them with information about the probate process.
  4. Inventorying the assets in the estate: The executor or administrator is responsible for identifying and valuing the deceased person’s assets, including real estate, personal property, and financial accounts.
  5. Paying debts and taxes: The executor or administrator is responsible for paying any outstanding debts and taxes owed by the decedent’s estate, as well as any legal fees incurred.
  6. Distributing the assets owned by the estate: Once all the debts and taxes have been paid off, the remaining assets of the estate will be distributed to the beneficiaries or heirs according to the terms of the will or state law.

Now, back to the situation I described above with the eight initial heirs, and the heirs of heirs. What if everyone wanted to sell except for a single stubborn holdout? In most cases, you’re out of luck. That sole holdout can keep that property ransom for as long as they want. This can turn into an absolute mess.

Contrast this with a much better situation: those very wise great grandparents of mine put that remaining acreage from the farm into something called a “trust”.

What is a trust?

A trust can be a very helpful tool for estate planning when you have multiple descendants with real estate, as it can help a person specify exactly how they want their real estate assets to be managed and distributed after death. It can also help you to avoid the probate process, which can be time-consuming and expensive. When you transfer ownership of your real estate assets to a trust, they can be distributed according to the terms of the trust without going through probate court. This can help ensure that your assets are distributed according to your wishes more quickly and efficiently.

Take that example of a sole holdout who doesn’t want to sell. A trust could avoid this. The trustee, or person who manages the trust, can manage it according to the exact wishes of the grantors, or creators of the trust.

A trust can also provide asset protection for your descendants. If your descendants own real estate through a trust, their assets may be protected from creditors, lawsuits, and other legal actions.

One benefit of using a trust for estate planning is that it allows you to specify the terms of distribution more specifically than a will. For example, you can specify that your “real” assets (real estate) be divided equally among your descendants, or you can specify that certain assets be given to certain descendants. You can also specify conditions that must be met before certain assets are distributed, such as requiring that a descendant reach a certain age or meet educational or professional goals.

While creating a trust may take time and money to do it properly with an estate attorney, it can ultimately save you significant cost, time and headaches down the road.

 

Here’s a good article that outlines the different types of trusts and how to create one.

What happens if you’re in a situation where you inherited land and outside of a trust? Well, first off, I’d contact an estate lawyer or real estate attorney for your specific situation. And if the person’s will from which you inherited it hasn’t gone through the probate process, chances are it will need to before you’re able to sell it.

We still buy land from folks who are in this situation, and even work with them to get in touch with an estate attorney who can help clear up title issues and can sometimes even help with the costs. It may take longer for us to be able to buy the land, but we still get it done. There’s always hope.

About Haystack Land Company

We started Haystack Land Company with the core value of “integrity above all else” in mind, and it reaches into everything that we do. Our goal is to do right by our customers, business partners and providers — and to treat them with the care and respect that every individual deserves.

If you own land and you’re interested in selling, please get in touch with us.