What Every Realtor Needs to Know about Estate Planning & Probate and Selling Homes out of Probate

1. Stagnaro, Saba & Patterson, Co., L.P.A.
All rights reserved.

2.  Full Service Law Firm
◦ Wills, Trusts, Estate Planning & Administration
◦ Real Estate
◦ Corporate
◦ General Litigation
 Business Disputes
 Personal Injury And Medical Malpractice
 Labor And Employment Law
 Creditor’s Rights
◦ Real Estate Tax Valuation Appeals
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3. This presentation is offered for informational
use only. Nothing in this presentation
constitutes legal advice and an attorney-
client relationship with either the presenter
or Stagnaro, Saba & Patterson, Co. L.P.A. is
not created with any member of the
audience based solely upon this
presentation. Estate planning tips and
techniques should be used only after
personal consultation as each individual and
each situation is different.

4.  Probate is the judicial process of collecting
assets, paying bills and transferring assets.

5. Your Probate Estate
Includes assets in your
name that do not have a
beneficiary designation,
such as:
• Property in Single
Name
• Tenants in Common
• Community Property
Your Taxable Estate
(May differ from state
to federal level)
Includes your probate
estate + “non-probate”
estate such as:
• Life Insurance
• Payable on Death
• Transfer on Death
• Retirement Plans
• Revocable Trusts
• Joint Property With
Rights of Survivorship
Assets Outside
Your Estate
Includes assets you do
not own or control, such
as:
• Irrevocable Trusts
• Irrevocable Life
Insurance Trusts (ILITs)
• Annual Exclusion Gifts

6. Provide Notice
of Admission
Appoint
Executor
File Inventory
& Notices
Pay Valid Claims;
Deny Others
File Estate Tax
Return (s)
File Final &
Distributive
Account(s)
Executor
Released
Admit Will
to Probate

7. ◦ Can be costly and time-consuming in
some states
◦ Usually requires attorney’s services
◦ Is a public process; No
confidentiality

8. • Testate
• Original will executed and admitted OR copy of will
admitted after hearing with the original witnesses
testifying
• Beneficiaries are those named in the Will
• Intestate ORC 2105.06
• No Will
• Beneficiaries are those named in the statute
• Summary Administration
• Relief from Administration
• Full Administration

9. • Avoiding probate does NOT avoid creditors or estate taxes.
However, Creditors have 6 months from the date of death
to file a claim against a decedent’s estate or next of kin.
Even if the Creditor has no notice of the death, once the 6
months have passed, their claim is barred as a matter of
law. Many creditors and collection companies troll the
probate court websites to find out whether a debtor has
died. If no probate estate is opened, that is one less way
for a creditor to be aware of the death and subsequently file
a valid claim.

10. • Separate from estate case but still probate
court jurisdiction
• Occurs:
– Sale is not authorized by the Will or the
decedent dies intestate
• Exception: All heirs give consent to sale, sale
price is 80% of the appraised value and no
minor is the beneficiary
– A minor is one of the beneficiaries of the real
estate
• If sole beneficiary, the minor’s guardian may sell
property under ORC 2127.05

11. • Burdensome for both Executor and
Realtor
• The Probate Court plays a major role in
setting the price and approving the sale of
the property
• MLS listing must contain disclaimer that
the sale is subject to court approval
• Real estate can be set for public auction if
it does not sell in “reasonable” time

12. o Right to elect to take against will.
o Right to elect to receive mansion house
(primary marital residence) as part of the
spouse’s share of an intestate estate.
o Right to remain in the mansion house
rent free for up to one year.
o Right to purchase the mansion house and
household goods at appraised value.

13.  (A) If there is no surviving spouse, to the children of the intestate or their lineal
descendants, per stirpes;
 (B) If there is a spouse and one or more children of the decedent or their lineal
descendants surviving, and all of the decedent’s children who survive or have lineal
descendants surviving also are children of the surviving spouse, then the whole to
the surviving spouse;
 (C) If there is a spouse and one child of the decedent or the child’s lineal
descendants surviving and the surviving spouse is not the natural or adoptive
parent of the decedent’s child, the first twenty thousand dollars plus one-half of the
balance of the intestate estate to the spouse and the remainder to the child or the
child’s lineal descendants, per stirpes;
 (D) If there is a spouse and more than one child or their lineal descendants
surviving, the first sixty thousand dollars if the spouse is the natural or adoptive
parent of one, but not all, of the children, or the first twenty thousand dollars if the
spouse is the natural or adoptive parent of none of the children, plus one-third of
the balance of the intestate estate to the spouse and the remainder to the children
equally, or to the lineal descendants of any deceased child, per stirpes;
 (E) If there are no children or their lineal descendants, then the whole to the
surviving spouse;
 (F) If there is no spouse and no children or their lineal descendants, to the parents
of the intestate equally, or to the surviving parent;
 (G) If there is no spouse, no children or their lineal descendants, and no parent
surviving, to the brothers and sisters, whether of the whole or of the half blood of
the intestate, or their lineal descendants, per stirpes;

14. • Last Will and Testament
• Health Care Power of Attorney and HIPPA
Release
• Living Will (optional)
• Durable Financial Power of Attorney
• Revocable Trust
• Irrevocable Life Insurance Trust (ILIT)
• Assignment(s) of Interest

15.  Testate v. intestate
 “Simple Wills” and why they aren’t so simple
 Pourover Wills
 Wills containing testamentary trusts
◦ Guardianship caveats
◦ Probate Court “administration”

16. Authorizes another person to make health care
decisions for you if you cannot make them for
yourself.
• Names an individual you trust to make a wide variety of health
care decisions for you at any time you cannot do so for
yourself, whether or not your condition is terminal
• Becomes effective only when you cannot make your own
decisions regarding treatment
• Requires the person you appoint to make decisions that are
consistent with your wishes
• Will not overrule a living will if you have both documents.

17. Covers use of life-sustaining treatment if you
become terminally ill or permanently
unconscious
– Becomes effective only when you are unable to
communicate your wishes and are permanently
unconscious
– Gives doctors the directive to follow your
instructions regarding the medical treatment you
want under these conditions OR
– Can be changed or revoked by you at any time, but
cannot be changed or revoked by anyone else

18.  Statutory powers given by Ohio Revised
Code Section 1337.18
◦ Can be broad or limited
◦ Covers transactions and signature capabilities
◦ Code provides specific powers but those can be
expanded or contracted
◦ “Springing” or immediate effect

19.  Single
 Disclaimer
 A/B (Also known as Marital)

20. Year Estate Tax
Exemption
Top Estate Tax
Rate
2012 $5,120,000 35%
2013 $5,250,000 40%
2014 $5,340,000 40%

21.  Life Insurance Trusts (ILITs)
 Charitable Remainder and Lead Trusts
 Qualified Personal Residence Trusts
 ILITs are great for illiquid estates such as
farms, commercial real estate or family
businesses

22. • First to die vs. Second to die policies
• Benefits
–Take advantage of present value gifts
–Remove proceeds from your estate
–Supplement an inheritance
–Pay estate taxes (Great for small
businesses, real estate entrepreneurs,
and farm owners)

23. • Require administrative oversight by
Trustee willing to send Crummey
letters each year
–Grantor cannot be the Trustee without
the likelihood of the asset being pulled
back into to Grantor’s taxable estate
• Gives withdrawal rights to children/
grandchildren/ other beneficiaries

24.  Personal Property assignments
◦ Tangible such as furniture and clothing
◦ Intangible such as business interests
◦ CANNOT use assignment for bank accounts,
stocks, etc.
◦ Good for confidentiality

25. • Both C and S Corps can achieve this as well,
but the annual administrative requirements
and costs with an LLC are less
• Rental properties should be separated from
other assets to ensure limited liability

26. • Very important to actually set up the company
properly
– File the proper articles with the secretary of state
– Sign an operating agreement (or equivocal document for
corporation)
– Separate bank account(s)

27. - Great for real estate
- Transfers without deeds
- Minority/Marketability discounts

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29.  Congress directed Consumer Financial
Protection Bureau to create new forms
◦ Current forms overlapping
◦ Can be confusing for consumers
 Rule replaces current forms with 2 new
forms
◦ Loan Estimate
 Given 3 business days after application
◦ Closing Disclosure
 Given 3 business days before closing
 Effective August 1, 2015
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32.  Reduced paperwork and consumer
confusion
 Important information prominent on 1st
page
◦ Interest rate
◦ Monthly payments
◦ Total closing costs
 Easier to compare mortgage loans
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33.  More information
◦ Costs of taxes and insurance
◦ How interest rate & payments may change in future
 Warnings for consumers
◦ Penalties for paying off loan early
◦ Increases to loan balance even if payments on time
 More reliable estimates for required services
◦ Appraisal / pest inspection fees, etc.
◦ Limits increases in charges
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52.  Although Title Insurance is a large part of
the real estate process, it is one of the
least understood
 A real estate investment is your client’s
largest outlay of money and subsequently
their largest risk

53. ◦ Title insurance is insurance that covers defects in the title prior to when
your client purchased their property
◦ Protects the buyer from unforeseen defect to the title of their property
among other things that could affect their rights of ownership
◦ The title process provides information about the property and involves the
proper distributions, payoffs, & paperwork involved in the transfer of the
property

54. ◦ Title Insurance Policies
 Mortgage practices have made title insurance a necessary part of the
residential closing & escrow process in a majority of cases in Ohio
 Lender’s Policy
 Insures the lender that is has a valid first mortgage on your property
 In the event that a defect is found in the title, the lender is protected
under its insurance policy.
 Owner’s Policy
 Insures that the owner has good title to their own property

55. ◦ The buyer is the typical party responsible for paying for the title
insurance & has the right to engage in a title company or agency
◦ Lender’s Coverage
 The buyer is usually required by the Lender to provide coverage in the amount of
the loan
◦ Owner’s Coverage
 The buyer has the choice to purchase owner’s coverage in the amount of the purchase
price
◦ Real Estate Settlement Procedures Act
 Effective July 21st, 2011
 RESPA makes it unlawful for a lender, broker, attorney, or seller to require a
buyer to use a particular title insurance provider

56. ◦ The seller warrants “good and marketable title”,
free of liens or adverse claims that would impair it’s
marketability
◦ The seller is responsible for paying off any liens or
encumbrances
◦ Encumbrances are legal interests, claims, or
restrictions upon property in the form of liens,
encroachments, deeds restrictions, licenses,
easements, or mortgages

57. ◦ Liens are legal claims or security interests in a piece
of property
◦ The seller must provide the title agency with paid
tax receipts and mortgage and lien payoff
information
◦ This can be accomplished by the seller or through
the realtor, title agency, or other company
specializing in conveyance

58. ◦ What is your role?
 Act as a facilitator
 Acquire & distribute information to make sure the process moves
forward

59. ◦ Parties work to clear encroachments to the title &
clear the title at or before closing
◦ The title agency typically hosts the closing &
ensures that the liens and judgments are paid off,
tax payments are prorated, and distribution is made
based upon the HUD-1 Settlement Sheet
◦ The new mortgage and deed are executed &
recorded at the courthouse in the county in which
the home is located

60. ◦ Title Search is engaged to review the records & to
report that information back to the title agent
◦ The search may be performed by a lawyer, an
escrow or title company, or an individual
specializing in searches
◦ Liens, records of death, divorces, court judgments
& contests over wills must all be examined

61. ◦ Documents Creating Interests in or Affecting Title –
Chapters 5301 & 5302 of the Ohio Revised Code
◦ Organization & Corporate Authority Documents
◦ Power of Attorneys
◦ Trusts/Wills

62. ◦ Title Examinations, Title Commitment & Title
Insurance
◦ Escrow v. Round Table Closings
◦ Tenants-in-Common & Co-Tenancy Agreements
◦ Documents Creating Interest In or Affecting Title

63.  Seller must execute deed
 Seller must deliver deed
 After the deed is accepted, the purchase contract merges into the
deed and is destroyed, and all contractual provisions are lost
unless included in the deed or the purchase contract specifies that
they survive

64. ◦ Same names in “deeds in” and “deeds out”
◦ Need Grantor’s Name(s) and Marital Status
◦ Grantee’s Name(s) must be placed in all necessary clauses
◦ Signed by Grantor
◦ Witnesses no longer required
◦ Granting Clause
◦ Acknowledgement (Notary Public)
◦ Description of the property

65. ◦ Types of Deeds
 General Warranty
 Limited Warranty
 Quit Claim
 Transfer on Death
 Survivorship

66. ◦ Secured Instrument
 Given by a debtor (mortgagor) to a creditor (mortgagee)
 Instrument used to secure a loan on real property
 Typically serves as security devise used to enforce the
terms and conditions
of a promissory note or other contract obligation
 Mortgagee can foreclose on the mortgage if Mortgagor is
in default and enforce court-ordered sale of property
 Equity of redemption – at any time up until the
foreclosure sale, the Mortgagor can redeem the property
by paying the full amount owed

67.  Due on sale clauses
 Must be executed in accordance with similar
requirements as a deed in order to be recorded and
effective as to third parties
 Priority
 Special problems with marital status
 Mortgage is an effective lien as to 3rd parties and against
the real property described in the mortgage from the date
that it is filed for recording
 Assignment of mortgages
 Typical residential mortgage is easily assignable
 May be assigned either by separate instrument or on
mortgage itself

68. ◦ Full Satisfaction and Release
◦ Partial Release
◦ Mortgages are typically released of record when the
debt secured by the mortgage is discharged
◦ If not released of record by Mortgagee, a mortgage
is released by statute after 21 years have run from
the scheduled maturity date of the principal
obligation

69. ◦ If there is no maturity date in the mortgage, then
the 21-year statute of
limitation runs from the date of the execution of
the mortgage
◦ Mortgage can be released by a separate instrument
or on the mortgage itself
◦ Mortgage on residential property must be released
within 90 days of the date of satisfaction. (O.R.C.
Section 5301.36)

70. ◦ Statutory protections for contracts that meet definition: “Land
Installment Contract” means an executory agreement which, by its
terms, is not required to be fully performed by one or more of the
parties to the agreement within one year of the date of the
agreement and under which the vendor agrees to convey title in
real property located in this state to the vendee and the vendee
agrees to pay the purchase price in installment payments, while
the vendor retains title to the property as security for the vendee’s
obligation.

71.  Option contracts for the purchase of real property
are not land installment contracts.
 Statute appears to apply only to residences, but
not limited to single family residences: “Property”
means real property located in this state improved
by virtue of a dwelling having been erected on
real property
 Statutory protections are substantive and
procedural in content and execution of contract
and effect

72.  General Information
 Price, down payment, and interest calculation
 Information on Seller’s mortgage and limitation on
balances less then amount due under Land
Installment Contract
 Deed and title information
 Vendor (Seller) required to record Land Installment
Contract
 Payment of taxes, assessments and other charges must
be addressed
 General Warranty Deed/Conveyance
 Execution and recording formalities (like deed) and
approved legal description must be used
 Vendor’s Mortgage

73.  If Vendee (Buyer) has paid for more than five
years or paid more than 20% of the total
stated purchase price, then foreclosure is the
only option
 Otherwise, remedy is “forfeiture,” a court
action to terminate Land Installment Contract
 10-Day statutory notice and right to cure for
Vendee (O.R.C. Section 5313.06)

74. ◦ Security interest in real property
◦ Priority
◦ Common Types
 Mechanic’s Lien
 Judgment Lien
 Federal Tax Lien
 State Liens

75. ◦ Reserved by grantors in deeds
◦ Condominium Declarations
◦ Subdivision Declarations and HOA documents

76. ◦ Bonding off liens
◦ Satisfaction and release of mortgages and liens
◦ Settlement or dismissal of pending litigation
◦ Quit Claim Deeds
◦ Affidavit of facts Related to Real Estate (O.R.C.
Section 5301.252)
◦ Termination of old leases or contracts

77. ◦ Title Insurance Forms (2007)
◦ Closing Protection Coverage Letters
◦ Owner’s Title Insurance Availability Notice
◦ Notice to Consumer Residential Mortgage or $75,000 or less
◦ Possible Insurance over Title Exceptions & Defects
◦ Owner’s Coverage
◦ Lender’s Coverage
◦ Rates
 Owner’s
 Lender’s
 Simultaneous Issue
 Re-Issue
 Refinance
 Endorsements