The title of this post is the California Probate process and real estate investors and with that I could go two directions. 1) how do real estate investors buy properties in California probates and 2) how do families or loved ones clean up messes left behind by deceased California real estate investors? I am going to focus on the latter today and come back to the first question another time as I have talked about it before. In short, I think “deals” in probate are highly unlikely. Again, we’ll talk about that another day.
Today, let’s focus on how you clean up the mess left behind when a real estate investor dies without all their ducks in a row. That is, they die, or even become incapacitated, and do not have everything properly set up in a California living trust. Let’s be honest… this happens a lot! Real estate investors, by the very definition, are often moving and grooving… or buying and selling! Plus, they are often playing finance games with the precision of a high level gymnast! The more stuff changes, on deeds, the more likely a property will be left out of a living trust. I have seen this countless times!
So, if you are the investor reading this please make sure your affairs are set up properly. The use of LLC’s is very common with real estate investments but make sure those LLC’s reflect the trust as the member. If you don’t have an LLC then you likely want the trust to own the property on the face of the deed. The key is be proactive! Also, be sure your trust is up-to-date and reflective of your current wishes!
Now back to the bigger problem… a real estate investor, often with investments in different states, who died without their properties in their living trust. I just saw one recently where they re-did their trust before death and put their California property into the trust but failed to put two of their out of state rental properties into the trust. That’s going to be a multi-state probate mess I suspect.
Let’s start with California. If real estate is owned directly by the person who died a California probate will be required. Yes, if the value is below around $180,000 then a full probate can be avoided but a small estate costs just as much as a full probate at that level. Thus, a probate is a probate… small, or big, it costs money and takes a lot of time!
Time is often of the essence with rental properties. That is, one of the key attributes of investment properties is tenants who pay rent. Who does the tenant pay rent to after the real estate investor dies? You guessed it… that’s likely to be a problem! Get the probate started ASAP so rents don’t fall behind… or further behind!
What if a repair is needed? Can you just go on to the property and fix if the property is in the name of a deceased person? Do you need a probate court order? The key is don’t sit back and do nothing. Be proactive!
Another one we see often is the need to start an eviction because the tenant is not paying rent. Perhaps the loved one, before dying, had been sick. I have seen situations where tenants get a little “forgetful” with the rent when their landlord was in the hospital. You take over, after your loved one has died, and want to start the eviction process. Again, if the property is not properly owned by a trust or LLC it is almost a certainty that you will need to get yourself, or someone else, appointed as Executor to have standing in court to move forward with the eviction.
I don’t have to tell you that the California eviction process is not very fast. If you have to first get a person appointed executor you are just extending the process even more. Or, worse yet, if you show up at the eviction hearing without the proper authority from the probate court the Judge could throw the eviction out and cause you to have to start over! That’s right, the long eviction or unlawful detainer process may have to be re-started! Do it right the first time and make sure your probate attorney and your eviction attorney communicate with each other!
In summary, for these and other reasons get your affairs properly setup before death. Help your family, help your loved ones, help your chosen beneficiary by having everything in a California living trust. If someone died, or is incapacitated, and you need to talk to a California probate attorney please reach out!
-John
The post The California Probate process and real estate investors appeared first on Probate Sacramento CA | Trusted Probate and Estate Attorney.