Managing an estate with multiple properties can add layers of complexity to the probate process. Whether the properties are residential, commercial, or rental, the logistics of valuing, maintaining, and distributing them to heirs can quickly become overwhelming.
Without proper planning, an estate with several properties can cause delays, lead to disputes among heirs, and other unintended consequences.
What Are the Challenges of Having an Estate with Multiple Properties?
The more properties involved in an estate, the more complicated the probate process becomes. Not only do different types of properties—residential homes, vacation properties, rental units, or commercial real estate—have varying rules and considerations, but their geographic locations can also add complexity. For example, properties located in different states or countries may require ancillary probate or compliance with international laws.
Valuation is another challenge. Real estate markets fluctuate, and determining the current value of each property is crucial for distributing the estate fairly. Additionally, coordinating with multiple heirs can create disputes, particularly if some heirs want to sell a property while others wish to retain it.
Property Valuation and Appraisals
One of the first steps in managing an estate with multiple properties is obtaining accurate property valuations. Real estate appraisals are sometimes necessary to determine the fair market value of each property at the time of death. These appraisals not only guide how the estate is divided but also impact tax calculations.
If heirs disagree about the value of a property, it’s important to have a professional, impartial appraisal to resolve conflicts. In some cases, multiple appraisals may be required, especially if market conditions change.
Distributing Properties to Heirs
The estate plan or will typically dictates how assets are divided. Some heirs may wish to keep a property, while others may prefer a cash inheritance. In these cases, the estate may need to sell certain properties to provide an equitable distribution.
One way to address this is through equalization. For example, if one heir inherits a high-value property, other heirs may receive additional cash or other assets to make the distribution fair. When properties are sold, the proceeds can be divided among beneficiaries, but selling may not always be the best option if market conditions are unfavorable.
Dealing with Out-of-State or Foreign Properties
Properties located outside of Michigan can complicate the probate process. If the deceased owned property in another state, the estate will likely need to go through ancillary probate in that state. This process involves a secondary probate proceeding to handle the real estate, which can add time and expense to the administration of the estate.
For foreign properties, the situation can be even more complex. Different countries have their own rules regarding inheritance, taxes, and probate. It’s crucial to work with an attorney who is experienced in international estate law to navigate these challenges.
Who Maintains and Manages Properties During Probate?
The estate is responsible for covering expenses during probate such as property taxes, insurance, utilities, and general upkeep. In some cases, the court may appoint a property manager or personal representative to oversee these tasks.
Rental properties pose additional considerations. If the estate includes income-generating rental units, the personal representative may need to manage tenants, collect rent, and ensure the properties remain in good condition. Decisions about whether to continue renting or sell the properties will be made in consultation with the beneficiaries.
Tax Implications for Multiple Properties
Multiple properties in an estate can trigger significant tax implications. At the federal level, estate taxes apply if the estate exceeds the exemption threshold (set at $13.6 million in 2024). Additionally, capital gains taxes may come into play if properties are sold, depending on the increase in value from the time of the deceased’s purchase to the sale.
An estate planning attorney can help structure the estate in a way that minimizes tax liabilities and maximizes the value of the assets passed on to heirs.
Strategies to Simplify the Process of Managing Multiple Properties
To simplify the management of multiple properties, many estate planners recommend using revocable living trusts. By placing properties in a trust, they can bypass probate entirely, allowing for a smoother transfer to beneficiaries. Trusts also offer more privacy than the probate process, which is public record.
Joint ownership and transfer-on-death (TOD) deeds are other tools that can help avoid probate. These methods allow properties to transfer automatically to the surviving owner or designated beneficiary without the need for court intervention.
Why Work with an Estate Planning Attorney?
Managing an estate with multiple properties requires a deep understanding of real estate law, taxes, and probate procedures. An experienced estate planning attorney can guide families through the complexities of appraisals, property management, tax issues, and the distribution of assets. An attorney can also help create a plan that ensures properties are handled efficiently and according to the decedent’s wishes.
By working with legal and financial professionals, families can avoid common pitfalls and reduce the risk of disputes over property division.
Questions about Your Estate? Contact Legacy Counsel PLC
If you are managing an estate with multiple properties or looking to create a plan for your own estate, the experienced estate planning attorneys of Legacy Counsel are here to help. We can guide you through the probate process, assist with property appraisals, and provide strategies to minimize taxes and simplify asset distribution.
Contact us today to schedule an initial consultation.
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