Real estate often causes confusion for personal representatives. In most cases, real estate is not an estate asset. Title to real estate vests automatically in the deceased person’s heirs at the time of death. If the decedent left the real estate to beneficiaries in his or her Will, title becomes vested in the beneficiaries when the Will is probated and relates back to the time of death.
There are, however, instances in which real estate can become an asset of the estate. One is when a Will leaves the real estate to the executor and directs the executor to sell the real estate. Another is when there are insufficient assets to pay the creditors of the estate. In that case, the real estate can be brought into the estate and sold to pay creditors. This is often an issue in the context of Medicaid estate recovery.
It is important that the personal representative and the beneficiaries who inherit real estate understand that when real estate is not an estate asset, expenses related to real estate, including utilities, taxes, mortgage payments, and maintenance are not estate expenses. This means that those expenses may not be paid from estate funds. When there is cash in the estate, the beneficiaries often wish to use these funds to make payments on the real estate. However, this is usually not an appropriate use of estate funds. A personal representative who makes incorrect payments from an estate may be personally liable for these distributions if there are creditors or other beneficiaries who were entitled to those funds.
