Trusts, Probate and Homestead Property – Oh my!

Trusts and homestead can be confusing aspects of real estate.  Introduce a death into the scenario, and things get even more confusing.

To review, an individual may not grant upon death (“devise”) their homestead property to a third party if they’re survived by a spouse or minor child.  Generally, the spouse will always have at least a life estate interest in the property with the fee simple interest vesting in the minor children.  Say there are no minor children, a devise of all of the interest in the property will vest in the surviving spouse, but a partial or improper devise (say the will states that the spouse gets 50% and the brother gets 50%) will result in an invalid/ignored devise with the spouse getting a life estate and any adult heirs getting the remaining fee simple interest.  Individuals who are not survived by a spouse or minor children can devise their property to anyone.

The exception to all of these scenarios is when the decedent and surviving spouse owned the property as “husband and wife” a/k/a tenants by the entirety (as the property would automatically vest in the surviving spouse).

Based on the above, while homestead property bypasses the probate estate, an Order Determining Homestead would typically be filed in the probate case – detailing the heirs/devisees vested in title.  The lack of such order would require the Personal Representative of the probate case to also join in (with heirs/devisees) on any conveyance.

Homestead Property Owned In Trust

So what happens when the homestead property is owned by the trustee of a trust and the settlor of the trust dies?  It’s been determined that deeding the property to trust will not bypass the homestead rules detailed above.  Instead, the terms of the trust agreement would act as the will – determining how the property is “devised”.  Upon the death of the settlor (creator/vestor of the trust), an affidavit should be obtained stating that the decedent had no spouse or minor children – therefore allowing the trustee of the trust to freely convey title.  If the settlor was survived by a spouse or minor child, it’s as if the settlor was vested in title individually, and the above rules of probate would have to be followed (also obtaining a deed from the trustee, just to be safe).

The moral of the above is to know the law and how property descends through title.  It can be a rude awaking for a trustee who thinks they’re in title to have to open a probate case and get deeds from the heirs of the decedent.

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