Avoiding Probate Gone Awry –Part II

Let’s take a look at another example where someone’s thought avoiding probate was the best solution in an estate plan.

Let’s say that the desire to is to leave the family home equally to all three of their married adult children. Each child would own a one third interest and they can figure out what they want to do with it later. The clients say, “Oh, by the way, we want to do this while avoiding probate. Definitely no probate. Probate is bad.”

So the option to avoid probate is the quick and dirty Transfer on Death (TOD) Affidavit. Clients sign and record the TOD Affidavit. Clients both die. The attorney records paperwork to transfer the house into the names of the three children. The children want to sell the house. In the midst of the home selling process, one of the children starts to go through an ugly divorce.

In Ohio, when a married person acquires any interest in real estate, their spouse also acquires an interest in that real estate. This means that deed to the person who purchases the family home from the children requires six signatures (three signatures from the children and three from their spouses). In this scenario, the divorcing child is at odds with her spouse. Her spouse refuses to sign the deed for the family home. The real estate sale falls through. The family waits to list the house until the child’s divorce is final. The desire was to avoid probate, but the delay in selling the home was still a big setback for the family.

What’s the alternative to this? Leave the house to the three children in a will.  This means the house would be a probate asset. But the executor has the power to sell real property under the will. This means that only the executor must sign that deed to sell the house. This is true even if the executor is the one getting divorced. The executor can then sell the house and each sibling leaves the probate administration with their portion of the cash proceeds.