If you have to sell the property of someone who has passed away, you should understand the "First Dealings" exemption, since it may save you a lot of time and stress.
First, it is important to know that when someone passes away, you are usually required to obtain a certificate from the Court in order to deal with land owned by the deceased. This document is known as the “Certificate of Appointment of Estate Trustee”, and more commonly referred to as “Probate”, as this was the formal title of this process historically. Obtaining a Certificate takes some time to obtain. For busy law offices and courthouses, this can affect the confidence of an executor in listing the property, since not having a Certificate makes negotiating a closing date more of a challenge.
Sometimes, the estate can avoid the delay of waiting for a certificate by relying on the First Dealings Exemption (the “Exemption”). This Exemption allows you to deal with the land immediately upon death without the need for a certificate, as long as three conditions are met. First, the property must be in the Registry System or Land Titles Conversion Qualified (“LTCQ”). More on this point below. Second, if LTCQ, there must not have been any previous “dealings”, meaning the estate transfer is the first transfer of ownership involving the deceased, apart from any survivorships. Last, the executor must possess of a valid will to bypass the need for an estate certificate. If all three conditions are met, an executor may immediately sell or transfer the home. It is important to receive a legal review of title and will documents in order to determine if the Exemption applies.
There is even better news about the Exemption! If the land is the only item that would have needed a certificate, meaning bank accounts or other investments are all managed jointly, the Estate Administration Tax (“EAT”) may be avoided altogether. For example, a million-dollars of equity in a home requires payment of $14,250.00 in tax, not including the extra legal fees required for probate. The home would therefore not be subject to the EAT tax under the first dealings exemption!
A proper estate plan will minimize the stress and liability of your beneficiaries upon their inheritance. If you wish to have an estate review, or you have recently been made responsible for the administration of an estate, be sure to reach out to Liddiard Law today for a no-obligation consultation.
