In my mind, as a practicing Minnesota probate lawyer, perhaps the most common reason that probates are required in a deceased person’s estate is their ownership of a parcel of real property – otherwise known as their home.
In many instances, the home or other property may have existing loans or mortgage on it. This means that the deceased person owned “title” to the home but that he or she still owed money to a bank or other mortgage “creditor.”
There is no problem with an estate owing money – in fact most estates do owe some amount of money to creditors. However, a mortgage on a home creates difficulties that are often only solved through probate law.
In any Minnesota probate, there is a heirachy of bills that must be paid first in any probate estate. It is important for personal representatives to keep in mind that they will have the duty to follow the law and pays debts of the estate in the correct “order”. It is also true that the “correct order” begin with attorney fees, court costs, and funeral expenses or expenses associated with the deceased person’s last illness.
However, in the instance of a home, there is already a creditor with a secured lien on the home and that lien “runs with the land”. What does that mean? It means that the mortgage company is a secured creditor and it will be impossible to sell or transfer the home without either paying the debt on the home or allowing the home to go into foreclosure.
This brings up another interesting difficulty. What happens when there is some equity in the home? Where does that money go? How does that effect other potential debts of the estate?
Equity in a home is an “asset” of the home that should be divided among the beneficiaries of the estate. For instance, if a dceased person had a Will that named his or her two children as beneficiaries, those two children would presumably share a 50/50 interest in any equity in the home.
Yet, we must not forget that there may be other debts of the estate such as credit card debt, electric bills, medical bills, car payments, etc. This complicates things greatly.
As I stated earlier, the personal representative has the burden to administer the estate correctly and pursuant to Minnesota law. Failure to follow the aw could land the perosnal representative in hot water and may create legal liabilty.
It is also important to keep in mind that, in Minnesota, qualified blood relatives (children) and surviving spouses are entitled to an elective share of the estate. This is another complicated converstation the lawyer has with the personal representative. However, for the purspose of this article, we simply wanted any readers to know that children and surviving spouses may be entitled to “elect” to claim the home, one vehcile, and up to $10,000 of the deceased persons assets free and clear of any creditor claims. This means that, In Minnesota, thse qualified parties can claim an “exemption” from many creditor cliams.
Of course, there is an exception to this exception. In the case of the home, as we discussed above, the mortgage lien is superior to this exception. Therefore, the mortgage debt “runs with the land” and must be paid.
In sum, it would be very difficult for a non-lawyer personal representative to administer an estate without the help of a qualified Minnesota probate lawyer. If you are a personal representative of a Minnesota estate, contact the Flanders Law Firm today to speak with a qualified Eagan Minnesota probate lawyer about your particular question.
Great way of explaining “equity” in a home as an asset. Informative write-up!