Transferring inherited property

Not all that infrequently someone calls needing to transfer property they inherited from a relative. In some cases, the surviving heir has continued to pay the property tax, insurance and mortgage without formally changing ownership. So long as all the bills get paid, does it even matter when a deed gets filed?

Generally speaking, yes. It is wise to transfer ownership as soon as practical for several reasons.

First, a non-owner cannot get homestead credit for property being their principal residence. What this means is that if a son or daughter or whomever inherit property but wait awhile to transfer the deed, they will NOT qualify for the homestead credit in Maryland, nor get the benefit of any associated cap on tax hikes. If the deceased owner was getting a homestead credit, that will NOT continue after their death. Even if it takes the county/city a few years, once they eventually learn that the record owner dies, they will generally require repayment of the tax credit for all tax periods after the death. For instance, lets say that Sonny inherited property from his father. His dad passed away in 2010 but Sonny, who was already living in the property and paying the bills, doesn't get around to filing the deed until 2016. At this point the county will seek to "recapture" six years worth of tax credits and Sonny will need to repay same. If instead Sonny filed the deed the same year his father passed away, he would have been able to get this credit in his own name.

Secondly, when insurance comes up for renewal, a dead person cannot get insurance in their name. If the PR or relatives don't let the insurance company know, it may continue to send bills in the deceased owner's name and collect premiums… until, that is a catastrophe hits. Then the heirs run the very real risk that the insurance company will kick back the premiums for any policy issued after the original owner died -- leaving the property potentially uninsured. Until the new deed is recorded, the person inheriting will not have ownership status and will not be able to get insurance in their own name.

Finally, estates rarely get easier to administer with the passage of time. What could be a very simple estate to administer when mom or dad die can be very complicated 5, 10 or more years down the road. The named Personal Representatives may no longer be available or beneficiaries may have since passed, requiring opening up levels of estates with associated time and cost.

Bottom line? If you inherit property, try to open an estate as soon as reasonably practical. An estate / personal representative deed is not expensive (this firm prepares such deeds for a flat fee) and can generally be drawn up as soon as the time period for creditor claims has passed. There are some prerequisites - you'll need to have an opened estate and letters of administration in hand before the deed can be prepared. If an estate has not been opened or the PR needs assistance an experienced lawyer can help with the estate administration as well. If the PR feels comfortable managing the estate on their own, they may wish to hire an attorney for the sole task of drawing up and recording the deed.

If you are considering planning for your own estate, consider a life estate deed - this will automatically transfer property at the original owner's death, without need for a second deed OR probate proceedings to pass the asset.

ArdenLawFirm 2014-2018 Managing Attorney Cedulie Laumann, Esq.