A Case Study for Your Next Estate Listing

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This week, I wanted to talk about a closing we handled that highlights the complexities of Estate Sales.

Recently, we handled a closing for Estate Trustees for their late parent's home.

The home, which formed part of the estate, qualified for a First Dealings Exemption.

What is a First Dealings Exemption?

In simple terms, the first dealings exemption allows an estate to transfer or sell a property without needing to go through probate first, provided it meets the criteria.

In certain cases, it also means avoiding Probate Fees (aka Estate Administration Tax) on the value of the house.

This exemption can save money and significantly speed up the process, allowing the Estate Trustees to sell the property sooner, rather than waiting months for probate to be completed.

Now, in our recent case, the exemption applied, and the Realtor was able to sell the property, and we were able to close before the Probate Process.

However, despite this time-saving benefit, there was a crucial element the Estate Trustees needed to understand:

Even though the property was able to be sold before probate, the Probate Fees still applied to the value of the house.

This is because there were other assets in the estate that required probate — for example, bank accounts, investments, vehicle, etc.

So, while the first dealings exemption can save significant time by allowing a property to be sold quickly, it doesn’t necessarily save money on taxes.

The Probate Fees, still apply to the total value of the estate, including the house, if there are other assets that need to go through probate.

Avoiding Probate Fees with the First Dealings Exemption

To truly avoid the Probate Fees on a property, it must be the only asset in the estate and qualify for the exemption.

Alternatively, the deceased can implement a Dual Will System during their estate planning.

Under this system, one will governs the assets that require probate, and the other covers assets that do not, such as real estate that would qualify for the First Dealings Exemption.

This strategic planning can help minimize the tax burden on the estate.

Final Thoughts

For our clients, while the first dealings exemption provided a much-needed time savings to get the property sold, the overall tax impact remained unchanged due to the other assets in the estate.

And this experience highlights the importance of comprehensive estate planning, particularly for those looking to minimize probate fees.

If you or your clients have any questions about estate sales, the first dealings exemption, or how to effectively plan for probate, we're here to help.