How are Property Taxes in Probate Handled?

Real estate and property is one of the most common things to be accounted for in an estate plan, and one of the largest items that a probate court will have to deal with when administering an estate. But despite that, many people overlook one thing that can stand in the way of loved ones or beneficiaries, inheriting a home: property taxes.

Continuing to Pay Property Taxes

Many people think that when the owner of a home dies, the obligation to pay property taxes dies as well—that is, whoever inherits the property, inherits it free and clear of any property tax obligations. But that isn’t true.

While beneficiaries will never personally owe property taxes on the property that were unpaid while the previous owner (the deceased) was alive, the state or other taxing authority who put on the property tax lien, can still foreclosure, or sell the property at a tax deed sale, if the property taxes remain unpaid.

The executor of the estate or the personal representative, has a duty to pay the property taxes on the property as they come due, from proceeds that are in the estate. That means that in a long, protracted fight in probate court (if there is such a fight), every year that the estate remains open, the estate is losing money, having to pay the property taxes on the property.

In situations where property taxes are paid as part of the normal installment mortgage payments, so long as those mortgage payments continue to be paid, there will be no problem with property taxes being owed.

Not as Easy as it Sounds

While simply paying the property taxes as they become due out of the proceeds of the estate seems like a logical solution, the reality is that in most cases, if an estate had money to pay those property taxes, the former owner probably just would have paid them when the taxes became due and owing. That means that for most real estate in probate with unpaid property taxes, the estate may not have enough assets to pay off those taxes.

You may also be tempted to say “forget the house, just let it go and pay the other creditors of the estate.” But you can’t do that either, because property taxes are a class 3 creditor. That means that right after the actual cost of the administration of the estate, and funeral expenses, taxes are next in line to be paid—even if doing so leaves other creditors with nothing.

For those in line to inherit that property, this priority can be a good thing—you’re guaranteed that the property taxes will be paid, and the property will be preserved for you to inherit it. For others looking to inherit items other than the real estate that owes taxes, this can be bad—what they stand to inherit will be depleted to pay off the property taxes.

Do you have a home or real estate in probate court? Call the West Palm Beach probate lawyers at The Law Offices of Larry E. Bray today for help.