Are you planning on selling real estate in Massachusetts or Rhode Island? If so, there are some important things you need to know about estates and taxes. In this article, we will discuss key points related to estate tax liens, the process of selling real estate owned by estates, and the quirks of registered land in Massachusetts. By understanding these important aspects, you can navigate the selling process more effectively and ensure a smooth transaction.
Estate Tax Liens
When someone dies and owns real estate in Massachusetts, there is an automatic estate tax lien on the property. This lien is not recorded publicly and is known only by real estate lawyers who handle estate sales. To remove the lien, you have two options:
File an estate tax return: If the gross estate is over a million dollars, you must file an estate tax return, even if no estate tax is due. This is true even if the property was jointly owned with a spouse. Once the return is filed, you can obtain a lien release.
Use an affidavit: If the gross estate is below a million dollars, you can use a self-serving affidavit to declare that the estate is worth less than a million. This affidavit needs to be recorded in the chain of title to proceed with a sale.
In Rhode Island, the rules are similar but with a different threshold. A taxable estate in Rhode Island must be worth over 1.7 million dollars to require an estate tax return. Unfortunately, there is no simple affidavit like in Massachusetts. Even if the estate is below the threshold, you still have to file an estate tax return to prove the estate’s value. This additional step can be inconvenient for individuals who are far below the threshold but is necessary to ensure accuracy.
Estate Taxes and Thresholds
Massachusetts has been criticized for its low estate tax threshold, especially considering rising property values. Currently set at one million dollars, this threshold has remained unchanged for about two decades. However, there have been discussions about raising the limit to two million dollars, an adjustment that is long overdue. On the other hand, Rhode Island has a higher threshold set at 1.7 million dollars, but it also requires a tax return for estates that fall below this amount.
It is crucial for individuals with assets valued over these thresholds to plan for estate taxes. A millionaire today is not what it used to be, and many individuals who own modest homes and savings find themselves grappling with estate tax liabilities. Without proper planning, heirs may have to deal with filing an estate tax return and paying taxes upon the owner’s death. An important note is that owning real estate in Massachusetts, even for out-of-state residents, still requires filing a Massachusetts estate tax return. The estate tax will be a fraction of the total, determined by the value of the Massachusetts property compared to the overall estate.
Selling Real Estate Owned by Estates
When someone dies owning real estate, selling the property requires a probate process. Whether there is a will or not, the property must go through probate to establish who inherits it. If there is no will, Massachusetts law determines the inheritance, while a will controls the distribution in cases where one exists. The individual in charge of the estate, called a personal representative, must petition the court to be appointed as the executor or administrator of the estate.
To facilitate the sale of the property, the personal representative must obtain the power to sell from the probate court. If the will grants this power, the personal representative can proceed with the sale immediately. However, if the will does not contain this provision or if there is no will, known as an intestacy, a license to sell must be obtained from the probate court. This additional step can sometimes be time-consuming and adds complexity to the selling process.
In Rhode Island, the process is almost identical to Massachusetts. Rhode Island adopted its version of the uniform probate code when Massachusetts updated its own probate laws. However, there have been delays in the probate system, with reports indicating that it can take up to two months for the court to even docket the papers. This extended timeline can cause frustration for buyers, sellers, and their agents who are eagerly waiting for the transaction to move forward.
Quirks of Registered Land in Massachusetts
Massachusetts has two types of real estate deeds: recorded deeds and registered land deeds. Registered land is handled by the land court, and when there is a sale of registered land, the land court in Boston must sign off on the deed. Even with all the necessary authority, such as a power of sale or license to sell, the land court will not accept the deed without proper sign-off.
To obtain the required signature, a certified copy of the certificate of title, which shows the current ownership, must be obtained. This additional step adds complexity and time to the selling process for properties with registered land. However, it serves the purpose of ensuring that all land boundaries and ownership disputes are resolved, providing a clear title for the buyer.
Selling real estate owned by estates in Massachusetts and Rhode Island requires careful consideration of estate tax liens, probate processes, and the quirks of the registered land system. By being aware of the unique requirements and steps involved, sellers can navigate the selling process more effectively. It is crucial to consult with an experienced attorney who specializes in estates and real estate law to ensure compliance with all legal obligations and to mitigate any potential issues that may arise.