Inheriting a House – Illinois Law
The death of a close family member can cause a lot of chaos and stress. When it comes to the paying of debts and distribution of assets, the heirs often need to know the rules for inheriting a house in Illinois. This article will discuss the different types of real estate ownership and how that ownership impacts who inherits a family member’s house. The article will also cover inheriting a house under a will and in an unplanned estate. Lastly, the article will cover whether a person inheriting a house in Illinois should hire a lawyer.
Inheriting a House: Types of Ownership
The first, and often most important step in determining who inherits a house when someone dies (the person who died is called the “decedent”) is determining how the house was legally owned. The most common types of ownership are: sole ownership, tenancy in common, joint tenancy, tenancy by the entirety; and ownership in trust. Below, these types of ownership are discussed.
Sole ownership is the most simple type of real estate ownership. The sole owner of real estate owns the house solely in his or her name with no co-owners. If a person dies, solely owned real estate transfers pursuant to the terms of the decedent’s will or, if no will, pursuant to the default rules for transfer of ownership called “intestate succession.”
Tenancy in Common
When two or more people own real estate together, the default form of ownership is tenancy in common. In a tenancy in common each tenant owns a distinct share of the property, an undivided right of possession, and the share of ownership is freely transferable. When a tenant in common dies, his or her interest passes pursuant to the decedent’s will or in accordance with the rules of intestate succession.
When reviewing a deed, multiple owners will own as tenants in common unless the deed that transferred the property to the current owners transfers it “jointly” or to the owners as “joint tenants.”
Joint tenancy is a form of property ownership where two or more people own the property much like tenancy in common with one important difference – the owners have a “right of survivorship.”
The right of survivorship is the right to own the property after the death of one of the other owners. If a house has three owners and they hold the property in joint tenancy, the death of the first owner causes the property to immediately transfer to the remaining two owners. When the second owner dies, the final surviving owner owns the property solely. Upon the death of the sole owner, the property will transfer in accordance with his or her will or, if none, intestate succession.
Determining whether a house is owned in joint tenancy or tenancy in common is very important because the heirs of a joint owner receive nothing unless their relative was the last to survive.
Tenancy by the Entirety
Tenancy by the entirety is a special form of ownership that can only be possessed by a married couple. For purposes of inheriting a house, the rules are the same as joint tenancy. Tenants in the entirety have the right of survivorship.
What makes tenancy by the entirety different is that owners of a house in tenancy by the entirety may not transfer ownership interest without the consent of the other and creditors of only one may not foreclose on the property. The protection from creditors of only one spouse is the main benefit of this type of ownership over joint tenancy.
Trusts are complex and flexible, so it is hard to make generalizations. Here, I will cover ownership as a trustee, beneficial interests, and land trusts.
Decedent as Trustee
A trustee can be a legal owner of a piece of real estate. However, if the trustee’s only interest in that property is as trustee, it is unlikely the beneficial interest in the property will transfer to anyone new when the trustee dies. The beneficial interest will often be defined in the trust document, but it usually entails the right to use and occupy the property. Upon the death of the trustee, legal ownership will typically transfer to a successor trustee and the current beneficiary will continue to use the property.
However, it should be noted that in many estate planning trusts, the trustee is also the current beneficiary. In those cases both legal ownership and beneficial interests will pass at death in accordance with the trust document.
Decedent as Beneficiary
When the decedent is the beneficiary of a trust, the decedent’s death will cause the property to pass pursuant to the terms of the trust document. This is true whether or not the decedent was also the trustee. Typically, the trust document will name the people that inherit a house, much like in a will.
Illinois Land Trusts
Though land trusts have lost some of their historical benefits, they are still commonly seen in Illinois.
In a land trust, a nominal owner serves as trustee for beneficiaries. Typically, the trustee is Chicago Title and Land Trust Company as it has taken become the successor trustee for many banks that have gone out of business or discontinued their land trust practices. The trustee is solely the legal owner and does not have any of the rights or benefits of a typical owner of property.
The beneficiaries of a land trust have all rights and conveniences of ownership and are the “owners” for purposes of inheritance. Like other trusts, the land trust document will control who inherits the beneficial interest in the property if one or all current beneficiaries die. The property could pass to other current beneficiaries, named successor beneficiaries, or even pursuant to the decedent’s will or intestate succession.
Inheriting a House in Illinois: Rules of Inheritance
There are two broad categories of inheritance rules. The first is planned estates. Planned estates are usually estates where the decedent executed a will before his or her death. The second is unplanned estates. Most people die without an estate plan and their property, including their house, is inherited by their heirs pursuant to the Illinois rules of intestate succession.
Once the type of ownership is determined, the next step is to apply any estate planning documents the decedent executed. Though trusts are often used in estate planning, they actually change the type of property ownership, so they will not be covered again here. This section will focus on wills and the Illinois Transfer on Death Instrument.
Houses Distributed in a Will
It is common for a decedent to leave his or her house to a family member through a gift in a will. For a gift of a house via a will to be effective, the following requirements must be met:
- The house must be a probate asset;
- The will must be legally valid; and
- The estate must be sufficient to satisfy all claims.
The House Must Be a Probate Asset
A will can only distribute “probate assets.” A house owned in joint tenancy or tenancy by the entirety will not be a probate asset so long as one of the other owners lives longer than the decedent. A house subject to a recorded Illinois Transfer on Death Instrument with a living beneficiary will also not be a probate asset. Lastly, a house owned in a well drafted trust will not be a probate asset.
Generally, houses solely owned or owned as tenants in common are probate assets. Houses owned in joint tenancy or tenancy by the entirety with no living co-owners will also be probate assets when the decedent dies.
The Will Must Be Legally Valid
The validity of a will and contesting a will justifies its own series of articles, but for the purposes of this article the basic requirements of a valid will are:
- The will must be in writing;
- The testator (person who makes a will) must be of sound mind at the time of making the will;
- The testator must be at least 18 years old at the time of making the will;
- The will must be signed by the testator or by someone else at the testator’s direction and in the testator’s presence;
- The will must be signed in the presence of at least two witnesses that are not beneficiaries of the will. They must sign in the presence of the testator and the presence of each other.
If a will fails to meet any of the necessary requirements, it will be invalid and will not effectively distribute any property, including a house.
The Estate Must Be Sufficient to Satisfy All Claims
Probate assets are only distributed after all valid claims are paid. The gift of a house is what is called a “specific bequest” (gift of an actual item), which is the least likely to be sold off to pay claimants. If all claims can be paid from the residuary assets or lower classes of gifts, then the gift of the house will be successful.
If the estate has many debts, it may be necessary to sell the house to satisfy the claims.
Illinois Transfer on Death Instrument
The Illinois Transfer on Death Instrument is a newer (2011) tool regulated by 755 ILCS 27/1. It was designed to facilitate the quick and efficient transfer of residential real estate without the pitfalls of joint tenancy.
If the owner of real estate properly executes the Illinois Transfer on Death Instrument, names a beneficiary and records the instrument, the house will transfer to the named beneficiary.
Of course, a decedent cannot give away something he or she does not own, so for the Transfer on Death Instrument to be effective the house must be solely owned, or, if jointly owned, all joint owners must execute the instrument for it to be effective. In the case of the last surviving joint owner, the Transfer on Death Instrument will be effective to transfer the house to the beneficiary.
Most people never get around to making an estate plan. Therefore, when it comes to inheriting a house, it is most often in accordance with the Illinois default rules for inheritance – intestate succession.
Houses are inherited through intestate succession when the following conditions are met:
- The house is a “Probate Asset”;
- There is no will or the will is invalid;
- There is no valid Illinois Transfer on Death Instrument; and
- Assets are sufficient to pay claims without selling the house.
To understand Illinois intestate succession, a grasp of a few key concepts is necessary. This section will address the concepts of per stirpes and descendants.
The Concept of Per Stirpes
Generally, property in Illinois descends to a decedent’s heirs per stirpes. Per stirpes means that property is distributed equally to each branch of a family. Under per stirpes distribution, if an heir dies before the decedent, but that heir leaves descendants, the descendants will receive the pre-deceased heir’s share equally.
A common example is a grandchild inheriting from the child’s grandparent because the child’s parent pre-deceased the grandparent. The grandchild receives their parent’s share and if there are multiple children in that branch the parent’s share will be split equally among them.
The Concept of Descendants
A descendant is a person that is in direct line to an ancestor, such as a child, grandchild, great-grandchild, ect.
Illinois rules of intestate succession are set forth in 755 ILCS 5/2-1. In most families there will be close relatives of the decedent, so it is unlikely any heir beyond the third class will inherit. However, Illinois law was designed to cover all family structures and avoid property flowing to the state. My article that focuses on intestate succession addresses much more remote distribution rules and quirks. This section will provide an overview of the rules that come into play in most cases.
Class 1: Spouses and Descendants
Few estates move beyond the first class of inheritance since most people leave either a spouse, children, or grandchildren. There are three scenarios in this class:
If the decedent dies leaving a spouse and no descendants, the entire estate goes to the spouse.
If the decedent dies leaving descendants, but no spouse, the entire estate goes to the descendants per stirpes.
If the decedent dies leaving both a spouse and descendants, the estate goes 1/2 to the spouse and 1/2 to the descendants per stirpes.
Class 2: Parents and Siblings
When a decedent does not leave a spouse or descendants, property goes to the decedent’s parents and siblings.
If the decedent does not leave a spouse or descendants, but leaves a parent or siblings, then each parent and sibling takes an equal share. If one parent pre-deceases the decedent, the surviving parent receives a double share. If a sibling pre-deceases the decedent, the descendants of the deceased sibling take the sibling’s share, per stirpes.
Class 3: Grandparents
When a decedent does not leave a spouse, descendants, parents, siblings, or descendants of siblings (nieces and nephews and their descendants), property goes to the decedent’s grandparents and their descendants. The property is split half to the paternal line and half to the maternal line. If there are no survivors in one line, all the property goes to the other line. The property is distributed to the descendants of the grandparents per stirpes.
As one can imagine, this class of distribution is seldom used as it requires the decedent to die without leaving a spouse, children, grandchildren, great-grandchildren, parents, siblings, nieces, nephews and the descendants of nieces and nephews.
More Remote Classes
The law of intestate succession in Illinois does not stop at distribution to grandparents and their descendants. If no heir is found in that class, the rules dictate that the property will go to the great-grandparents and their descendants and, if none, to the nearest kindred. In the rarest of cases, the representative of the estate will have to go back many generations and trace the line of descent down to find a living heir.
If no living heir can be found – the decedent died with no living relatives, however remote – the property will be transferred to the government. In the case of a house, a house located in Illinois will be transferred to the county government in the county where it is located.
Summary of Inheriting a House in Unplanned Estates
In an unplanned estate, a house that was owned by the decedent at the time of death and was not titled in a way that caused immediate transfer (joint tenancy, ect.) will be inherited by the decedent’s closest family members. Typically, the house is inherited by the spouse and children. If the decedent leaves no close relatives, more remote relatives can inherit through the laws of intestate succession.
Does a Person Inheriting a House Need a Lawyer
The transfer of real estate is complex and a lawyer is usually required. The amount of work (and cost associated with the work) can vary dramatically depending on how the house is being inherited.
Inheriting a House as an Heir Not Acting as Executor or Administrator
If the house is going through probate and the person inheriting the house is not the administrator or executor, a lawyer may not be required since the representative of the estate should already have a lawyer.
That said, it may be prudent for the heir to have a lawyer review the transfer, the fee for this is minimal and the representative’s lawyer could make mistakes.
If an heir believes he or she should inherit a house, but is told the house will be sold or transferred to someone else, hiring a lawyer is wise.
If an heir is entitled to a house in a situation where probate is necessary, but probate has not been initiated, the heir should hire a lawyer as the heir may need to initiate probate.
Inheriting a House as an Heir and as Executor or Administrator
An executor is a person named in a will to manage the decedent’s estate. An administrator is a person that acts as the representative of an estate when there is no will. The administrator is typically a close family member of the decedent.
If an heir will also be acting as executor or administrator, the heir should hire a lawyer. A full discussion on the topic of whether a lawyer is required for probate can be found at this link. The bottom line is that the probate process is extremely complex and acting as a representative without a lawyer is foolish and can lead to disastrous results.
Additionally, if family relations are even slightly contentious, an executor or administrator that is inheriting a house might be accused of self-dealing or unfairness and he or she will need a lawyer to ensure the rules are followed.
Inheriting a House as a Joint Tenant or Beneficiary
Surviving joint tenants, tenants in the entirety and beneficiaries under an Illinois Transfer on Death Instrument inherit property as a matter of law. However, some documentation is still necessary to wrap up the process and hiring a lawyer is prudent. The fee for this service is minimal.
Determining whether an heir is inheriting a house in Illinois is a multi-step process. First, the type of ownership must be considered and then the terms of a will or intestate succession may need to be applied. In all cases it is best to hire a lawyer to help with the process and the cost of representation is minimal in most circumstances.
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