Q: My single son died two years ago. He had no children. His only assets were his condominium and the money he had in his 401(k) plan. His condo is worth around $100,000 and his 401(k) plan has about $10,000.
For the past two years, we continued to make his mortgage and tax payments on his condo and, of course, we paid for his funeral expenses. No creditors have opened probate nor have made a formal claim against his estate. Once he died, his credit card companies stopped sending letters requesting payment on the amount he owed on his cards. He had around $20,000 in credit card debt.
Can we (his parents and his only sibling) now place the condo up for sale without probate and being named executor? Can we get access to the 401(k)?
A: We are so sorry for the loss of your son. We know that his passing must have been hard for you and your entire family.
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You didn’t mention in your question whether your son had written a will or if he had taken any steps to build an estate plan. We’re guessing that he didn’t have one, but knowing for sure whether he had a valid will is critical and will determine your next steps.
Let’s start with your son’s 401(k) account. If your son designated a beneficiary for the account, you shouldn’t have any issues closing the account and having the person or persons designated as beneficiaries receive the funds. The key is finding out if your son designated you, your wife or your other child as a beneficiary under the account.
If your son never designated a beneficiary for his 401(k) account, the account administrator cannot legally give the money to you, even if you’re a close relative. The account administrator needs a court order to send the funds to a specific person. Usually, this process requires the probating of a will.
The will should indicate who your son designated as the executor of the will. That person would then become the court-appointed person to handle your son’s affairs and distribute your son’s assets as provided under the terms of the will. You should also know that the executor would also have the obligation to pay off any debts owed by your son, including the credit card debt and any mortgage remaining.
Once an executor is appointed by the court, the executor can then reach out to the 401(k) company to have them distribute the funds in accordance with the terms of the will or as instructed by the court.
If your son died intestate, or without a will, you still need to go to probate court and have an executor appointed to handle the affairs of your son’s estate, including the sale of the condo. The only exception to this would be if there is a co-owner of the condo, who is a joint tenant with rights of survivorship. If there is a co-owner and the property’s title is held as joint tenants, then that person would have inherited the property outright upon your son’s death..
Assuming he owned it alone, the executor of his estate (whether named under the will or was appointed by the court) could then list the home for sale and distribute the proceeds from the sale after settling any debts owed by your son’s estate.
We’d urge you to talk to a probate attorney close to where your son lived and the condo is located. Your state may offer different options if your son is deemed to have died owing more than he was worth.
Based on the information you provided, it’s unclear how much equity is in the property. You indicated that the condominium is worth around $100,000, but if your son still owed $80,000 on the mortgage, that amount would need to be repaid to the lender. Still, you should be entitled to reimbursement for the property tax and mortgage payments you made for your son’s estate. After you’re repaid, and the closing costs for the sale of the condo are paid, there may not be much left to distribute.
In particular, if the estate needs to settle up with your son’s lender and various credit card companies, there might be nothing left other than the funds in the 401(k) account. Make sure you talk to the probate attorney and understand what fees you’ll incur in settling your son’s estate.
Ask the 401(k) company if your son designated a beneficiary for his account, how to handle the transfer of funds and what documentation they need. More importantly, if your son died intestate, ask them what the options are if the 401(k) account is the only real asset left in this estate.
You have some work to do to figure out the best course of action. We do think, however, that you’d benefit from consulting with a probate attorney on your situation. And, if you don’t see eye to eye with the attorney, find one that you feel comfortable with and gives you a sense of what you can get out of the estate without spending all of the estate’s money on attorney fees and probate costs.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)
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