Most experienced real estate agents, lenders and investors have at some point been confronted with the passing of a property owner that necessitates probate. In some states, probate is a protracted proceeding that is worth avoiding through preemptive estate planning due to the costs and delays it portends. Probate in Idaho is not normally as time intensive or costly, but it does still bring with it some added expense and delay to a real estate transaction that has already been set in motion.
Enter the lack of probate affidavit. The origin of an affidavit being used to pass real property from a decedent to their heirs is not particularly clear; indeed there is no Idaho statute authorizing its use in the real property realm. It’s possible it grew from the Small Estate Affidavit authorized by Idaho Code § 15-3-1201, which allows an heir of the decedent to take title to property of the decedent outside of probate. However, it’s limited to transferring personal property up to but not exceeding $100,000 in value. Despite its tenuous statutory foundation, the Lack of Probate Affidavit has been used in multiple counties in Idaho to transfer real estate from decedent to heirs, thanks to the real estate law concept of insurable versus marketable title.
Marketable title is a term of art in real estate law. It means that title to property is reasonably free from doubt or threat of litigation. The promise to provide marketable title is implied in real estate contracts and is regularly an explicit contractual provision. Insurable title, on the other hand, simply means that a title insurance company is willing to insure against defects that may affect ownership or value. Thus, a seller may not have marketable title, but if a title company is willing to insure over the defect, then seller still has insurable title. This is often sufficient for a buyer to proceed with the purchase.
Applying this concept to the situation where a person in title to real property dies, using an affidavit of lack of probate to transfer the decedent’s interest in the property to someone else may create a title defect. Here’s an example of how this might occur:
John Smith is married to Jane Smith. Jane prepared a will that bequeathed her interest in certain real property to her niece, Janet. At Jane’s passing, John Smith, Jane’s surviving spouse, caused an affidavit of lack or probate to be recorded, whereby he claimed full interest in Jane’s real property. If Jane’s will were probated, her niece, Janet, would be entitled to her interest in the property, not John. As a result, John’s filing of the affidavit of lack of probate creates a defect or cloud on the title, which would render the title unmarketable
Title in this example would become insurable if a title company was willing to insure the sale of the property to an ultimate buyer notwithstanding the failure to probate Jane’s will and the reliance on the lack of probate affidavit.
It is unlikely that a title company would insure the example set forth above. However, it is currently a widely accepted practice in many Idaho counties to insure transactions using an affidavit of lack of probate in the following situations:
- Decedent did not leave a will, and his or her surviving spouse is claiming the property under the affidavit.
- Decedent did not leave a will and does not have a surviving spouse, and all of the decedent’s children acknowledge the lack of probate affidavit.
- Decedent did leave a will, but the will dictates that the real property passes to heirs in the same manner as Idaho’s intestacy laws. See I.C. § 15-2-101 et al.
Because a title insurance company would be willing to insure a sale where the affidavit of lack of probate is used to transfer real property titled in the name of the decedent in the above situations — despite a potential title defect by failing to probate a will or administer an intestate estate under the appropriate statutory mechanism — title is insurable even if not marketable.
It may well be argued that using an affidavit in these contexts does not render the title unmarketable, because either the transfer follows Idaho’s intestacy laws (which dictate who inherits property when there is no will) or the transfer follows the will of the decedent. But the fact that there is no statutory basis for the affidavit’s use to avoid probate raises some cause for concern. Thus, ensuring that this type of transfer can be insured over with title insurance is essential to its continued use.
In summary, check with your title insurance company prior to using an affidavit of lack of probate to transfer a decedent’s interest in real property. This approach should also be validated by sellers with their prospective buyers prior to closing to ensure that sellers don’t breach their obligation to buyers to convey marketable title. But if these boxes can be checked, then the lack of probate affidavit may be a helpful tool to keep costs down and transactions on track.
Tayler Tibbitts is a licensed attorney and general counsel for Empire Title, LLC. His comments here are not meant to create an attorney client relationship or to be considered legal advice. Readers are encouraged to seek independent legal advice on the matters addressed in this article.