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Monday, June 7, 2010

Things for an executor to consider when selling a house from an estate


One of the largest tasks that an executor often has to take care of in an estate is selling the deceased's house. There are a lot of issues to consider before taking this step. Here are some of the things you should keep in mind:

1. Has the Grant of Probate been issued? If not, you will not be able to transfer the title to anyone. This doesn't mean you can't list the house before getting probate, but the deal has to be made subject to the Grant issuing within a reasonable time.

2. Does the Will direct you to grant an option to purchase to anyone? Are there any other instructions in the Will about disposing of the house?

3. Keep the house insured right up until the title transfers. The house is legally under your care while you're the executor so if it burns down before it's sold, you're on the hook. Let the insurer know that the house is vacant.

4. Get an appraisal - or two - before listing the property. This will head off any objections from beneficiaries that either you sold it too cheaply or it's taking too long to sell because you priced it too high.

5. Do a title search to check that the ownership of the house was owned by the deceased alone. Check the title for liens and mortgages that you might have to deal with.

6. Check the Will to see what it says about dealing with personal items in the house and in any outbuildings such as garages, shops and sheds. Give away items according to the Will. You will have to decide what to do about the rest of the furnishings and household items, whether that ends up being an estate auction, a garage sale or a donation of items to charity. Any money earned from selling items should be pooled with the estate.

7. You might have to spend some money on repairs, cleaning or renovations before the house can be sold. If there is estate money available, this is a legitimate estate expense as long as you keep it reasonable and you keep detailed records with receipts. If you end up spending your own money on this because there is no estate money available, you are entitled to be repaid before the beneficiaries split the sale proceeds.

8. If the house you're selling was the deceased's principal residence, there will be no capital gains tax arising from the sale. However, if the house is a cottage or other secondary home, there will be tax implications. Remember that taxes have to be paid before beneficiaries can receive their shares.

9. Deposit the proceeds from the sale of the house into your executor's bank account. Never put estate money in an account with your own personal funds.

11 comments:

  1. What about a house held in joint tenancy by the estate trustee who is also a beneficiary. When they decide to keep house, renovate but have distributed its' value amongst the other beneficiaries. Is the house valued at the D.O.D. or years later when it is sold ?

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    1. Would you clarify your question for me a bit? Who are the joint tenants? I assume that one of them is the executor in his personal capacity, as the estate should not be a joint owner, but who is the other? And when you ask about how the house is valued, I think you are asking whether the other beneficiaries are supposed to receive some part of the increase in value.

      I'm going to answer based on what I think you mean. I think one of the beneficiaries received the house as part of his or her equal share of an estate. The other beneficiaries got an equal share of the estate. The beneficiary improved the house and later sold it for a lot more than it was worth originally.

      Assuming I've got the facts straight, then whatever increase there might be in the value belongs only to the beneficiary who received the house. If the other beneficiaries received money, they are not expected to share any interest or dividends they earn on that money. Once the estate is divided, each of you is on your own to make the most of your inheritance.

      Lynne

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  2. I am the executor of the estate and my parent in their will left the house to me but not till I turn 65. Can I sell the house prior to turning 65 and leave the proceeds in the estate till I turn 65?

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    1. That's going to depend on the wording of the trust. I sure hope the will was drawn up by a lawyer who understands trusts. If so, the will should address whether or not it can be sold, rented, mortgaged, etc. Without specific permission in the will itself, you will likely need the consent of the court, as you will be changing the terms of a trust. If you're really not sure (because let's face it, some wills contain so much legalese you have to have a PhD in latin to understand them), then take the will to an experienced wills lawyer for an opinion.

      Lynne

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  3. Hi Lynne; My husband and I were separated, so he was living in a new condo when he died last year. His (properly executed) will left everything to me, so I inherited the condo. I kept the condo, pay all its expenses, paid off the mortgage, and have just received the mortgage discharge documents. I know I have to register the discharge, but my lawyer said I will also have to go through probate (Nova Scotia) if I ever want to sell the condo. I am having difficulty understanding why, because there are no issues with the will or any other estate matters. Do I really have to probate the will and consequently pay the associated fees? Thank you for your comments.

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  4. My father died and left his house to me and my brother in equal shares. He is sole title on house. My father remarried 5 months prior to his death and his step mother lives in the house, she has also been named executor in the will. The will does give her pretty broad powers on what she can do with the estate, but she also has a duty to pay the beneficiaries. Can she not sell the house for 5-10 years or what are my options to get her to sell the property so my brother and I can enjoy the inheritance as well ?

    ReplyDelete
    Replies
    1. You are right that as an executor, she has the responsibility to wrap up the estate and pay out the beneficiaries. The normal time span for an uncomplicated estate is within a year.

      Normally I would say that 5-10 years is way too long, and I still think that's the case, but there are three things that could impact this answer:

      1. Matrimonial property is different from other real estate. Each province has laws that dictate how the house will be treated when it's owned only by the spouse who dies. Her right to the house could be nothing, could be a life estate (i.e. right to live there for life), or a right to own it. Find out what the law in your province says.

      2. A pre-nuptial agreement may have specifically waived any automatic rights under matrimional property law.

      3. The will itself might state that she is allowed to stay in the home for a certain amount of time.

      If none of those things apply in this case, then she has to move out and get on with the estate.

      I usually think that a polite but firm letter stating your position (i.e that you're not prepared to delay receiving your inheritance) is a good way to start. If that doesn't produce results, you may wish to hire a lawyer. Remember that the estate lawyer, if there is one, doesn't work for you. He works only for the executor. If you went to court, you'd be asking the judge to order her to sell or transfer the house without delay.

      Lynne

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  5. Hello, Thanks for sharing your expertise.

    I am executor to an estate that includes a newly built house that was not quite complete. I would like to begin some last pieces of work to prepare the house for sale.

    Question 1- Is this permitted?

    Question 2- Does another named party in the will have to agree to the expense (both before and after probate is granted)?

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    1. Yes, this is permitted if it will, in your opinion, be a benefit to the estate. This means if it will help you get a better price for the house, or if the house would take a really long time to sell if unfinished, you can take the steps you need to make it more saleable.

      No, nobody else needs to agree to the expenses specifically, but always keep in mind that at the end of the estate the beneficiaries get to examine all of your accounts. If it turns out the expense of finishing the house was excessive or pointless, they may refuse to approve them. If that happens, it may end up being decided by a judge. So realistically, even though you don't need anyone's permission, it might be a good idea to have an open discussion with the beneficiaries so they aren't taken by surprise later.

      Lynne

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  6. I am a co-executor of two estates, my parents, whose main asset was a house which they held as tenants in common. Do I have to transfer the title of the house into both executors' names before I can sell the house? I must add that my sister is my co-executor, and we are the main beneficiaries of the estate.

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    Replies
    1. Yes, the transfer of property takes two steps. One is from the deceased to the executors. The next is from the executors to the buyers or beneficiaries. This is because your parents are no longer around to sell it themselves, and therefore it has to go into the executors' names for them to sell it. In terms of paperwork though, you can submit both steps at the same time. You don't have to wait in between.

      Lynne

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