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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.

59 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 ?

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    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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    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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  7. Hello, I am the court appointed Administrator of an Estate in BC (executors renounced), and have listed and sold (subjects removed yesterday) the property held by the deceased. I was just notified today by my Notary, that since 180 days has not passed since probate, I will need consent from all beneficiaries (yikes, there are 8!) before conveyancing, otherwise the title cannot be transferred. Is this correct? I know I cannot distribute the estate to beneficiaries, but whey can't I sell the property with proceeds going to the estate? There is no spouse, no children (minor or otherwise).

    Please advise, and many thanks...K.

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    1. It has to do with the time allowed for a person to make a claim against the estate. 180 days is the amount of time (starting when probate is granted) that a spouse or child has to bring an application for support from the estate. I know you said there is no spouse or children, but you have to allow for surprise people you know nothing about. The deadline can be ignored for the purpose of registering a property if you get the consent of all of the beneficiaries, or a court order allowing it.

      Lynne

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  8. I am currently the Executor of a large estate. I understand that you cannot sell a house before probate is granted by the Courts, but can you sell household items that are not granted to anyone in a Garage/Estate sale before probate is formally granted? Any advice is most appreciated... Andrew

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    1. Yes, you can. Your authority under the will allows you to do that. Keep careful records and put the proceeds into an estate bank account, but yes, go ahead with the household items. This goes for vehicles, ATVs, snowmobiles, etc as well.

      Lynne

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  9. A lawyer is the executor of my grandmothers home. my mother and her two brothers were the original beneficiaries. Things get a bit tricky, though: one of the brother passed away and his daughter is to receive half of his share. That technically is only 16.6% to my cousin. So, my mom and her brother each will receive 42% of the sale of the home. Unfortunately, the lawyer and executator wants to sell the home, but the new beneficiary (cousin at 16.6%) wants to sell it. The lawyer is trying to seek it, despite the two major beneficiaries disagreeing. One is living in the home and fixing it up (an agreement all the siblings came up with before one passed away). I understand the cousin could be bought out, which we are in the process of trying to, but the executor is threatening to sell it if our offer doesn't go through. What power does he really have over the property if all party members are on a different page ( 2 want to sell and the cousin wants money).

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    1. The executor has quite a bit of power. As a general rule, the executor can sell or dispose of all estate assets in any way that he sees fit, without needing any okays from any beneficiaries. That is, after all, a big part of the job of being an executor.

      Real estate is in a somewhat different position, and whether or not the executor has the power to sell without permission is going to depend on the wording of the will.

      When real estate in an estate is being sold for any reason other than the necessity to pay bills (which I assume to be the case here or the lawyer would have just gone ahead already), approval is needed from residuary beneficiaries. However, the need to get that approval can be dispensed with if the will contains a clause giving the executor the power to sell real estate at his discretion.

      Obviously I don't know whether that clause was in your grandmother's will. I can tell you though that I haven't seen many wills without that clause in the last 10 or 15 years because we wills lawyers know it needs to be there to allow the executor to do his job.

      If the will contains a clause like that, the executor can go ahead and sell the property.

      If the clause is not there, the executor's only option is to ask the court to approve of a sale despite the bickering of the beneficiaries.

      Lynne

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  10. Can an Executor take back an estate item after giving it freely to the beneficiary to later find out that it was listed in the will and wasn't listed as part of the Inventory either.

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    1. I'm sorry but I find this question totally confusing. When you say "it was listed in the will" do you mean that it was specifically left to the beneficiary who first got it, or to someone else?

      If an executor has made a mistake in the distribution of an estate, it makes sense for him or her to try to correct the error. Your question doesn't make it clear whether the item was supposed to go to this beneficiary or to someone else.

      Not each individual item is necessarily listed in an inventory. For example, it's quite common to see household and personal items all lumped together as one entry for the purposes of the inventory. Since I don't know what the item was, I can't actually be more specific than that.

      Lynne

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    2. This comment has been removed by the author.

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  11. Hi, there. I'm the sole executor of an estate that will not need to go to probate. The house got an offer which I accepted and the possession date is one month from today. The titles will be in order, so there is no issue there. The issue is that it has been a month since I met with his bank and have made several follow-up calls since and they have yet to even draft the paperwork for the life insurance he purchased that pays off the full value of the mortgage in the event of his death. So, I guess my question is, if the bank dragging their feet ultimately results in the mortgage not being paid off in time causing the sale of the home to fall through, do I have any recourse? Or are you aware of any options I may have to avoid that situation? Thanks so much.

    Paul

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    1. I have a comment but no answer. However, I think Lynne will say you should proceed with the sale, let conveyancing take care of clearing title for completion and then go after the insurance. That of course assumes proceeds of sale are sufficient to pay out the mortgage.

      My comment;
      I am 6 months into probate of a very simple estate and I can say, banks in general and CIBC in particular, have been far and away the most difficult people to deal with.

      Good luck.

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    2. Thanks, Tim. The bank actually came through finally, so the sale should be good to go now.

      I definitely feel your pain. I met with the bank two days after my father's passing and two weeks later they hadn't even cancelled his credit card. At that point I had to specifically ask just to get them to tell me what additional paperwork was needed to file for the life insurance. It was nearly a month before they cancelled his line of credit (which had a zero balance but still had fees coming out). They scheduled an appointment with me for a week or so ago to sign paperwork to fix a situation with his RRSPs and didn't even have the paperwork ready. They didn't even bother calling. They just let me come in (I had to take time off work) to tell me they weren't ready for me yet lol. My mom is working through an estate at the moment with her new husband's late father and is experiencing similar things too. She is a nurse. It was kind of funny to hear her say that people would die if she approached her job the same way the people at the bank approach theirs.

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  12. Hi there. My dad died and left his properties to 4 beneficiaries. Myself, and my 3 nephews. One thing from the listing is my dads house where I'm living for the last 3years since he got really sick. Will just states that everything should be divided 4ways. Me and one nephew don't want to sell the house, other 2 want to sell it. Executor of the will is the nephew that wants to sell. Will doesn't say to sell all the properties (4 million total value) and house worth is around 300k. What are my options here?

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  13. Hi What do you do when you feel that the executor is dragging their feet. Mom and Dad passed away and now my sister who is the executor cannot get her A... in geer. She has an excuse for everything. She has been living in Mom and Dad's home for the last year and a half since Mom died. Dad died previous to Mom. My sister ad her husband have a home further out of toen and prior to Mom and Dad oassing would often look at homes in the area expressing a desire to buy. This gives them the same adantage of living where they want without having to buy. My brother-in-law is a cheapskate to begin with. There is always an excuse why it is not on the market. They have used the money from Mom to live there and when I asked for some of the money was told that it is gone, used for them to live there. I feel like they are parisites.

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    1. A year and a half is long enough. She should have been paying rent to live in the house, though I'm sure she hasn't.

      You have only two options. One is to persuade her to get on with it. The other is to force her to get on with it. If you try to force her, that means taking her to court.

      She is breaching a number of her executor duties. She is taking too long to administer the estate. She is taking advantage of the estate to her own financial advantage. She is not maximizing the estate (by paying rent or renting the place out to someone else who would pay rent).

      It sounds as if you've already asked nicely a few times and this has gotten you exactly nowhere. Time to ask yourself whether you're up for pushing this.

      Your best bet is probably to hire a lawyer who will write to your sister and tell her that you are planning to take her to court to a) remove her as executor, b) charge her back rent for the last 18 months, and c) get her to pay your legal costs.

      That should light a fire under her. If it doesn't, you have to be prepared to go ahead with it.

      Lynne

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    2. but if the executor is a fellow beneficiary and residing in the house does the rent have to be payed monthly to the estate or is it taken off at the end out of their portion? it would make sense to me that it would be payed monthly as waiting until the end they have already financially gained through the property monthly by not having to pay until the end.

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    3. It also makes sense to me that it be paid monthly, since the person using the asset will be the person supporting the asset. Also there will be no loss of interest on capital that would otherwise have accumulated during the rental period.

      Lynne

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  14. My uncle passed away 8 years ago when at that time my aunt took over as administrator .. he had no wife no kids. Anyways she passed away 5 years ago and his pro ate still hasn t been closed nor land sold .. also he son was living in the house and it recently burnt .. how do i go about selling it if granted administrator

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  15. Hi. I am co executor with my sister Deb for my fathers estate. Deb wants to buy the property and we have 2 appraisals. She is bidding in between the 2. Do we have to list it. Another sister is against her buying it and believes we have to list it to see if we could get more. If we already have a private sale that is paying fair market value are we safe? She as a beneficiary only has contacted got a apprasial and has contacted a realtor abd says they want to show the place. I believe she can't do that and it will be invalid.

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    1. No, you are not legally obligated to list the house.

      Just be sure that you are not putting personal gain ahead of doing what's best for the estate. I like that you have obtained appraisals, and that is what I would have advised you to do. That should be proof enough that the private deal is in the right ballpark.

      The beneficiary does not have the legal authority to make any arrangements with the realtor. Only the executors can do that.

      Lynne

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    2. Thank you. She believes we have to list to get higher price. But we could get less and pay realtor fees as well. We sent her a letter stating any bid could be sent to the lawyer. Thanks again.

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  16. Hello..My brother and I are the beneficiaries of our parents estate and he is the executor of this...can we sell their home from the estate to avoid capitol gains tax..also if one of us was to buy the other out could this be done from the estate as well and proceeds go in the estate account and then distributed to that person?

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    1. To answer the question you asked, yes you can sell from the estate.

      To answer the one you didn't ask, there shouldn't even be capital gains tax on their home. Perhaps talk over the tax issues with an accountant or estate lawyer so that you are clear on what you're avoiding and what you're not. Better to spend a few dollars getting advice first than to make a major mistake and have to pay a lot later to fix it.

      Lynne

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  17. Hello We are in BC. We have been left a townhouse by our parent. The property has to be put through probate...while waiting for this can one of the beneficiaries live there under rental value and expect the estate or other beneficiaries to pay for assessments?

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    1. Certainly the property can be rented out, and if it happens to be one of the beneficiaries who rents it, that's ok. The executor will need to keep good records of rents, expenses, etc just as he would if the tenant were a stranger.

      I assume the assessments you're talking about are those done in anticipation of selling the house on the open market. That would be an expense of the estate because the assessment would have to be done no matter who the tenant was. I can't think of any reason why a tenant would pay for a property assessment.

      Lynne

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    2. Hi Lynne;
      "Assessments" in this case, since not clarified could be those monthly strata fees, which here in BC are most commonly refered to as "assessments; including special assessments (levies).

      If that is the case, then would this not be an expense to the estate?

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  18. Hi Lynne - I am a beneficiary to a non-real estate portion of a will. The executors who both inherited a cottage are waiting to distribute funds until they sell the land and share the proceeds between them. Since the land has nothing to do with me is it reasonable for them to delay the disbursement? It has already been a year and the cottage is still for sale.
    Also, are they allowed to take expenses related to selling this property from the estate when the benefit of the sale is not shared? Your expertise is appreciated!

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    1. If you are supposed to get a defined dollar amount, say $100, and there is enough money in the estate to pay you, then the executor should pay you. A year is long enough to wait.

      If you are getting a share of the residue of the estate, that is, everything that's left over after bills are paid and defined gifts are given, then it makes sense to wait. Your gift wouldn't be available until the cottage is sold and the funds all sorted out.

      If the executors inherited the land (as opposed to inheriting the proceeds of the sale of the land) then they should not be taking selling expenses out of the estate. The cost of taking the property out of the estate and into their names is the responsibility of the estate. Once that is done, any sale they carry out is their private responsibility, not the estate's.

      It sounds as if once again the executors are just doing whatever they want and assuming the beneficiaries either won't know any better or won't cause a fuss.

      Lynne

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  19. Hello Lynn, I am single, 70 years old and have 3 children aged 21, 23 and 44. Essentially, the vast majority of the estate money will come from my house which is mortgage free. The 2 younger kids are are not established in careers as yet and both have psychological issues that would make it difficult for them to survive if they had to leave the sanctuary of my home. Therefor I would like to put a clause in the will stating that they be allowed to stay in the house until they reach the age of 25 and 27 (4 years from today) Although I will probably not die within the next 4 years but I want this clause as a safety valve just in case. My older daughter would probably not like to wait 4 years to put the house on the market if I die tomorrow but she is well established and reasonably normal. Is a clause of this nature legal? Thanks for your advice!
    John

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    1. Yes, you can certainly put something like that in your will. I suggest you set aside a sum of money as well that will be used to pay insurance and property tax. Also, when your lawyer drafts this residence trust, consider all of the variables and "what ifs". Some of them might be: who pays for utilities? What is they don't want to stay in the house? If they do stay in the house, can other people move in too? What if one of them gets marries? Can they sell that house and use the money to buy another one? In other words, don't assume that everything will stay the way it is right now, and try to cover off as many reasonable contingencies as you can.

      Lynne

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  20. Hello,

    My mom passed away and her house was left to her estate, to which my brother and I are beneficiaries to. I am wondering who should be paying the mortgage on her house while we wait to have it sold. It has been 6 months and my brother and I are seeing our inheritance fly out of our bank accounts trying to keep the mortgage in good standing, and insurance.

    If the house should not sell for 2-3 years it will have cost us 40-50 thousand dollars for a house we cant live in (we live in different areas) and we haven't rented out. What are our options?

    Thank you.

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  21. Hi Lynne. I am enjoying reading all your responses. I do have a question. My dad and step mother have their house. Which may be entirely under the step mothers name. Couple years ago, they stuck my dad in a home.since then myself &my kids have been written off. When the step mother passed,we heard nothing of being beneficiaries. It has been 11 months and now my dad passed.She had little household trinkets for us &we had to sign a receipt book for them.No word on their house matters..she told me when my dad passes it will be sold.I think all the funds will go to her and her kids.Anything I can do? We haven't seen any wills from either parent,yet had to sign for trinkets. Thanks. Confused

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  22. I am the court appointed Executor of my best friend will he has 2 siblings that are beneficiaries to the estate
    The estate consists of a mobile home in a park worth about $100,000
    Was going to put it in their name but the fighting between the two is terrible and bickering unreasonable
    Can I sell it and split the estate money after
    The notary has put trailer in my name I was going to put in kids name but only see future problems
    One child lived with the father and was paying rent
    The other child has thrown him out and moved in not paying rent and the fight goes on

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    1. I wouldn't even consider putting an asset in the name of two people who fight with each other. Unless the will says to give the TRAILER to them (as opposed to the ESTATE to them), then sell it.

      Many executors think that if an estate is being divided among beneficiaries and there is a property in the estate, all names have to go on the property. That is completely wrong. There is no requirement at all for an executor to do that.

      As the executor, you're supposed to do what's best for the estate over all, and it looks like you've figured out how that will go.

      Lynne

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  23. My brother and I are co-executors of my fathers estate. There are 4 of us siblings. The will states that everything gets split 4 ways. I am finding that my sister who is a beneficiary is trying to control the distribution of items in the house for example: I wanted an item so I asked everyone if they wanted it and they said no so I said I will take it. When my sister saw that the item was worth $70 she said well no then we should sell it. She only says that because she doesn't want me to have it for spite. When my father died we agreed that decisions will be made by majority but i am finding that my voice goes unheard between the 4 of us. As an executor don't I have a right to say how this estate is administered? I am getting very frustrated I feel that I am excluded in the decision making and I shouldn't be. Any advice as to what I can do? My co-executor is the type of person who is non-confrontational.

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  24. Logical not legal comment... Decide the $70 in three, pay each sib and keep the item. There, the estate sold it to you.

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  25. Hi Lynne, in the light of beneficiaries allowed a detailed, clear and accurate account of all financial transactions: (a) Why aren't beneficiaries allowed to see a statement or list of items that falls under a corporate account? (b) Why aren't beneficiaries allowed a list / record of sold and unsold items as per auction completed. Unsold items were donated and beneficiaries have no idea of the total monatary value of the unsold items. If a large amount it will reduce the value of the estate which is not in the interest of the beneficiaries. I need a second opinion on this please. Your feedback would be greatly appreciated.

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  26. Hello Lynne,
    My brother is acquiring my father's house. It is an income property. He is doing renovations on it before it is in his name. Can he still claim the renovations on his taxes for the income property? My sister and I don't have any issues with my brother. We are just waiting for probate to transfer the ownership. I don't want him to lose the money that he puts into the house.
    Thank you very much

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    1. I'm not an accountant, and therefore am not a specialist in income tax details. However, my understanding of what goes into calculating the adjusted cost base of a property includes renovations done by the new owner. I assume there is some signed Agreement for Sale which can be used to establish the date on which it was agreed to transfer the title.

      Lynne

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  27. Hi, my sister and myself are both beneficiaries of the estate and my deceased father's home. She is the appointed executor. I would like to live in the home until it is actually sold, which could take some time as the process has just started with the probate papers going through the court etc., I'm willing to pay rent while residing there. However if my sister says that she does not want me living in the house (with no valid reasons) do I still have a right as a co-beneficiary to reside there regardless? Also, though I'm willing to pay rent (which i assume would go back into the estate) must I pay full market rent to live there? The house is damaged (major cigarette burns on much of the carpeting) to the extent that it can not be rented out by an outside party.As she is the executor, does she have the final say in the matter? I'm without a home to live in from November 1 so it would be great to know my rights in this situation, I hope you can help with my questions. Thanks!

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    1. The executor is in charge of the assets until they are sold or transferred to beneficiaries, so yes she does have the last say. Even though you are a beneficiary, you do not own the property until the estate debts and expenses have been paid and the executor transfers the assets to you.

      You mentioned that the house is damaged. Perhaps she doesn't want you to live there because she wants to make some improvements to the house so that it can be sold for a higher price. Maybe she intends to empty out the furniture and clean the place up (which she has to do to sell the place), and having a tenant would delay that. It could also be that she anticipates trouble in getting you to move out when the house is sold. Not knowing the parties, I can only speculate on that bit.

      If that's not the case, perhaps you can still persuade her to allow you to live there. I think she might be more open to the discussion when she finds out that insurance companies do not like to insure vacant properties and may discontinue coverage if the house is empty. If the house burns down or sustains other damage while it's in the estate and uninsured, she will be vulnerable to a lawsuit. Also, she might save the estate money by allowing you to live there because if you pay for heat, utilities etc, the estate doesn't have to pay for them.

      If you do move in, yes you should expect to pay market rent. However, market rent for a damaged property is probably less than it would be for a pristine property. As you mentioned, rent proceeds go into the estate and as a beneficiary, you would eventually receive half of the estate.

      If you move in there, I suggest that the two of you openly and frankly discuss the potential timeline for you living there and any terms about who will pay for heat, water, utilities etc. Agree on how much notice you will need to move out. Agree on you not interfering with her access to the house including bringing in workers to repair things. Write it all down, sign it, and both of you keep a copy.

      Lynne

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    2. Hi Lynne and thank you so much for the quick reply! Your information has been so wonderful to receive as I find it so difficult to get answers through google searched. She can and will access the house anytime she likes if I rented the house and that is just fine. I just have a couple more questions. When I mentioned renting the house her primary concern was that she herself (not the estate) would then have to pay tax on the rental income from the property, as in she would be losing money somehow... How would that work? and this would be the case no matter who she rented to then? If I understood correctly, you are saying that the rental income I would pay would simply go back into the estate to which I am half the owner, so I would then not be losing full rent while renting outside our house. It would be like re-investing in it and half of that rent would come back to me anyway (after rental income tax etc.)... Would you recommend an actual rental contract between us or would a written letter suffice? Thanks for your much needed help!

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    3. She misunderstands the payment of the rent. It's just as hard for an executor to understand the ins and outs of estates as it is for beneficiaries, so I can't fault her on that. But the rental income is not paid to her personally; it is paid to the estate. The estate will have its own tax return to report the income. If she hasn't already opened an estate bank account, she no doubt will be opening one soon. That is where the rent cheques would go. Her personal money shouldn't ever be mingled with estate money so there should be no problem with her having to pay the tax.

      I would suggest an agreement signed by both of you. If you just write her a letter, there is no way of proving that she agreed to any of it. You don't have to get one prepared by a lawyer. Maybe see if Law Depot (see the link on this page) has a form you can use.

      Lynne

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  28. Hi Lynne! I am the executor of my mother's estate. My question is about a potential increase from fair market value at the time of my mother's passing and what we receieve when the house sells.

    My understanding is that CRA may require the estate to file a tax return for capital gains on that asset during this period. Is this correct and if so how does this work? Specifically, if I have the estate pay for some upgrades to increase the value of the house, which results in it selling for more than what we include in the list of assets for the probate certificate.

    We do not plan for the time between her passing and the sale to be very long - perhaps six months at the most.

    Thanks!

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    Replies
    1. Hi Bob,
      Yes it is correct that the estate should file a tax return if it has income. A capital gain is income for that purpose.

      Don't forget, though, that the cost of renovations are added to adjusted cost base of the property, meaning that the cost of renovations reduce the amount of tax payable.

      Lynne

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    2. Thanks for your response.

      To be clear, this is Mom's primary residence so for Mom's final tax return there will be no capital gains. I am referring specifically of the period from Mom's passing to when we actually sell the house.

      How does one determine if there are capital gains here? Do we get an appraisal of the property for the probate application and then a few months later when we sell the house, if we get more than that appraisal the estate has to file capital gains (minus any upgrades and real estate fees?)

      If this is true, it seems that an awful lot would be riding on the accuracy of the appraisal. Moreover, we would be incentivized to get as high an appraisal as possible.

      Am I missing something here Lynne?

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  29. Hi Lynne, great information throughout your site!

    I am the executor on my fathers estate and am trying to sell his home, but the current Covid market is challenging. Can I legally rent out the home for a year, putting all income into the estate account? And will this income be considered capital gains for me, or will it just be income for the estate?

    Another side question: how soon after probate must I close out and dispense the assets? Could one keep the house rented for 5 years and put all income into the estate? I want to avoid putting the house in my name to keep from paying capital gains on a second home. Our goal
    Is to sell the house soon.

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  30. I am executor of my moms estate. She has a house and 70 foot shop that was used as a business by my dad. He passed away 20 years ago and has been used for storage. The shop is zoned commercial. I have an offer on the property and am wondering is there capital gains or hst considération for the shop part of the building

    ReplyDelete

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