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Monday, November 4, 2013

Sometimes executors second-guess themselves

In this blog, we see a lot of questions and complaints from beneficiaries about executors. However, not all executors are the bull-headed tyrants that cause problems in estate administration. In today's post, I'm featuring a letter that I received from an executor who is second-guessing herself about how she is handling the estate. Her letter and my response appear below.

"My Dad passed away recently. I am his daughter and the executor. Last week I went to my Dad's city to start going through his personal items with my sister. Long story short she brought a realtor with her and I signed papers to put my Dads condo for sale. I have been 2nd guessing myself ever since because I was grieving terribly and just stupidly signed the paper. There really was no rush to sell right now and another option the lawyer mentioned was that we could have rented it out for time being. Is it wiser to wait until probate is granted or if we get a good offer (as we did tonight) should we take it? I am wondering are we paying more in legal fees because we are selling this now while it is still in probate and making more work for the Estate lawyer? Would I have been wiser to wait until probate was granted and the condo put in my siblings and my names and then sell?"

You certainly are second guessing yourself! It's great to hear from an executor who is trying to control expenses on the estate. I don't see anything wrong with what you've done so far, but let's tackle some of your questions separately.

You can accept a good offer, subject to getting the probate. There is no difference in legal fees between doing it this way, or waiting until after probate to accept an offer. No extra steps are involved so there is no extra work for the lawyer. You have to get the probate anyway, regardless of where along the process the offer is received.

In your last line, you ask whether it would be better to put the condo into three names and then sell. That would in fact double the work for the lawyer and cost more in fees. Why go through the step of adding the names and then selling, effectively turning one sales transaction into two? You achieve the same result (i.e. an equal three-way division among beneficiaries) by selling the property from the estate and dividing the money proportionately.

As for the option of renting the condo out for the time being, consider whether there would really be any benefit to anyone by doing that. While the condo is in the name of the estate or of the beneficiaries, someone has to cover the cost of insurance, property tax and maintenance or repairs. This means that at least some portion of other estate assets must be kept as well, delaying the distribution to the beneficiaries. If the property depreciates or is damaged while in the name of the estate, you as executor could well be held personally liable for it.

You may also be creating a tax problem for one or all of you beneficiaries, if you put the condo into all of your names. Presumably at least one of you owns a home already, meaning that this property would not be the principal residence for that person. If the property appreciates in value before it is sold, that person would be liable for capital gains tax. From what you've said here, I don't see the advantage to renting out the condo.

You may believe there is "no rush to sell right now" but obviously your sister doesn't agree with you, since she brought in a realtor at the first possible opportunity. You should read the writing on the wall and understand that if you decided not to sell for a while, she would have a problem with that. In fact, most beneficiaries of most estates would object if a major asset was held onto for longer than necessary for no particular reason other than "there is no rush".

You're doing fine.

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