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Thursday, March 16, 2017

Two beneficiaries want Dad's house sold, and two don't. What will happen?

If some beneficiaries want a specific piece of estate property to be sold, and others don't, what will happen? Who decides whether it's sold? Can it be given to a beneficiary? A reader recently asked these questions:

"My dad died and left his estate to 4 beneficiaries. Myself, and my 3 nephews. One thing on the inventory is my dads house where I'm living for the last 3 years since he got really sick. Will just states that everything should be divided 4 ways. 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?"

The will appears to be set up to give flexibility. It does not give individual properties to individual people but simply says to divide the whole estate in four equal shares. This gives you options. Often executors think that when everything is to be split four ways, all four names have to go on each piece of property. That is flat out wrong. There is no reason whatsoever for all four of you to be put on the individual properties before they are sold. That is just an extra step, extra work, extra cost, and extra headaches.

A will does not have to direct the executor to sell the properties, and in fact most wills don't say that. It's understood, though, that items that are not being given directly to beneficiaries will be sold and the proceeds will be divided among the beneficiaries. The person who decides whether the house is to be sold or not is the executor. It doesn't actually matter whether everyone agrees or not. He still has the power to sell it.

I assume that when you say you don't want the house to be sold, what you really mean is that you want to own it yourself. Obviously it cannot stay in your father's name so it has to be given or sold to someone.

If the estate value is four million, and you are one of four equal beneficiaries, your share is going to be something under a million dollars. Taxes and expenses will come out first before your share is calculated.

One option is instead of taking a million dollars in cash, you receive the house and $700,000. In other words, you are taking the house instead of $300,000 (or whatever the final number turns out to be). The title would be transferred from your father to the estate, and then from the estate to you. You can suggest that to the executor.

If you choose this option, it would protect both you and the executor if he got a property valuation to place an accurate price on the house and for you to exchange funds equal to fair market value for the house. You don't want other beneficiaries complaining that you were given some sort of break that cost them money.

Another option is for the house to be listed for sale on the open market, and for you to offer to buy it. You can use some of your inheritance for that.

It sounds as if one of your nephews is also interested in the house. I do not recommend that you and he both own the house. That will work for about five minutes before it falls apart. Even if you could both happily share the occupancy of the house, there will eventually be a need for one of you to sell, move, re-finance, or leave it in your will, and you can't do any of that without the consent of a co-owner.

If both you and your nephew want the house, the executor is the one who has to decide which one get it, and he has to stay neutral between you. To do this, he can use any method that gives both of you an equal chance, such as flipping a coin or drawing numbers out of a hat. It would be nice if your nephew recognized that this house has been your home for the last three years, but that is not a legal matter. Being there while your father was alive doesn't give you any right to own the house now.

Remember that if you get the house - either by gift or by purchase - you do not get the contents of the house. That's completely separate.

9 comments:

  1. Thanks for sharing a valuable information about beneficiaries.

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  2. @Lynne
    That is an incredible amount of free advice.

    My case. I am Executor and residuary beneficiary along with a sibling who is a residuary beneficiary. Ongoing case for 11 years.
    A previous lawyer tried to fool me into putting the house under both names which would have created a problem. I was wise enough to have previously put the house in the estates name via an earlier lawyer. The second lawyer could have asked me what the status was re the house and he could have asked the first lawyer. He did not.
    I am currently waiting to hear from my 4th lawyer re a Motions hearing. The 3rd lawyer? He was a screw up and left the firm. Lynne as you recently stated..'a holy mess'. I believe something is in the works. I worked out, I believe, a strategy that will corner the other side. My current lawyer should have come up with that strategy but I have to tell him what to do at 100's of dollars per hour. The amount of work has been 'enormous'not to mention the'stress'.

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    Replies
    1. While the details of why this has gone on for 11 years was not specified, I seem to recall webeye had previously referred to the delay being due to un-cooperation by the sibling.

      I anticipate as Executor, webeye should have long ago specified on writing, a deadline for the sibling to comply with. If the deadline was exceeded without a valid or reasonable reason, then webeye should have applied to the court for a judge to pass an order, thereby allowing the estate administration to move forward, one way or another.

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    2. webeye (me) did have a lawyer, the second one in 2010, but that lawyer did not follow his instructions, his directive. That lawyer deceived everyone and 'got off the record'. Another younger lawyer was retained and he did not follow through ie request a Motion/Order to get the required financials. He dug himself into a hole. He was not prepared to have the misbehaving lawyers as witnesses. He curiously left the firm and went corporate. A partner has taken over and this is now in Court. This is a rather unusual case. Why? I complained to the LSUC about the first lawyer (well known law firm) in 2004. Lawyers in small towns/cities where they all know each other are very reluctant to go after other lawyers. In such cases using a lawyer from another city that does not have any contact with that misbehaving lawyer might be the better way to go. It is a very simple Estate case that got out of control due to a disgruntled beneficiary. It is now a Court situation. Many lawyers that I contacted did not want to touch this case. Cops have a 'blue code', lawyers have a '____ code'? TBC

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  3. Thank you very much for detailed answer. The problem there is that I'm the only one staying in the province of Ontario, everyone else is in BC. And executor of the will has been keeping us all in the dark, doesn't want to give us bank statements, doesn't replay on emails and wants to sell everything 50cents on a dollar. My other nephew and myself are strictly against that. She doesn't want me to take the house as a part of my portion of estate. I'm guessing we'll have to go to court than. She doesn't even want to put the house on my name so I can take the mortgage and pay her share out (75 000$) because other nephews are fine with me getting the house. Biggest problem is she is the executor that's been doing a poor job. Do I have chance on the court?

    ReplyDelete
    Replies
    1. Somewhat confusing as the OP said a nephew is the executor but in the reply, the executor appears to be referred to as a 'she'.

      The executor's obligation is to ensure the estate value is maximized. Selling items at 50 cents on the dollar is not fulfilling the obligations. Official valuations should be obtained on anything of value, particularly real estate, jewelry, automobiles, collectibles, silver, gold etc.

      The executor is responsible to report to all residual beneficiaries which is typically done with a detailed financial report. While bank statements are usually not included, there should be no reason for an executor to deny providing copies if properly requested in writting.

      Selling the house in either manner detailed by Lynne is proper. The executor's obligation is also to deal with each beneficiary on an equal basis so if the decision was made to sell the home, the executor cannot restrict any of the beneficiaries from making an offer. The house should be sold to the highest offer, assuming that offer meets or exceeds the official valuation.

      The executor's position is a legal one and he/she must act professionally and ethically, otherwise, the other beneficiaries can force matters to the court for a judge to force corrections to be made.

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  4. Another dysfunctional family/relations. Like many parents, Dad meant well believing he had done right by the people he cared about. Leaving a house to be split among beneficiaries (4 in this case) as you have stated so often Lynne, is not the way to go. I wonder if the lawyer who wrote the Will advised them against that?

    ReplyDelete
    Replies
    1. That question about the lawyer advising the client about the house is a good one. I have heard from many people that when they approach a lawyer to have a will made, they are given a sort of questionnaire to fill out where they are supposed to say what they want in their wills. This would be okay if the lawyer then sat down with the questionnaire and went over it all with the clients, but I have been told by many that it doesn't happen that way and they never have a meaningful conversation with the lawyer about what goes into the will. And given some of the wills I've seen that have been made by lawyers, I believe it.

      I guess what I'm getting at is there are lawyers and there are lawyers. There are bad apples in every bushel, no matter the industry. Anyone who gets a will made should feel that the lawyer knows their situation well and that their plans have been thoroughly discussed.

      Lynne

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  5. Please see
    Anonymous March 20, 2017 at 2:51 PM
    and my response March 21, 2017

    ReplyDelete

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