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Tuesday, September 19, 2017

Executor wants to buy the family home but a beneficiary has hired a realtor to sell it

Is there any asset that causes as much trouble in an estate as the parent's home? The interplay of legal rights and volatile emotions can make it tough to deal with. This reader recently asked me a question about an executor (who is also a sibling and a beneficiary) who wants to buy their father's home. Here is her question and my response.

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 appraisal and has contacted a realtor and says they want to show the place. I believe she can't do that and it will be invalid.

Dealing with the beneficiaries of an estate involves legal issues, of course, but all kinds of other things get dragged in. Can you imagine any other scenario where someone who doesn't own a house hires a realtor to show and sell that house? Estates are like that. There are always assumptions and expectations as well as strong feelings to contend with.

In this case, the beneficiary does not have the right to show and list the house. Nor does she have the right to override the executor's decision to sell the house. Unless the executor is doing something that is clearly not in the best interest of the estate, the beneficiary really has no grounds for an objection at all.

An executor who buys an asset from the estate should pay fair market value. An executor cannot give herself a great deal on the house to the detriment of the beneficiaries. Here, the executor who wants to buy the home has obtained two appraisals and is bidding within that range. That is exactly what an outsider would be expected to do, so there should be no reason to object to this particular buyer at this particular price.

It could even be to the advantage of the estate to accept this bid, because the estate would not have to pay realtor's fees. There is no law or rule that says the house must be listed. If there is a private offer that is comparable to what the house would fetch on the open market and the executor is not receiving a benefit (i.e. an artificially low purchase price), certainly the house can be sold to that executor.

Sometimes the real objection is not the price. Sometimes it's personal. I've seen many cases where a sibling doesn't want the house for himself or herself, but adamantly refuses to allow another sibling to buy it. Vendettas and resentments go way back and this is one way they manifest.

I always advise executors to change the locks on the house when a parent has passed away. This is because the beneficiaries tend to think of the house as "the family home" and with that, they believe they have rights they don't actually have. The sister who has hired the realtor is a prime example. But it's not her house. Legally it's not the family's house. It's the estate's house and the executor has the right and the obligation to deal with it.

The will itself can be of great value in a case like this. Perhaps the will gives explicit permission for the executor to buy from the estate. The will might contain options or powers that will help the executor. This is a reason that it pays in the long run to have a will prepared by a very experienced wills and estate lawyer.

I hope this matter doesn't have to be decided by a court, but hard feelings between siblings often cause simple matters to end up there.

2 comments:

  1. Excellent letter and response considering what I am going through.
    I am the only executor and the house is in the name of the Estate. What is curious is that my lawyer at the time wanted to put the house in both our names (with other beneficiary). Now that would have put me at a great disadvantage. Of course there would be a cost to do so. Something is very wrong here.

    ReplyDelete
    Replies
    1. I find that the practice of putting an asset - often the house - into the names of all the beneficiaries is everywhere. I personally don't see the value of it or the legal need for it, and in fact I can think of half a dozen reasons why it's a terrible idea.

      An asset can - and IMO should - be sold by the executor out of the estate without going through the beneficiaries.

      Lynne

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