Can an executor sell a property to his friend without telling the beneficiaries?

A comment left by a reader touched on the subject of an executor selling an estate property to a friend. Many beneficiaries are concerned when they see an executor undertaking transactions with estate assets when the transactions don't appear to be what the law calls "at arm's length". In other words, beneficiaries worry that the executor will be more interested in helping his or her friend than in looking after the welfare of the beneficiaries.

Since this is a very common concern, I thought it would be a good idea to talk a bit about this. Here is the note I received from the reader: "Can an executor sell a property in the estate to his friend/relative without asking/telling the beneficiaries?"

As you can see, this question is not only about the powers of the executor, but also about the powers of the beneficiaries when it comes to governing the executor's actions.

The executor's job when it comes to selling an estate asset such as real estate is to get the best deal he or she can on behalf of the estate, and to do so within a reasonable time. There are several variables at play, particularly market conditions. Beneficiaries might be shocked or disappointed if a property is sold for, say, less than the deceased had paid for it ten years earlier, but if the market has dropped, there is nothing the executor can do about that.

An executor has the duty to pay any debts outstanding that are secured by the property (such as liens or lines of credit) and if necessary, renovate or clean the property to make it more salable.

However, there is no rule that says the person who buys the property from the estate cannot be a relative or friend. As long as the executor is truly selling for a reasonable market price and not giving someone a "deal" based solely on the relationship, then there is no reason not to sell to a relative or friend. In fact, this is sometimes very advantageous to the estate because it may save the costs and delays associated with advertising the property, showing the property to prospective buyers, and perhaps the realtor's commission as well.

Similarly, there is no rule that says an executor has to tell the beneficiaries who the buyer is, or ask for their approval of the buyer. Selling the property is up to the executor, and this includes selecting the most appropriate purchaser.

To be clear, the beneficiaries have the right to object if the executor is under-valuing the property, because selling at too low a price directly affects what the beneficiaries are going to inherit. Under-valuing breaches the executor's duty to maximize the estate. But the beneficiaries do not have the right to approve or disapprove of a specific buyer.