Typically, the amount that the land, home, cottage, or condo is sold for is administered amongst the beneficiaries in portions dictated by the will.
But it isn’t always that simple.
What happens when a beneficiary wants to purchase the property?
Can an executor sell directly to a family member?
How to Sell Estate Property to Family Members
Handling the sale of the deceased’s real estate is one of the largest tasks you’ll undertake as the Executor, so it’s a common area for questions and confusion.
When it’s a case of selling to estate property to family, Butler recommends you follow these steps:
Step One: Review the Will
First you need to rule out that the Will does not prevent this sale from happening. A few common causes could be:
- The property could be left to a beneficiary as their inheritance.
- The Will might stipulate that a beneficiary has a certain amount of time to make an offer before it becomes available for public sale.
- The deceased ordered that the estate be liquidated.
Step Two: Review Estate Debts
If the Will does not present any issues and the property is not needed to cover any debts of the estate, then a sale at fair market value can go forward.
“The executor must always remember that the beneficiaries can’t receive anything from the estate until the deceased’s debts have been paid, so it’s possible that the house is needed for paying debts. In that case, the family member who wants the house is out of luck.”Lynne Butler, Estate Law Canada
Step Three: Appraisal and Sale
Butler also recommends getting two or three appraisals of the property before committing to a sale price.
Real estate is a common area of estate debates, another reason why Executors are recommended to protect themselves with liability insurance in case beneficiaries asset a claim of negligence during the sale.
What if the family member is a beneficiary too?
Butler gives us two examples for what to do in this common scenario.
The first example occurs when the property is worth less than the beneficiary’s total inheritance:
“…the beneficiary’s share of the estate might be worth $500,000, while the house is worth $400,000. Instead of taking $500,000 cash, the beneficiary might want to take the house plus $100,000.Lynne Butler, Estate Law Canada
In the second example, the beneficiary’s inheritance is worth less than the value of the property:
“…if the beneficiary’s share is going to be $200,000, and the house is worth $400,000, obviously the beneficiary can’t simply take the house. But he or she would only have to pay $200,000 for the house, as the other $200,000 is coming out of the estate.”Lynne Butler, Estate Law Canada
It’s recommended that in situations such as this, you seek the assistance of an Estate Lawyer to eliminate any potential estate disputes.