Buying flat from deceased estate

getmore4less

A £50k house on a very short lease with a £20k mortgage, unless on a very short repayment term the place could end up with no equity

00ec25

seven-day-weekend wrote: »

I am pretty sure won't have

As for the flat, it's not going to be a bargain if we have to pay market value based on its value with an extended lease, and then actually extending the lease, which I know from my son extending his lease on a flat in the same development is about £12k before costs :eek::eek::eek:

we are possibly talking at cross purposes?

sticking with the numbers in your OP. The flat is "worth" 50k. It has a 20k mortgage, so on death the estate is "worth" a net 30k and the whole estate is to be split equally among 3 beneficiaries. That is known as a residuary estate and obviously means the two charities plus seven day weekend will therefore each get 10k

problem is the estate does not have 50k in cash, it has 50k in bricks and mortar so the property will have to be sold to liquidate the cash as the mortgage must be cleared and the charities will want cash, not a share of a building someone else proposes to start living in. As already mentioned that requires all the beneficiaries to accept that the property is worth 50k (net 30k after the mortgage has been cleared). Clearance of estate debts being the absolute first priority of an executor, so the property needs to sold for at least 40k in cash so that there is 20k to pay the mortgage and 10k and 10k to distribute to the two charities as their shares of the net estate. If you wish to retain the property then obviously you do not physically pay your 10k share in cash, you pay 40k to buy it, not 40k

now using your numbers in the post quoted above: the estate comprises a flat with a short lease. The will now says charity A & B are to be given 10k each as pecuniary legacies (ie a specified sum of money which is, as you can see, completely different to the terms of a residuary legacy) and seven day weekend gets what's left as a residuary legacy.
But suppose the flat is only worth 20k because of its condition, and the mortgage is still o/s, so the estate "owes" 40k in total, but cannot meet those demands on it as selling the flat will generate only 20k. The bank must be paid first as it is an estate debtor, the pecuniary legacies are next in order but there's no money left to pay them so they nothing, and you a residuary legacy obviously also get nothing as the estate is now "insolvent".

extended lease: I don't follow your comment.
If the owner extends the lease before they die then the estate benefits from the higher value of the property and you would, as you say, have to pay more into the estate to buy out the shares left to the 2 charities if the will is a pure residuary one split 3 ways.

if the will has 2 x 10k pecuniary legacies (the charities) and 1 residuary (you), the estate now has a valuable property but only needs 20k cash + value of the o/s mortgage from you to give the estate enough cash to settle its debts and distributions. So if you want to "buy" the whole property and keep it yourself it would cost you 20k + the o/s mortgage amount

thepurplepixie

seven-day-weekend wrote: »

One is a small local charity, (a hospice), the other is Macmillan Nurses.

I don't think we are going to bother trying to buy the flat, it will be too much hassle.

Both my husband and I have also mentioned the local hospice in our wills. Our friend died there, they gave him terrific care for the short time he was in. We have specified an exact amount however . We have also specified an exact amount for other charities - thinking about it, our solicitor advised us to do that.

I think I will ask her to change her will to an exact amount for the charities,if it will not cost her too much to do so.

Be careful with this, it would be all too easy for her to state an amount that won't be covered by the sale of the flat. Think about the house prices going down in 2008 (I think it was 2008) you could find the value of the flat is reduced and the charities will be pushing for their money. You could end up with nothing.

seven-day-weekend

Thanks purple pixie, we have thought of this and will leave things as they are.

thepurplepixie

Sometimes the simple way is the best, or at least the safest. Lets hope she has many more years. I'm planning on getting my telegram from King William.