Executor considering buying estate property

Spelunthus

Asking for a friend. Does anyone see any problems with this scenario..

Mother dies and leave some debts, some legacies, and a residual inheritor, who is also the son and executor. The only substantial asset in the estate is the house, which is up for sale, but is slow to sell....

Executor has probate.

The Executor wants to redeem the debts and pay legacies, so is considering BUYING the house (at proper market value), thus releasing cash to pay debtors, and legacies. The residual estate, payable to the executor, will be very little, if anything.

I can't see any LEGAL difficulties here, but it all sounds convoluted, in that the executor will be accepting their own property bid, and also possibly inheriting some money that they themselves have provided.

Any thoughts?

getmore4less

Known as self dealing.

It can be an issue when there is a conflict of interest.

Two main conflicts are with HMRC and beneficiaries.

Sounds like HMRC won't be caring.

No other residual beneficiary.


Easiest to just transfer the house and make sure the debts and other beneficiaries are paid.

Estate accounts show the cashflow to match the IHT Forms that were sent or zero residual if house worth less.

Keep good evidence of value if any CGT likely in the future.


If they don't realy want the house or the estate will be insolvent if sold on open market the executor needs to be more careful if the want to reduce the legacies and take on the house.

Was the house overvalued during the enquiries stage?

Will the executor need a mortgage?

Keep_pedalling

Why does he have to buy the house? Why not simply pay the depts and legacies from his own pocket and transfer the house to his name.

nom_de_plume

Is the estate likley to be subject to IHT?

getmore4less

One point the proper market value is likely to be lower than the current asking price(it is not selling at that).

Spelunthus

Thank you all. I'll answer the questions and summarise.

• IHT does not apply (estate below threshold)
• Don't think the property is very overpriced - housing market is very slow owing to Brexit, in the area concerned.
• Mortgage may not be required.

I love the simplicity of the suggestion: Executor pays the debitors and legacies from their own funds (or loan, if required) , and transfers house to themselves. The risk is that the house was overvalued, and may finally have sold at a lower price, which would mean the legacies would have to be reduced. In this case, the executor takes a hit.



Clearly, very good records would need to be kept of these transactions. Thank you.

nom_de_plume

Spelunthus wrote: »

The risk is that the house was overvalued, and may finally have sold at a lower price, which would mean the legacies would have to be reduced. In this case, the executor takes a hit.

Are the legacies specific sums of money or percentages of the estate?

Spelunthus

Yes, the legacies are absolute, specific amounts. If the house sale cannot raise the money (after debts paid), I assume these would be pro-rated ?

Owain_Moneysaver

Spelunthus wrote: »

Yes, the legacies are absolute, specific amounts. If the house sale cannot raise the money (after debts paid), I assume these would be pro-rated ?

Not necessarily. Depends on the wording of the Will. The bequests that can't be satisfied may lapse entirely.

Spelunthus

Owain_Moneysaver wrote: »

Not necessarily. Depends on the wording of the Will. The bequests that can't be satisfied may lapse entirely.

Ohh Missus! I didn't know that, and I'm not competent to interpret the will for that condition. One for a solicitor, I think. Thank you.

nom_de_plume

Assuming the Will is along the lines of



I leave £500 each to X, Y and Z
£2000 each to A and B.
And the residual to my son


and, importantly, with no mention of the house being left specifically to the son then the norm would be for the house to be sold to release cash to pay of any debts and then to meet the legacies to A,B, X, Y and Z with anything remaining being given to the son.


In this scenario the son, wanting to keep the house, simply puts sufficient funds (up to a maximum of the house value) into the pot to ensure everyone else gets the cash due to them.


Does this sound how the Will was written?


Do the sums left to others add up to more than the house value and is one of the beneficiaries of the cash legacies also the son?