Residuary estate & property of interest between executor and other beneficiaries.

GreyMaze

Hi all. Looking for some advice on the distribution of my late Grandfathers will and potential conflict of interest between my father (who is joint executor with myself) and other beneficiaries - myself and my two sisters.

A brief background - my Grandfather passed away in January this year and left his property equally between all beneficiaries. His will then goes on to say that his residuary estate will be split equally between me and my sisters due to my father having had his inheritance around 8 years ago due to financial difficulties. 

I understand that the residuary is to be paid off once inheritance tax and debts are paid on the estate. This is where we run into a potential conflict of interest...

My dad intends on moving into the property and selling his property to buy us out so he owns it entirely. Me and my sisters are happy with this arrangement - however my dad is adamant that the residuary can’t be paid until the very end, once the house has been cleared and he’s ready to move in. Is this correct?

I’m reading very conflicting advice online and got some generic advice from a probate helpline that states the residuary needs to be paid once all outstanding debts that have accumulated since death (whilst probate was being granted) have been paid, not to cover ongoing expenses if my dad is looking to move into the property. I was advised if we were looking to sell, it would be deemed reasonable to use the money to upkeep the property and conduct any improvements that may add value if all beneficiaries were in agreement prior to putting the house on the market. However, I can’t seem to find an answer online where a beneficiary wants to take over the property and where responsibility lies, just if property has been left solely to a beneficiary in the will - which isn’t the case for us.

My dad has quite high standards in regards to how the property should be maintained - obviously this is my opinion, but an example is he wants a gardener to visit weekly to cut and weed the large gardens. He’s suggested the house may take up to two years to be ready to be moved in to (will states we have two years to distribute the will - so believe this is where this timeframe has come from) and he’s calculated bills to be around £20,000 in total should it take that long.. although admitted he’s been a little on the generous side to be safe. 

I’m very aware that myself and my dad have a legal duty to act on the best interests of all beneficiaries... but I’m starting to think this may not be the case and feel torn as to what to do. I haven’t approached my dad yet to tell him about the generic advice I have sought on Friday, but he keeps telling me he’s read a probate book and it tells us that the residuary is a pot of money to cover all expenses for up to those two years and if there’s nothing left - we won’t get anything. I do understand residuary is what’s left at the end - but when is this? Quite prepared for this to happen if this is legally the way it needs to be done, but if this is the case - is there a way we can manage his expectations regarding the maintenance of the house? Perhaps agree to keep a sum of money by to cover expenses and distribute the rest sooner?

I really don’t want relationships to be ruined through this, as that’s certainly the last thing my dear Grandfather would have wanted. But does anyone have any advice on this situation? 

Any advice or past experiences and outcomes would be greatly appreciated! Thank you.

GreyMaze

Sorry, I submitted without checking the title. Should read: 

Residuary estate & property maintenance - conflict of interest between executor and other beneficiaries.

sassyblue

I don’t think the legalities include improvements to the property for your dad's benefit, that’s only the case in selling the property to achieve a higher selling price to benefit the beneficiaries.

I'd tell your dad the house is his if he wants it but any maintenance or improvements are his to pay for. It’s only going to cause arguments every time he thinks he’s having free money for his home improvement choices. The Will didn’t specify that the house should be maintained for anyone so it’s your dad who should pay for what he wants.

I'd distribute the estate once the property ownership is sorted so there’s no more money he can have too.

GreyMaze

sassyblue said:

I don’t think the legalities include improvements to the property for your dad's benefit, that’s only the case in selling the property to achieve a higher selling price to benefit the beneficiaries.

I'd tell your dad the house is his if he wants it but any maintenance or improvements are his to pay for. It’s only going to cause arguments every time he thinks he’s having free money for his home improvement choices. The Will didn’t specify that the house should be maintained for anyone so it’s your dad who should pay for what he wants.

I'd distribute the estate once the property ownership is sorted so there’s no more money he can have too.

Thank you. That is so helpful 😊 Does this include maintaining the garden? Father is overly concerned the garden will go to seed if we don’t get a regular gardener in - we all live some distance from the property so are unable to visit as regularly as we would like and his level of maintaining the garden seems to be quite high for a property that is empty as he wants to maintain it as his parents did (his words). Thank you.

GreyMaze

sassyblue said:

I don’t think the legalities include improvements to the property for your dad's benefit, that’s only the case in selling the property to achieve a higher selling price to benefit the beneficiaries.

I'd tell your dad the house is his if he wants it but any maintenance or improvements are his to pay for. It’s only going to cause arguments every time he thinks he’s having free money for his home improvement choices. The Will didn’t specify that the house should be maintained for anyone so it’s your dad who should pay for what he wants.

I'd distribute the estate once the property ownership is sorted so there’s no more money he can have too.

Also, do you know where we might stand in regards to paying council tax and utility bills up to the point my dad decided to move in? There is always the possibility he may not, but the decision is very much with him and he is telling us the estate will pay until he decides what he’s doing within these 2 years. Thank you.

theoretica

Have you got probate?  One suggestion might be to transfer the property into the names of the beneficiaries - the estate can be finalised and your father needs to sort out the house as a 25% owner and not able to just dictate to the other 75%.

Also - at what price is your father buying the property?  The value given for probate whatever happens to the market?  Valuation at the time he buys it?

GreyMaze

theoretica said:

Have you got probate?  One suggestion might be to transfer the property into the names of the beneficiaries - the estate can be finalised and your father needs to sort out the house as a 25% owner and not able to just dictate to the other 75%.

Also - at what price is your father buying the property?  The value given for probate whatever happens to the market?  Valuation at the time he buys it?

Thank you. Probate was granted last month. We haven’t got far enough along to discuss price of property he would buy is out of. He’s suggesting we don’t register with land registry until right towards the end... this seems a very reasonable middle ground. I just feel he has control as his inheritance is in the property and not the residuary, so he has different priorities and his judgement may be clouded by his intention to move in. He has a lot to sort out before he’s able to move, which I feel is the reason he’s acting as he is.

naedanger

The default position is the property should be sold and the net proceeds divided between the four beneficiairies. Note all expenses of maintaining and selling the property are borne by all beneficiaries benefiting from the property (and not just the residual beneficiaries). There should be no undue delay over the sale. The remaining residual estate should then be divided between the residual beneficiaries. (Interim payments can be made to the residual beneficiaries provided enough money is retained to pay any remaining bills.) Unless the beneficiaries all agree to some other action, this is what should happen.

Anything else can be done provided all beneficiaries agree. So if your father is going to buy out the rest of you then you all need to agree the arrangement. The agreement should cover the amount to be received (e.g. how and when to value the property), timescales, who pays for maintenance in the interim etc. I suggest this is all firmed up and then you get all the other beneficiaries to agree. What you don't want is uncertainty over any significant aspect of the arrangement. If your father wishes to wait two years, that can be agreed provided you are all satisfied you are not disadvantaged relative to the default position. (So the other beneficiaries might agree to the delay provided they are compensated financially, and not disadvantaged by having to pay maintenance costs that would not arise were the property to be sold sooner.)

All the above is just my layman's understanding so may not be accurate.

RAS

My layperson's take on this is:

I would expect the executors to have put the property on the market once they had confirmation of receipt from the Probate Office.

And I'd expect the property to remain in the executor's names until sale, perhaps 4-6 months after probate was granted. And during that time the estate would pick up the tabs for utilities, Council tax and someone to go in once a week until autumn to keep the grass cut and the front garden looking decent enough for sale. 

Any delay in transferring  beyond six months to accommodate the the desire of one beneficiary to purchase the property should be funded by the beneficiary benefitting from the delay, not the estate.

Otherwise, it would be in the best interests of the majority of the beneficiaries to sell promptly, outside the family. 

Have you spoken to your sisters about the full implications of your father's desire to buy the property?  Are you going to sell at the probate valuation, or risk the empty property devaluing over the 2 years, or the market going crazy and dad buying well under value?

To put it bluntly, if dad wants you all to be disadvantaged by his plans, he needs to compensate you for the bother, or you'd be better selling now. Of course as an executor, he can stymy that but maybe he values his relationships with his children?

Keep_pedalling

It is unfortunate that your father is a joint executor, there is no way the estate should be paying for this. He wants a gardener for what will become his house he pays for it. Delaying moving in until everything is perfect for him is not on, and in your shoes I would make it clear that unless he can complete the sale in reasonable time I want the sale to go though the open market.

sassyblue

GreyMaze said:

sassyblue said:

I don’t think the legalities include improvements to the property for your dad's benefit, that’s only the case in selling the property to achieve a higher selling price to benefit the beneficiaries.

I'd tell your dad the house is his if he wants it but any maintenance or improvements are his to pay for. It’s only going to cause arguments every time he thinks he’s having free money for his home improvement choices. The Will didn’t specify that the house should be maintained for anyone so it’s your dad who should pay for what he wants.

I'd distribute the estate once the property ownership is sorted so there’s no more money he can have too.

Thank you. That is so helpful 😊 Does this include maintaining the garden? Father is overly concerned the garden will go to seed if we don’t get a regular gardener in - we all live some distance from the property so are unable to visit as regularly as we would like and his level of maintaining the garden seems to be quite high for a property that is empty as he wants to maintain it as his parents did (his words). Thank you.

What’s happened to the garden in the meantime? If father wants the property but hasn’t maintained the garden since grandfather passed it’s a bit of a cheek to expect the beneficiaries to pay up.

as for the bills, the estate could pay until such time as your dad takes ownership of the property and by that I mean from when he starts making alterations. Currently he expects you to wait until he moves in which could be a long time and the electricity costs in doing up property with power tools could be substantial. Our water company instantly stopped payments for water until we sold father in law’s property, they didn’t cut the water off so that was all free whilst we did the property up, not that we used much water anyway.

overall, it really depends on how much money is left for the beneficiaries and whether they are all willing to pay for what your dad wants. There aren’t any hard and fast rules. If there’s not going to be a lot left for everyone then naturally I would expect they’d say it was unfair to them and rightly so.