How to deal with estate with no liquid assets and a house?

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dm200
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How to deal with estate with no liquid assets and a house?

Post by dm200 » Mon Oct 09, 2017 10:36 am

An acquaintance of ours is one of three siblings who are heirs of their recently deceased mother. Another sibling is the executor and our acquaintence does not get along with the executor sister. There are debts (don't know how much), and no liquid assets -- but an older house in some need of repair/maintenance to properly sell. I think there should be a net gain from the estate when the house is sold.

Our acquaintence is considering/planning on taking out a personal loan ($10,000 range) for various expenses of the house before sale.

The more I think about it (with the bad relationship with the sister/executor) - the more I think this is a bad idea financially for her. Seems like she could spend this $10,000 and not get it back from the estate before the net proceeds are distributed.

What is the "normal" way executors deal with such expenses (needed to get value for the house) when there are no other assets to pay them? Might a real estate agent be of some assistance, since the agent has a financial interest in getting a good price for the house?

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Sandtrap
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Re: How to deal with estate with no liquid assets and a house?

Post by Sandtrap » Mon Oct 09, 2017 10:54 am

AFAIK an executor/trustee is empowered to take out a loan, in this case perhaps an equity loan on the home. The trust, or estate, bears the liability for the loan. It would not seem prudent for a beneficiary to assume any financial burden in this circumstance, whether relationships were positive or not.
Not legal counsel. Input based on being in a similar circumstance many times.

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8foot7
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Re: How to deal with estate with no liquid assets and a house?

Post by 8foot7 » Mon Oct 09, 2017 11:11 am

The executor could borrow from a beneficiary on behalf of the estate, and the beneficiary could establish a lien on the decedent's home for the amount of the loan. The beneficiary would want an appraisal and market analysis to understand the likely sales price of the home less other mortgages. That is about the only way I can see this making sense.

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Re: How to deal with estate with no liquid assets and a house?

Post by stan1 » Mon Oct 09, 2017 11:19 am

One approach would be to let the executor deal with this situation (since they don't get along).

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Re: How to deal with estate with no liquid assets and a house?

Post by Spirit Rider » Mon Oct 09, 2017 11:33 am

It is far easier for the executor to advance the money to the estate in anticipation of the sale than a loan from a beneficiary or even go through the effort of a mortgage. I have done this as executor. At least in my state, costs and expenses of administration of the estate are the #1 priority in charges to be paid. So if there is plenty equity, you don't have to worry about being paid, you are first in line.

Of course this assumes the executor in this case would do such a thing.

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Re: How to deal with estate with no liquid assets and a house?

Post by Gill » Mon Oct 09, 2017 11:34 am

Why not just sell it like it is, pay the debts from the proceeds and distribute the balance?
Gill

123
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Re: How to deal with estate with no liquid assets and a house?

Post by 123 » Mon Oct 09, 2017 12:23 pm

Gill wrote:
Mon Oct 09, 2017 11:34 am
Why not just sell it like it is, pay the debts from the proceeds and distribute the balance?
Gill
+1 This is the most practical solution. Even some minor repairs/upgrades to a home that has to be sold as part of an estate settlement seem to take a significant amount of time and effort and often cause a considerable delay in the closing of an estate. When there are family conflicts and the proceeds are to be divided sometimes it's just better to get it all done as quickly as possible and move on with your lives.
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Re: How to deal with estate with no liquid assets and a house?

Post by CABob » Mon Oct 09, 2017 1:34 pm

Our acquaintence is considering/planning on taking out a personal loan ($10,000 range) for various expenses of the house before sale.
Of the possibilities discussed this seems like the least desirable. I would think it would be up to the executor to get this loan if needed. The idea of selling without repairs/upgrades also seems reasonable under the circumstances.
Where does the third sibling sit with regard to the issue or for that matter what is the executor's opinion?
Bob

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Re: How to deal with estate with no liquid assets and a house?

Post by Gill » Mon Oct 09, 2017 1:46 pm

I’m not so sure it’s appropriate for an executor to be using estate funds to improve an asset of the estate with no assurance of benefitting the estate. The beneficiaries could certainly object to these expenditures and surcharge the executor for making these payments. The house should be sold promptly and sold as is.
Gill

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Re: How to deal with estate with no liquid assets and a house?

Post by Jack FFR1846 » Mon Oct 09, 2017 1:52 pm

Gill's thoughts are a great start. My first thought about doing any improvements with family turmoil is that somebody is going to sue when all is said and done, claiming that the house, unimproved would have paid out more to each beneficiary than it did after the improvements which had to be paid for.
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Re: How to deal with estate with no liquid assets and a house?

Post by Mlm » Mon Oct 09, 2017 1:55 pm

Gill wrote:
Mon Oct 09, 2017 1:46 pm
I’m not so sure it’s appropriate for an executor to be using estate funds to improve an asset of the estate with no assurance of benefitting the estate. The beneficiaries could certainly object to these expenditures and surcharge the executor for making these payments. The house should be sold promptly and sold as is.
Gill
+1 If I were the Executor that's what I would do. Keep it simple.
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Re: How to deal with estate with no liquid assets and a house?

Post by Carefreeap » Mon Oct 09, 2017 1:56 pm

8foot7 wrote:
Mon Oct 09, 2017 11:11 am
The executor could borrow from a beneficiary on behalf of the estate, and the beneficiary could establish a lien on the decedent's home for the amount of the loan. The beneficiary would want an appraisal and market analysis to understand the likely sales price of the home less other mortgages. That is about the only way I can see this making sense.
I lent money to my mother's estate to pay for property taxes, court costs to go through probate and some minor fix up costs. I was the Trustee and Executor. I filed a second (and a 3rd) Trust Deed against the property. My brother and I aren't close but I advised him what I was doing and he understood and agreed to the arrangement.

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Re: How to deal with estate with no liquid assets and a house?

Post by Spirit Rider » Mon Oct 09, 2017 2:06 pm

I think this is a matter of degree.

When I did this, I set a deadline of one month to have everything done. The next was to limit the cost for any one deficiency and only make repairs to items affecting first impressions.

I replaced one set of blinds. They were probably going to replace them all anyway, but for < $50 one set was disgusting. Replaced the thru-the- wall A/C < $500. it was making a hell of a racket, not cooling well and this was July/August selling period. Replaced the front storm door in severe disrepair (rusted and falling of the hinges). Replaced the bottom section of the garage door that was all rotted out.

I think this is the case for one of those colloquial rules; biggest bang for the buck, low hanging fruit, 80:20, etc...

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Re: How to deal with estate with no liquid assets and a house?

Post by denovo » Mon Oct 09, 2017 2:14 pm

I would just stay out of it and let the executor deal with it since they don't get along.
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Re: How to deal with estate with no liquid assets and a house?

Post by Tamarind » Mon Oct 09, 2017 3:25 pm

123 wrote:
Mon Oct 09, 2017 12:23 pm
Gill wrote:
Mon Oct 09, 2017 11:34 am
Why not just sell it like it is, pay the debts from the proceeds and distribute the balance?
Gill
+1 This is the most practical solution. Even some minor repairs/upgrades to a home that has to be sold as part of an estate settlement seem to take a significant amount of time and effort and often cause a considerable delay in the closing of an estate. When there are family conflicts and the proceeds are to be divided sometimes it's just better to get it all done as quickly as possible and move on with your lives.
+1 again. My mother's family is doing this even though the owner and heirs are all still living and talking to each other because a discounted offer is still money in the hand. Even better idea if there are difficulties. Yes you won't get top dollar, but with debts and no liquidity in the estate there are only two outcomes:

1) Home is worth less than debts and remainder will be discharged leaving no inheritance for anyone.

2) Home is worth somewhat more than debts and remainder will be split among beneficiaries. Odds that this is significant money for anyone are pretty low. If anyone feels it's important to increase the inheritance that person may choose to engage with the executor about fronting money for repairs.

Unlikely to be worth your friend's time, money, or heartache.

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dm200
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Re: How to deal with estate with no liquid assets and a house?

Post by dm200 » Mon Oct 09, 2017 5:24 pm

denovo wrote:
Mon Oct 09, 2017 2:14 pm
I would just stay out of it and let the executor deal with it since they don't get along.
Those are my thoughts as well.

There are, apparently, some indebtedness of the deceased. It seems to me that a focus of the heirs should be that only the legitimate assets (in this case the house) be used to pay those debts.

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Re: How to deal with estate with no liquid assets and a house?

Post by FIREchief » Mon Oct 09, 2017 5:40 pm

Gill wrote:
Mon Oct 09, 2017 11:34 am
Why not just sell it like it is, pay the debts from the proceeds and distribute the balance?
Gill
Gill read my mind. Isn't this why we have things called "estate sales."

The only person I would imagine would be pushing for the initial plan is some realtor who wants to wind up with an easier/more profitable sale. I am not a realtor.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: How to deal with estate with no liquid assets and a house?

Post by TravelforFun » Mon Oct 09, 2017 7:01 pm

Tough to be an executor. He (she) could be liable whether she (he) fixed or unfixed the house, especially if they're not talking.

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