Possible inheritance scenario

nathanl

I'm wondering if someone was both executor and beneficiary on a will where that person has the option to inherit one of two properties, could they legally do this: choose to inherit property A, use the proceeds to buy property B, and the proceeds of that sale of prop. B used to pay-out to the rest of the beneficiaries to the will. Let's assume the other beneficiaries were lump-sum only inheritors with no interest in either property. Would the sequencing of that be legal (i.e. the executor effectively taking their inheritance before paying - and in order to pay - the other beneficiaries)?

phildub

The solicitor for the estate will be able to guide you on this. You won't be able to buy the property without permission from the beneficiaries. But why do you need to buy property B just to sell it? You could sell it as the executor and use the proceeds to pay the other beneficiaries, if it hasn't been gifted in the will

nathanl

https://www.boards.ie/discussion/comment/122023775#Comment_122023775

Thanks. Wouldn't buy Property B to sell it. I wasn't clear. Having bought property B from the estate (with the proceeds of sale of property A) then there'd be cash to pay the beneficiaries.

Firblog

So, inherit property A → Sell it → Buy Property B with proceeds → distribute lump sums to others with excess cash from sale of A? Keep surplus?

Why not just choose to inherit property B, sell A, and distribute lump sums to others from proceeds? Keep surplus?

Peregrinus

What Firblog said. What are you trying to acheive here? You've a fairly complicated strategy that will incur higher professional and transactional costs than a simpler strategy would. What advantage does it offer you?

Seth Brundle

https://www.boards.ie/discussion/comment/122024622#Comment_122024622

Property B would need to be bought on the open market as if not then presumably the other beneficiaries coukd make a claim that Property B was sold below its market potential?

nathanl

https://www.boards.ie/discussion/comment/122024818#Comment_122024818

The advantage, and the problem, would be in covering inheritance tax. If there was no means to the executor/beneficiary of paying the hefty CAT bill and property A was more valuable than property B then - as Firblog said - there'd be extra cash which (instead of keeping it) would be used to pay off the tax bill. Especially if currently living in the cheaper property B and want to continue to do so.

https://www.boards.ie/discussion/comment/122024917#Comment_122024917

Yeah, that would be a concern. Executors usually have to make sure any tax calculations and property sales are fair market price. I guess if all the beneficaries were just due specified lump sums, which could be covered by sale of either property, they wouldn't really have grounds to object? But it's a risk for sure - never know how a beneficiary will behave until it happens I suppose.

Maybe tweaking terms of the will before it happens could head off the problem.

Firblog

1. Leave the executor/beneficiary property B,
2. all other property to be sold.
3. Specify a lump sum for the executor/beneficiary (which will cover most/all of the tax you're worried about)
4. leave other percentages of the residue to the other beneficiaries?

Peregrinus

Wait. Are you saying that the terms of the will provide that beneficiary no 1 is entitled to receive, at his choice, either more valuable property A or less valuable property B? That seems . . . weird.

Still, if that's the case, I think the position is as follows:

1. Obviously, Beneficiary no 1 is best off if he opts to take property A, and that's what he'll do.
2. Having taken it, he can sell it; it's his to do with as he wishes.
3. At that point he has (as I understand it) no further claim on the estate.
4. He can, however, offer to purchase property B from the estate. He intends to offer fair market value.
5. Wearing his executor hat, he must act in the interests of the beneficiaries of the estate. As he has already received his full entitlement from the estate at this point and has no further claim on it, that means he must act in the interests of the other beneficiaries. In deciding whether to accept his offer or not, he must put his own wishes and interests to one side.
6. So, the crucial question is, what is the attitude of the other beneficiaries? Do all or any of them have any interest in receiving property B, or a share in property B, rather than the proceeds of the sale of property B? Do they express any discomfort abou this cosy arrangement? Because, if they do, then I think the executor would be in a very awkward and vulnerable situation if he ignored the views of the other beneficiaries and sold property B to himself.
7. So, I think the executor should consult the other beneficiaries, and see how they feel about this.
8. I'd expect the other beneficiaries to be a bit leery. They'll likely already feel a bit iffy about the terms of the will, allowing beneficiary no. 1 to choose the more valuable inheritance, so reducing what is left for them.
9. Even if the other beneficiaries have no interest in getting property B or a share in property B, and are open in principle to Beneficiary no. 1 buying it, they are defintely going to want to know that the sale is for full market value. An opinion from a valuer, chosen by beneficiary no. 1, may not entirely satisfy them on that point. So be very open to other possiblities, such as getting two or more valuations, and buying at the higher valuation, and letting the other beneficiaries choose the valuers. Or letting the property be marketed and go to public auction, and beneficiary no 1 can bid for it.

nathanl

So, the crucial question is, what is the attitude of the other beneficiaries? Do all or any of them have any interest in receiving property B?

My understanding is no. But, yeah the crux of it is the beneficiaries attitudes to it. Some sort of agreement, as you suggest, might be a good idea before proceeding with it.

Firblog

Are you planning a will or trying to execute an existing one?

Claw Hammer

An option would be for the executor to resign as executor. Accept property A from the new executor. Sell if and make an offer to buy property B if they really want property B.