Taxation & Estate Planning

Selling Real Estate to a Beneficiary in Probate

By Joel A. Schoenmeyer

Here's a fairly common situation:

Jack and Judy Smith die, leaving four children: Allen, Barbara, Charles, and David. Jack and Judy owned a house at the time of their death -- the same house where they raised their children. Jack and Judy had a Will, naming Allen as executor and leaving all of their property equally to their four children. David wants to purchase the house. May he do so?

The short answer is "yes." Some comments on such a purchase:

1. The executor has to make the deal at fair market value unless the beneficiaries agree otherwise.

2. Keep in mind that David already owns 1/4 of the house. So (to simplify), if the house has a value of $400,000, he's really only has to pay $300,000.

3. In some cases, the child who wants to make the purchase is living in the house already, or various children have paid to keep up the house since Mom and Dad died. That's a bit trickier, as the executor needs to prepare an accounting to make sure everyone is paid appropriately. Also, if David was living in the house after his parents passed away, he should be assessed fair market rent.

Full post as published by Death and Taxes Blog on December 17, 2007 (boomark / email).