An executor of an estate (referred to as a “personal representative” in New Mexico) has a lot of power and responsibility assigned to them during the probate process. At the same time, it is crucial to understand what an executor cannot do, as they have a duty to the estate and to uphold the probate process before distributing assets to heirs.
As part of their duties, an executor is sometimes tasked with the sale of some or all of the real property held in an estate before probate is completed. These sales are only allowed under specific circumstances, however. If there is no justifiable cause for a property to be sold, then it must be held within the estate until probate is completed. Only when probate is finalized can property be distributed and inherited according to the wording of the will or the laws of intestate succession.
If you are an administrator or someone with a property interest in an estate and have legal questions, refer to a probate lawyer in New Mexico. They can assist you with undergoing the probate process and understanding your rights as a personal representative or a beneficiary. You can also use the following information to understand more about how and when an executor might sell property during probate for specific reasons.
The first concept to fully understand is that no one, technically, owns the property in an estate until probate is over. That property is owned by the estate itself. Once a will is probated — or an estate goes through the intestate probate procedure — then the property in an estate is available to be distributed. The property can then be sold by the beneficiary, according to their desires.
There are three main stages to probate to understand:
Once someone has died, a surviving family member or an individual designated as their personal representative must petition the probate court. The probate court will officially recognize a representative, and they will begin the probate of the will.
Before a representative is appointed, no one may attempt to take possession or otherwise control the assets in an estate (unless they were held in joint tenancy, in which case they are passed to the surviving owner).
Once a representative is appointed, the probate process can begin. The representative will take care of all administration costs, including funeral expenses, and field all creditor claims.
In certain situations, the representative may be compelled to sell parts of an estate to cover the costs of debts (more on this later). They may also need to liquidate assets if the details of a will call for certain monetary amounts to be distributed as opposed to discrete pieces of property.
To close probate, the representative files an accounting of all the activities taken during the process. They must indicate that all debts are paid and all other claims and obligations settled. Only then can probate be closed and assets distributed according to the will.
There are a few scenarios where an executor may be required to sell one or more pieces of property during probate.
In the event that there is not enough money set aside to handle all creditor claims, then certain assets may be liquidated in order to raise funds and pay off creditors. First, any property not described in the will can be sold, then the “residue,” or any remaining general value of the estate that would remain once all beneficiaries receive their specific inheritances.
The will may also designate certain property to be charged in the event that debts need to be repaid, which are then sold next.
Finally, the executor may need to dip into cash gifts described in the will before moving on to liquidating other assets, including property.
When money is taken away from an estate to repay debts, heirs will receive the remainder of the estate in proportion to the distribution described in the will.
In some cases, the distribution of assets described in a will cannot take place as intended because certain assets need to be divided first. Commonly, the representative will sell these assets for a fair price and then distribute the cash value among heirs in proportion to the arrangement described in the will.
In cases where a piece of property has been granted to a specific heir, the representative may still be required to liquidate the asset to cover the total value of distributions, as stated in the will. This event is more common in situations where the described distributions cannot be honored with all of the property in the estate left “intact.”
Put more simply, the representative may need to sell a house or other piece of property and split the proceeds among heirs to uphold the wishes of the decedent.
Because no heir has possession of a piece of property until probate is closed, they cannot object to the sale of property during probate except under certain grounds. If they feel that the representative is failing to act in the interests of the estate or acting in bad faith, for example, they can file a motion for an injunction to halt the sale or even request that the representative be removed from their duties.
Two main types of co-ownership of a piece of property are joint tenancy and tenancy in common.
What does joint tenancy mean? Properties held in Joint Tenancy with Rights of Survivorship (JTWROS) are immediately transferred to the joint tenant(s) upon the death of the co-owner. This means that they effectively leave the estate and bypass probate. Note, however, that the tenant assuming control may still have an obligation to pay certain debts of the decedent, especially if they were a spouse.
Properties held through a tenancy in common agreement do not automatically pass to devisees. The ownership stake of the decedent will be distributed among surviving tenants, but only once probate has been completed.
Technically, the sale of the property is not legally possible until the asset has been formally transferred following the close of probate.
At the same time, there are situations where it is assumed that the future heir of the property will acquire the property as intended, and they may wish to look for a buyer before the property officially changes hands. They may even be tasked with maintaining the property or helping prepare it for a sale once probate has been completed.
In situations where it makes sense to do so, the future owner of a property may wish to obtain an appraisal and begin seeking bids for sale. Taking these actions can make sense in situations where the future owner wishes to make a hasty sale.
With that said, there is a high degree of risk to both parties with such an arrangement. Any number of complications can arise during probate, and the transfer of property may not happen as intended.
In situations where bids are being solicited before the future owner inherits the property, the would-be seller must declare openly the status of the house, and they must make every good faith effort to ensure that the home is acquired and then sold as-intended. The would-be seller can also include contingency clauses stating that the sale will only go through pending the transfer of the asset as-expected.
Both buyer and seller have a tremendous expectation of due diligence in this situation, and the seller in particular must be cautious to not misrepresent the solicitation of bids or fail to disclose the ownership status of the property in general. It may be advisable to delay such a process until probate is completed and the beneficiary has assured possession of the property.
If you object to the actions taken by an estate representative, it’s advised to move fast to halt any sales from taking place.
But first, understand why the action is supposedly necessary. If the representative does not have enough liquid money in the estate to pay off claims, handle administration expenses, or distribute the value of the estate as intended to all heirs, then the sale of the property may be considered necessary.
With that said, representatives have a fiduciary duty to administrate the estate responsibly and then to distribute assets to heirs as intended by the decedent. If, for any reason, a person with interest in the estate feels that the representative is acting irresponsibly — or in bad faith towards their interests — they can file motions to stop any activities and potentially have the representative removed from their duties.
Conflicts that arise during probate can become complicated quickly, and representatives have a fair amount of leeway to conduct activities they claim are necessary to probate the will and resolve all claims. In other words, it is highly advisable to obtain the services of an experienced probate lawyer to discuss your concerns and move quickly to stop any possible sales or asset transfers.
The duties of an estate representative permit them to take certain actions in liquidating estate assets or otherwise freeing up money for the purposes of resolving claims, settling administration costs, and completing probate.
Heirs may quickly become upset at your actions, especially if they do not understand how and why you intend to resolve your duties. You can work with a New Mexico probate attorney to help you understand all options available and how to ensure you are meeting your duties as a representative. Your lawyer can even help you resolve disputes, claims, and other conflicts that arise during the probate process.
Having an attorney review any property sales or other actions taken with assets expected to be inherited (barring the current circumstances) is an important aspect of due diligence. You can protect your own interests and the interests of the estate by doing so.
Probate is supposed to be a straightforward process, but a lot of confusion and conflict can arise. Probate lawyers represent executors and other interested parties to help explain the options available during probate, settle outstanding issues like creditor claims, and ultimately distribute assets to beneficiaries according to the language of the will (or as closely as possible, given the circumstances).
Any disputes that arise during probate mean that the case will move to district court. Complicated legal questions can arise, and parties filing contests or complaints will have their own perspective and legal reasoning behind their actions. An estate’s representative — and its primary heirs — will want to act in their own best interests by obtaining the legal knowledge needed to understand what is happening and what their legal rights and options are in the situation.
If, for example, a creditor is claiming an outstanding debt of a dubious nature that would wipe out the value of the estate before any of it is inherited, then the representative has a strong interest in looking into the nature of the claim, establishing its validity, and seeing if any alternative resolution options can be used.
Having a probate lawyer can be highly beneficial for those looking to reduce the burden of representing an estate and who want to expedite the process of closing probate for good.
New Mexico Financial & Family Law understands the stress and the drama that can follow in the wake of a loved one’s death. Whether you are tasked with being their executor or you are someone with an interest in the estate, questions about property sales and liquidation can be difficult for the average person to answer. We are here to help you find the right answers. Our goal is to reduce the stress and uncertainty in this trying time and to promote the interests of the estate — and the recently passed loved one — as a whole.
If you have questions or concerns about the probate process or carrying out your loved one’s wishes, we are here to provide guidance. Reach out to schedule a no-obligation case review and consultation when you call (505) 503-1637 or contact us online.
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