The largest asset in an estate is often real estate, such as the family home. Sometimes the decedent owns additional real estate, such as a vacation home or an income-producing rental property. What happens to such property varies in every situation and poses different risks for the Personal Representative.
The most straightforward situation is when the decedent leaves real estate through a Will to a devisee, such as a parent leaving the family home to their children. Upon the parent’s death, the real estate transfers to the children to whom it was devised through the Will, subject only to certain allowances, rights of creditors, elective share of a surviving spouse, and administration. See M.G.L. c. 190B, § 3-101.
The Personal Representative of an estate will be tasked with the sale of real estate if the Will so directs, the beneficiaries ask the Personal Representative to sell the real estate, or the personal estate is insufficient to pay the decedent’s debts, legacies, and administration expenses. See M.G.L. c. 202, § 1.
Also, depending on the real estate market conditions, the Personal Representative might recommend selling a second home or rental property. This makes sense to avoid carrying costs if the property is unproductive, unused, or poses safety risks. One such example is the fire in a Back Bay brownstone last year that killed two firefighters, where the real estate was owned by an estate. According to newspaper articles, the fiduciary of the estate faced potential liability relating to the building’s safety and also filed a lawsuit against the welding company that had been working in the back of the neighboring building. This is an unusual example of an estate owning rental property for an extended period of time due, according to the court docket, to contested estate litigation, when the fiduciary perhaps wished the property had been sold.
The Personal Representative has an obligation to maximize the value of all of the decedent’s property, including a duty to the beneficiaries to obtain the highest sale price for real estate. Depending on the real estate market conditions at the time, however, this duty can present issues and potential liability to the Personal Representative.
For instance, the Personal Representative might or might not need to obtain a license to sell from the probate court. Massachusetts Uniform Probate Code, M.G.L. c. 190B, § 3-715(a)(23 ½), provides explicit authority to the formally or informally appointed Personal Representative to sell, lease, or mortgage real estate to an arm’s length third-party without a court license if he or she was so authorized in the Will. In this situation, a prudent Personal Representative might want to obtain an assent and release from each beneficiary agreeing to the sale and releasing the Personal Representative from their obligation to consider any higher price for the real estate, especially if the real estate market is hot. If the estate proceeding is contested or the beneficiaries are simply difficult, it is prudent for a Personal Representative to avoid liability by seeking protection from the probate court through a license to sell. Also, if a Will does not contain a general power to sell real estate, or if the decedent died without a Will, the Personal Representative must obtain a license to sell from the probate court before selling the real estate.