How to split up the willed family home |
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Here's what you should know about the particular challenges the family home presents to the executor of an estate:
Wait for court order before acting
Doing anything with estate assets, much less selling a home, before you've been granted authority to do so by the court is one of the biggest mistakes an executor can make.
"The biggest issue is people who make decisions
they ought not to be making and take money that doesn't belong to
them," says Tennyson. "This includes mixing estate money
with personal money, borrowing from the estate or distributing money
before ordered to do so by the court. Those are all things that
you just shouldn't do, but it gets tempting when you're sitting
there with this large bank account."
This is particularly difficult if you have been living with and caring for your parents and their money. Once they're gone, their estate, including their bank accounts, becomes a separate legal entity with its own rights. Be sure to respect that line as executor or you may be liable for misappropriations and inappropriate distributions.
Don't even think about posting a "for sale"
sign in the front yard just yet.
"There are certain things you can't do as a personal representative without getting approval from the court, and selling a piece of real estate is one of them," says Tennyson.
The main job: maintain and organize
Once the will is ruled valid and the executor is selected, several steps follow. You'll be asked to identify and take an inventory of assets and outstanding debts, notify named parties and creditors, and arrange for maintenance of the home until its fate can be determined.
As executor, you have an obligation to maintain the value of the assets in the estate. Expenditures you make from the estate to clean out the house and pay the ongoing mortgage, insurance, utility and maintenance bills are appropriate and will pass court scrutiny on your interim or final accounting. However, a new swimming pool, a $50,000 kitchen remodel or other upgrades almost certainly will not.
"Generally, your prime directive as an executor is to keep things from losing value," says Randolph. "It's not like you're a trustee and you're investing to increase the value of the assets. You just don't want to mess up."
Beware of homestead exemption
In a handful of states, including Florida, Iowa, Kansas, South Dakota and Texas, you may be prevented from using estate assets to maintain the family home. Why? Every state has a homestead exemption that seeks to protect the primary residence from creditors, not to be confused with the homestead tax exemption that lowers your property tax bill.
Most states have a dollar cap on homestead exemption; those named above do not. Primary residences in states with unlimited homestead exemption generally are transferred outside of probate and are not considered part of the estate. Vacation homes and other real estate holdings generally remain part of the estate, however.
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