[WSBAPT] best way to deed property to heir who is buying out siblings

Tue Mar 17 13:54:51 PDT 2015

Maybe the PR distributes all the real estate as a nonprorata distribution
to one beneficiary who then buys some other stuff from the PR with the
promissory note?

On Tue, Mar 17, 2015 at 10:19 AM, Maureen Wickert <wickertlaw at comcast.net>
wrote:

> As an added two cents to Eric's comments, the certified appraisal also
> becomes important in the event the Department of Revenue reviews and elects
> to audit the sales price and collected excise tax on the transaction.
>
> A client came to me about what he believed he received as an heir a
> distribution of property from an estate.  The estate sold property to a
> third party on a short term note and the third party defaulted. The heir
> believed he received the property as his share of the estate, but instead
> the estate distributed to him the bad promissory note. He was not happy,
> but luckily, the client and the third party were able to agree to
> new terms.
>
>
>
> Very truly yours,
> Maureen A. Wickert, Attorney at Law
>
>        WICKERT LAW OFFICE
>
> 14900 Interurban Avenue South, Ste 255
>         Tukwila, WA 98168
>        Phone: 206-859-5502
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>        wickertlaw at comcast.net
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> ------------------------------
> *From: *"Eric Nelsen" <Eric at sayrelawoffices.com>
> *To: *"WSBA Probate & Trust Listserv" <wsbapt at lists.wsbarppt.com>
> *Sent: *Tuesday, March 17, 2015 9:42:08 AM
> *Subject: *Re: [WSBAPT] best way to deed property to heir who is
> buying        out        siblings
>
>
>  I think the deed sequence depends upon how the transaction is structured.
>
>
>
> If the Estate is transferring directly to buyer-heir, then I think it
> should be done as a direct deed from Estate to buyer-heir. It would have to
> be a sale rather than inheritance because it's not simply a non-pro-rata
> distribution: the buyer is having to pay in money above her/his
> inheritance. I find that it's easiest to imagine this simply as a straight
> sale of property from Estate to a third party, with the third party getting
> a credit against the purchase price representing the heir's share of the
> Estate. That keeps the tax and other consequences clear: it's a normal
> sale, with all the usual requirements of reporting the sale as capital
> realization gain/loss; but excise tax is lower than full sale price because
> there's an inheritance exemption for a portion.
>
>
>
> Purchase price absolutely must be backed up by a certified appraisal and
> agreement of all heirs in writing. That safeguards the PR from any
> accusation of breach of fiduciary duty.
>
>
>
> The seller-financing that you describe is a little unusual for an estate.
> I think it qualifies for the regulatory exemption with DFI--see
> http://www.dfi.wa.gov/residential-seller-financing
> <http://www.dfi.wa.gov/residential-seller-financing--but>--but the main
> question in my mind is, what is the PR's obligation concerning financing
> terms and security? I think the PR has a duty to charge commercial rates of
> interest and properly secure the debt, just like any other lender. Then the
> Note should be promptly distributed in-kind (assigned) to the other heir so
> that the debt is owed directly to the other heir. (I also necessarily
> assume that the other heir is completely cooperative with this entire
> scenario.) Both heirs should be advised to get their own lawyer if they
> want, since you don't represent them individually and you can't advise them
> whether the transaction is a good risk/good investment for either of them.
> Effectively, the non-buying heir is risking loss of part of their
> inheritance if they don't get paid back, and the buying heir doesn't know
> if the price and terms are good.
>
>
>
> Alternatively, if you don't want to mess with any of that, then it's okay
> to do it the other way: distribute from Estate in equal shares to the two
> heirs, and let the buyer make her/his own arrangements with sibling to buy
> the other out. They can get separate counsel for that. I think excise tax
> would be higher because it's a straight sale of 50% as opposed to a smaller
> interest resulting from an offset of the inheritance--but it keeps the
> Estate out of the transaction and avoids the Estate having to work through
> the nuances of its fiduciary duties to all heirs.
>
>
>
> Sincerely,
>
>
>
> Eric
>
>
>
> Eric C. Nelsen
>
> SAYRE LAW OFFICES, PLLC
>
> 1320 University St
>
> Seattle WA  98101-2837
>
> phone 206-625-0092
>
> fax 206-625-9040
>
>
>
>
>
>
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com [mailto:
> wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Chandra Lewnau
> *Sent:* Tuesday, March 17, 2015 8:42 AM
> *To:* WSBA Probate & Trust Discussion List
> *Subject:* [WSBAPT] best way to deed property to heir who is buying out
> siblings
>
>
>
> I have a probate where one heir wishes to purchase the decedent's home. Is
> there any reason this can't be done in one step - i.e. a deed from the PR
> (as pr and as individual) to the heir - rather than PR to all heirs and
> then all heirs to the purchasing heir? It's a small estate with two sibling
> heirs who get along well. The purchasing heir will take a smaller share of
> other assets and give a promissory note for the remaining balance with a
> relatively short payoff. It seems simple, I'm wondering if there are any
> tax or other consequences I may be missing.
>
> *Chandra M. Lewnau*   Wills & Trusts | Probate | Small Business
>
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