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

Tue Mar 17 17:20:05 PDT 2015

Thanks so much for all the very helpful discussion. Looks like the buying
heir can pay cash so there's no need to worry about a promissory note. They
have agreed to the purchase price and other terms in writing, backed up my
more casual evaluations of realtors, but I will warn them about the
potential for review of the excise tax owed if they don't get a formal
appraisal.

  *Chandra M. Lewnau*   Wills & Trusts | Probate | Small Business
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On Tue, Mar 17, 2015 at 1:54 PM, Mark Higgins <markthiggins at gmail.com>
wrote:

> 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
>>          Fax: 206-260-9005
>>      www.wickertlawoffice.com
>>        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
>>
>> [image: photo]
>>
>> Phone: 206-317-4282
>>
>> Email: chandra at lewnaulaw.com
>>
>> Website: lewnaulaw.com
>>
>> Address: 1001 4th Ave., 44th Floor, Seattle, WA 98154
>>
>> <http://linkedin.com/in/chandralewnau>  <http://twitter.com/lawspotting>
>> <http://plus.google.com/+ChandraLewnau/posts>
>>
>> In-person meetings available in West Seattle or downtown Seattle.
>>
>> <http://scheduleonce.com/chandralewnau>
>>
>> Schedule an appointment online <http://scheduleonce.com/chandralewnau>
>>
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>
>
> --
> Mark T. Higgins
> Mark T. Higgins, P.C.
> P.O. Box 57
> Darrington, WA 98241
> 206-491-2420
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