[WSBAPT] what an heir is entitled to

[Eric Nelsen]

Grandma's estate consists of her house, and her one third interest in the LLC. So long as that property remained in the Estate, any income, rents, and profits from the property belonged to the Estate. The Estate also of course retains the benefit of any increase in value of the assets themselves.

Grandmother's percentage interest in the LLC belongs to the estate, which means the estate had a right to its share of any distributions from LLC profits. That also means that the Estate had member voting rights in the LLC, as the owner of Grandma's interest. (subject to any shareholder agreement that might limit transfers.)

So I think this is primarily an accounting issue. The Estate must properly account for all income it received during the 6 years of its pendency, resulting from rental of the house and its share of distributions from the LLC.

Sounds like income also was used to pay various expenses. Estate income that was used to pay Estate expenses (to maintain Estate assets, etc.) is generally okay, but it sounds like perhaps some of the money went to benefit the LLC and/or daughter A and son. To the extent that occurred, it was improper, and at the very least should be regarded as an unequal distribution of the Estate, such that Beth should get an equal compensatory distribution to even things up.

The PR has probably breached fiduciary duties by delaying distribution of the estate, and perhaps taking benefit. Also, renting the estate house to a family member for below market value is a breach of fiduciary duty, and the PR should be liable for the lost rent (difference between actual rent paid and market value rent).

The Estate is likely owing to have to file back fiduciary income tax returns (Form 1041) for the years it has been operating. Any penalties and interest for failure to properly file would be fiduciary breaches by the PR, for which the PR should be personally liable.

Grandma's interest in the LLC needs to be distributed according to intestacy – sounds like in equal thirds to daughter A; son; and Beth, the only heir of deceased daughter B.

If daughter A and son want to keep the house, they need to buy out the one-third interest going to Beth. That would be at current market value, not date of death.

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 Jenna Brozik
Sent: Tuesday, October 20, 2015 12:39 PM
To: WSBA Probate & Trust Listserv
Subject: [WSBAPT] what an heir is entitled to

Here is the scenario:

Grandma, daughter A, and son, have LLC in which they own several properties and collect rental income.  Grandma has another daughter B that has passed away.

Grandma owns her own house, separate from the LLC.

Grandma dies, no will.  Son and daughter continue to run LLC on their own.  Probate is opened a couple months after death of grandma.  Probate has been open for six years and has not closed.

Son and daughter A pay for significant repairs and improvements for the properties out of the LLC profits over the past six years.

Daughter B has a daughter (let's say her name is Beth) who is entitled to her deceased mother's share.  She inherits a 1/3 of the estate, as well as the son inherits a 1/3 and the daughter A inherits a 1/3.

Son and daughter rent out grandma's house and do not pay off mortgage of the house.  Son and daughter pay the mortgage from grandma's house from LLC account and deposit rent into LLC account, not estate account.  Son and daughter rent out grandma's house to a family member way below market value.

If Beth inherits her share of the properties in the LLC at the value from the date of death six years ago, she gets cheated out of the improvements and the increase of value in those properties.

Son and daughter A want to continue to run LLC and own the properties in the LLC.  Son and daughter A want to keep grandma's house and continue to rent to the family member. Beth just wants out and her share.

Does any one have suggestions as to how Beth can inherit her fair share?
Thanks in advance,
Jenna Brozik
Attorney at Law
Prinz & Brozik PLLC
445 S Grand Ave
Pullman, WA 99163
(509)338-0908 / (509) 338-3527 (fax)
jennaprinzlaw at gmail.com<mailto:jennaprinzlaw at gmail.com>

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