[WSBAPT] probate question re buying out bene's share of real property

[Nick Pleasants]

Sharon,
I've done this a few times, feel free to give me a call. I think there are a few other driving factors:

  1.  Are there any assets besides the house, especially equal in value to the house? Because then PR can do non-pro rata distribution of house to himself, and give cash/other assets to the other beneficiary.
  2.  Is the house encumbered? If yes, does the PR want to try to keep the mortgage, or are they open to refinancing?
  3.  Does PR want title insurance (he should, because he probably cannot rely on decedent's title insurance)? If yes, then need to structure with title company so they are willing to insure. They will typically charge for insurance on the full value of the property, even if the consideration is only half the value of the property.
  4.  Does the other bene want cash now? If no, then PR can deed house to himself, and give the other bene a note/DOT for half the value and pay over time.
Looming in the background is whether or not excise tax will be due, how much, who pays, etc. It's a bit of an art rather than a science. If the parties all have the same last name, there is someone at DOR that will often issue a routine audit (SOL is 3 years + the year you record, so if you record today, DOR has until 12/31/27 to audit). If they have different last names, I have not had clients audited yet, but keep in mind that DOR views these transactions suspiciously.
Best,
Nick

Nicholas Pleasants | Shareholder

[OseranHahnAttyatLaw 8]

11225 SE 6th Street | Suite 100 | Bellevue, WA 98004
Main: (425) 455-3900 | Fax: (425) 455-9201 | E-mail: npleasants at ohswlaw.com<mailto:npleasants at ohswlaw.com>

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Sharon Rutberg
Sent: Friday, February 3, 2023 8:00 AM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] probate question re buying out bene's share of real property

Greetings -

I have a probate where the decedent's residuary estate is divided 50-50 between two unrelated persons. The main asset is a house. One of the beneficiaries is also the PR.

The PR is interested in ending up with the house. What is the best way for him to purchase the other beneficiary's share (assuming she is agreeable)?  Does he need to take out a mortgage for one-half of the house value and pay her with the proceeds? Will a mortgage company agree to that? Does he need to transfer the house to the two of them first via a PR deed and then arrange the buy-out, or can he do it prior to making that transfer?

Appreciate your wisdom!

Sharon

Sharon C. Rutberg, Attorney at Law
Salmon Bay Law Group, PLLC
1734 NW Market St.
Seattle, WA 98107
206-735-3177, ext. 2
sharon at salmonbaylaw.com<mailto:sharon at salmonbaylaw.com>
Website: www.salmonbaylaw.com<http://www.salmonbaylaw.com/>
Washington State Bar #47055

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