Registered Valuation of Estate Property Prior to Distribution
As executor of an estate, you have a duty to act prudently and reasonably in the sale of any estate property. This includes a duty to obtain the best price you can on a sale of estate assets, for the benefit of the beneficiaries. As a result of this, it is recommended that the executor obtain a registered valuation of the property owned by the estate, before it is sold. Obtaining a valuation ensures that you have knowledge of the market value of the property.
If the property is sold at an undervalue, the beneficiaries will be entitled to make a claim against you in the future for the shortfall. The beneficiaries could claim that they did not receive their full entitlement of inheritance under the will. In this situation, you could be personally liable to pay any losses deemed to have been suffered by the beneficiaries due to the sale at an undervalue. This means that you could potentially have to pay the difference between market value and sale price out of your own personal funds, to reinstate the beneficiaries.
If an executor does not wish to receive a registered valuation of the property, informed written consent would need to be obtained from the beneficiaries. This means that the beneficiaries would need to be properly advised of the implications of the property being sold without first receiving a registered valuation, and confirm that they are happy for the property to be sold on those terms. The beneficiaries would need to receive independent legal advice for this. A Deed of Family Arrangement would need to be formed and signed by all of the beneficiaries. This deed should also include a clause that indemnifies the executor from any future claims in regard to the sale of the property. This would mean that the beneficiaries and their children would be unable to make a claim against the executor in the future as a result of this sale (if it was later deemed to be sold at an under value).
Distribution of Estate Within Six Months
It is usually recommended that estate property is not distributed for at least six months from the date probate is granted to the executor(s). If the property is distributed before the six months is up, the executor could be personally liable for any successful claims made against the estate.
Executor’s are required to take reasonable steps to make sure that there are no debts owed by the deceased. This could include advertising for creditors in publications such as newspapers. If an executor is that sure there will be no claims, they may choose to distribute the estate early, but should understand that this risk is involved. Again, if an executor decides to go ahead with the early distribution we would recommend that informed written consent is obtained from the beneficiaries. The beneficiaries should be required to indemnify the executor from any future claims by them and their children. They would need to receive independent legal advice in regard to this.