Dear David,
We lost our dad a few months ago and my brother and I are executors of his will. Four siblings are sharing the proceeds of the estate. It’s easy for us to divide simple things like cashable investments, bank accounts or RIFs, but we also have two properties to sell and each one has a sibling who wants to buy it. How do we establish the value of these properties and ensure the proceeds are split equally among the four of us? We’ve talked about getting three Realtor opinions of value, but I’m not sure if that is the right way to go. – DIVIDED
DEAR DIVIDED: My condolences on the loss of your father. Being the executor of his estate is a huge responsibility. When someone sits down to write their will, they select their executor(s) with much care and forethought. Sometimes they assign more than one person to this role, to ensure the process is carried out properly. The writer of a will may choose to appoint a trusted individual outside of their family. In a time of grief, a non-relative may have an easier time staying at arm’s length making diligent decisions about the legacy of the departed, and ensuring the estate is dispersed in an effective manner.
Some aspects of the process are simpler than others, as you have noted. Cashing in a RIF or account where the value is determined when the account is closed is straightforward. Establishing property value is different, since it can vary depending on the motivation of the buyer and seller, the agent’s experience, and the state of the market. Real estate values are subjective and based on what someone is willing to pay, which is easily illustrated in a multiple offer situation. When buyers are competing, it’s not unusual to see five offers come in at completely different price points, sometimes ranging by as much as 10 to 20 percent. Getting three Realtor opinions is sometimes heralded as a “quick fix” to establish value, but I disagree with this method as Realtor opinions can vary. The only true way to establish value is to expose the property to the open market, where you will see what buyers are willing to pay.
This is where executorship gets complicated, especially if two of your siblings want to buy your father’s properties. In every purchase scenario, the buyer wants to pay as little as possible, which contradicts your duty to achieve the highest value for all beneficiaries. If one sibling gets a great deal, the others will suffer a loss, since their portion of the estate is devalued.
PRO TIP: The simplest solution is to sell the properties on the open market and invite your siblings to submit a competitive offer. Alternatively (and if all beneficiaries agree), you can seek two independent appraisals by certified appraisers and average their values to establish a price. The second option makes it simpler to move forward, but the estate should not be burdened with the cost of the appraisals, regardless of their outcome. The ultimate lesson in all of this is to be concise when writing a will. Spell out exactly how your property will be dispersed, and what portion of the proceeds each beneficiary will receive. Your lawyer can help you run through all the scenarios, and ultimately help avoid disputes among family members. #Advice #AskDavid #TheNegotiator
