What you should know when an executor sells a house

You could have been named executor in a will or you could be a prospective buyer of what has been a family residence. From the perspective of an executor/executrix, selling the family house can be one of the most significant and one of the most demanding jobs associated with settling his/her parent’s estate. Arranging for cleanout, deciding what belongings should be kept and which should be sent to auction or discarded, cancelling services at the residence and dealing with beneficiaries while answering repeated questions can consume a great deal of time. That is if there is only one property. There could be several. Then it is often a matter of finding a good Realtor or agency and trying to figure out the legal issues associated with the job and probate.

This is a critical decision making time. The job may not be easy.

When it comes to probate, a reasonable executor/executrix may often decide it might be a good idea to find an attorney experienced in the field to explain what is involved going forward and the responsibilities. He/ she might even consider getting more professional advice earlier when it involves choosing a Realtor or deciding what creditors need to be paid and how much or resolving title or lien issues.

However, it does happen more often than you might think that our office receives a call stating that settlement for transfer of a property is scheduled for next week and the Executor has just been notified there is something called a draft Pennsylvania Inheritance Tax return that has to be submitted to the title company by Friday. This could be our first call. Hopefully probate was accomplished properly. Delay might delay the settlement and the attorney has a very short period of time in which to assemble the information to properly complete the return. Earlier would have been better.

Much of the information also needs to be obtained from the title company and/or the real estate including a preliminary or draft ALTA (previously known as a HUD-1) which would describe expenses associated with the sale such as property tax apportionments, Realtor commissions and other miscellaneous payments, liens and mortgages that need to be satisfied and so on. Sometimes questions regarding title need to be answered. Contact between the attorney and the title company and Realtor is critical. Also the draft Inheritance Tax Return is not

limited to real estate information and needs to include other financial information, as best as it is known, for the decedent. We have, however, been able to come through in these cases although, as I say, earlier is better.

Assuming all other questions have been answered appropriately the title company will still almost

always on the date of settlement add another item to the ALTA — an escrow for payment of Pennsylvania Inheritance Tax. This happens even when prepayment has already been made. This is an additional area where an attorney can be helpful.

We often recommend a check from the title company at settlement directly to the Register of Wills, Agent for the Department of Revenue in partial payment of the estimated Inheritance Tax. The reason

for this is, where possible, to obtain the 5% discount for early payment. Also this alternative can be used to prevent long term escrow of large sums. It typically takes 3 to 6 months to receive an appraisement (approval) from the Department of Revenue and the estate is deprived during that time of use of the funds especially where it is obvious the escrowed amount otherwise would be too high. Regardless, when the final appraisement is received

we apply to the title company for release of the escrowed funds to the estate and then meet with the executor to accomplish this.

If you are a buyer there are a few points you should know also. When purchasing from an estate the executor is not required to provide a form property disclosure statement which is otherwise required under Pennsylvania statutory law. However, Realtors strongly recommend disclosure and will probably request the

executor to sign to the extent known. If an executor has reason to believe there are problems with the property he/she needs to come forward and disclose. They may not, however, know of specific problems especially if he/ she did not reside there.

The process can be complicated but made easier with professional help.

Janet Colliton is a Certified Elder Law Attorney by the National Elder Law Foundation and member

of the Pennsylvania Association of Elder Law Attorneys. She limits her practice to elder law, life care, special needs, real estate, and retirement. Also Medicaid, estate planning, estate administration and guardianships and is located at 790 East Market St., Suite 250, West Chester, 610-436-6674, colliton@ collitonlaw.com. She is, with Jeffrey Jones, cofounder of Life Transition Services LLC, a service for families with long term care needs.