Can Executor Sell Property Without All Beneficiaries Approving

Can Executor Sell Property Without Beneficiaries Approving

For those wondering if an executor can sell property of an estate without all beneficiaries approving, the short answer is this: an executor appointed by a New York court does not have to seek approval of the beneficiaries. But that does not mean that it’s a free-for-all. An executor is still obligated to look out for the best interest of the beneficiaries. As a consequence, an executor cannot profit from estate property at the expense of the beneficiaries and the executor cannot do anything that would diminish the beneficiaries’ share of the estate. Simply put, the executor is required by law to get the best possible price for the property and to not steal any of the proceeds.

If you need a consultation with an attorney about the executor selling property without all beneficiaries approving, you can send us an email at [email protected].

The executor should probably seek the approval of beneficiaries even though he does not have to

Even though the executor does not legally have to have the beneficiaries’ approval, it may still be a good idea for the executor to communicate with the beneficiaries in a way that can be later proven in court (such as email) to confirm in writing that they agree with the executor’s decision.

For example, if the executor is selling a property of an estate, such as a house or a business, the executor will do well to

advise beneficiaries of the price for which the asset is being sold
and confirm in writing that the beneficiaries are comfortable with that price, so as to avoid being sued in the future for “selling it under market value”

So does the executor have the final say? Yes. But is it a good idea for the executor to sell the property without all beneficiaries approving? Not really. Putting himself in such a risky position is what an executor should not do.

What if the beneficiaries are withholding approval of the sale of property

If the beneficiaries are withholding approval of the sale of the property, the executor has to decide whether the beneficiaries have a good reason to withhold the approval or they are being unreasonable. The executor’s estate attorney should be able to provide a good sounding board to this question.

A good estate attorney is not a yes-man and should be able to advise the executor honestly. A good attorney should tell the executor if it’s the executor who is being unreasonable, by for example self-dealing or not getting a good price for the property, or if it’s the beneficiaries who are being unreasonable by trying to obtain a benefit that they are not entitled to, or are living on the property, or are not well mentally and are engaging in conspiracy theories that have no basis.

If what we are dealing with are unreasonable beneficiaries, then it might be a good idea for the executor to get the court involved and get a court order approving the contract of sale and the sales price, just to cover the executor’s back and provide protection against a lawsuit from disgruntled beneficiaries.

Can the executor sell the property to himself?

If the executor is transferring a share of the decedent’s business, house, or other property to themselves, the executor should obtain a written release from the beneficiaries, or at least get them to approve it in writing, in order to avoid the possibility of being sued.

Transferring assets to yourself often triggers feelings of inequity in beneficiaries, so an executor needs to communicate with them. The executor can explain to the beneficiaries that they are still getting a fair share of the estate. The executor can explain to the beneficiaries that they are getting more money than they would have if not for the executor buying them out, because of cost savings on transaction costs such as paying a broker. It is important that beneficiaries feel that that the executor has fulfilled his responsibilities to them.

An executor is not allowed to benefit at the expense of the beneficiaries

An executor is a fiduciary, meaning that he has a duty to exercise the utmost good faith and undivided loyalty toward the beneficiaries throughout the relationship.^[1] Does the duty to exercise “good faith and undivided loyalty” include a duty to seek approval from the beneficiaries before selling a house? An executor “must act in accordance with the highest principles of morality, fidelity, loyalty and fair dealing.” ^[2] Does the executor’s failure to seek the beneficiaries’ approval violate those principles? Probably not. Unless of course, the executor is self-dealing, which is a violation of fiduciary duty.

Selling the house for less than market value for entities controlled by the executor, or getting money “under the table” is embezzlement, or more simply, stealing.

New York Consolidated Laws, Estates, Powers and Trusts Law – EPT § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property. He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.” ^[3]

New York’s Penal Law (the Criminal Law) states that “a person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” ^[4]

The estate owns the house. If the executor uses the house to benefit himself at the expense of the beneficiaries, he would be committing embezzlement, which is larceny.

New York Penal Law continues to say that “larceny includes a wrongful taking, obtaining or withholding of another’s property, with the intent prescribed in subdivision one of this section, committed … by conduct heretofore defined or known as common law larceny by trespassory taking, common law larceny by trick, embezzlement, or obtaining property by false pretenses.” ^[5]

It is important for an executor to get a release and discharge from the beneficiaries

The most crucial release that an executor can get from the beneficiaries is at the end of the estate. Once the assets are collected or sold, and the debts are paid out, and it’s time for the executor or administrator of a New York estate to disburse the funds to the beneficiaries. But before the executor disburses the funds, he should get the release from the beneficiaries that states that they are satisfied with what they are getting and are never going to sue the executor. The best release comes with an informal accounting, which provides

a summary of what property went into the estates,
what the expenses were,
and what is the share of inheritance for each beneficiary.

As an executor, having your New York estate lawyer get a release form beneficiaries is especially crucial when the transaction in question involves the executor personally, such as when the transaction is between the estate and the executor or the executor derives some benefit from the transaction.

An executor has no power to sell property until he is appointed by the court

Someone who has been nominated as the executor by the will but is not yet appointed by the court does not have the power to sell a house. The law states that “an executor named in a will has no power to dispose of any part of the estate of the testator before letters testamentary or preliminary letters testamentary are granted, except to pay reasonable funeral expenses, nor to interfere with such estate in any manner other than to take such action as is necessary to preserve it. ^[6]

An executor has to be mindful of limitations put in place by the court

Even though the executor does not have to ask beneficiaries’ approval, the executor has to be mindful of restrictions or limitations on the letters testamentary. Some courts, Brooklyn is the most common example, issue letters testamentary that state that the executor cannot sell real property without court approval. The court will review the contract and the sales price and will determine whether or not the sale of real estate is reasonable. This mechanism is put in place to protect beneficiaries and even the executor from being paid too little for the property. Many executors are not sophisticated and don’t know how much the property is really worth. With the prices of real estate in New York reaching record highs, it’s no wonder that courts placed extra mechanisms in place to protect beneficiaries of estates from being taken advantage of.

What can an executor do without approval of beneficiaries

The executor has the power to

marshal the assets of the estate
pay debts, taxes and expenses
and disburse the remainder of the estate to the rightful beneficiaries

The assets that the executor is charged with can include

a house
a bank account
a stock portfolio
automobiles
and any other assets of an estate

Technically, the executor is given latitude as far as approval of beneficiaries is concerned. But the executor should not take that too far.

There are questions that both beneficiaries and executors have in estate.

Can the executor sell property without all the beneficiaries approving?
Can the executor sell the house?
Does the executor have the final say?

The answer is, the executor does not have to seek the beneficiaries’ approval, but in many cases, it is better for an executor to seek beneficiaries’ approval before they sell a property, rather than to be sued by the beneficiaries later. And the executor should always act in the best interest of the beneficiaries and not benefit at their expense.

My name is Albert Goodwin and I am a New York estate lawyer with over a decade of experience dealing with disagreements between an executor and beneficiaries. We at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

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[1] NY EPTL § 11-1.1

[2] In re Estate of Naumoff, 301 A.D.2d 802, 803, 754 N.Y.S.2d 70 (3d Dep’t 2003)

Can an Executor Sell Property Without All Beneficiaries Approving?