Executor buying property from the estate – is that allowed? Only if he pays fair market value for it, or if the transfer is being done as part of distributing the estate, with equal distribution among all the beneficiaries and in accordance with all the applicable rules. Estate property does not belong to the executor – he is just managing it. What do we call it when a manager steals money he is managing? That’s right; it’s called embezzlement. Or more simply, stealing.
Let’s say an estate contains a house that is worth $1 million, and the executor buys the property from the estate for $200,000. This gives him the opportunity to “flip” the house on the market and walk away with $800,000 or live in a $1 million house having only paid $200,000. Even if the executor is one of the beneficiaries, he is responsible to manage the estate for everyone’s benefit, not just his own.
The estate belongs to all the beneficiaries. If an executor uses the estate’s money for his own needs in any way or buys the property from the estate at a lower than market price, he is considered by the law to be taking everyone’s money, not just his own. As an example, if he takes four thousand dollars, he is not taking four thousand dollars of his own money. He is stealing a thousand dollars from each of his siblings. If he takes a penny, most of that penny belongs to the other beneficiaries.
What can happen if an executor neglects good advice and buys the property from the estate for less than fair market value? Nothing good. The judge on the case can remove the executor. The court will force the executor to return the property to the estate or pay restitution to the beneficiaries of the estate. The court might order the executor to pay for his own attorneys’ fees as opposed to using estate funds to pay for his attorney’s fees. The judge may even order the executor to pay the beneficiaries’ attorneys’ fees. What is scarier is that the executor can even be criminally prosecuted for stealing. That’s right, a criminal prosecution for the executor buying property from the estate, even if the executor is one of the beneficiaries of the estate that contains the property. The Surrogate’s Court judge can refer the case to the District Attorney’s office, which has the power to prosecute the case in criminal court.
The executor cannot buy property from the estate for less than fair market value because the property belongs to someone else. As explained above, doing so is stealing and can lead to an array of legal woes.
Although we talk about an executor, the same rules apply to an administrator and a trustee, as well as a preliminary executor, administrator d.b.n., administrator c.t.a.d.b.n., administrator c.t.a., ancillary executor, ancillary administrator, and ancillary administrator c.t.a. 
Above, we’ve referred to the executor as a manager. The legal term for someone managing money, including an executor is “fiduciary.”  New York’s Estates, Powers and Trusts Law governs the conduct of an estate fiduciary, as well as a trustee and an agent under a Power of Attorney.
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.” 
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.” 
The estate is the owner of the property. If an executor buys the property from the estate for less than full market value, even if he’s paying something for it, he commits 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.” 
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 sort of benefit from the transaction. For example, if the executor is buying a share of the decedent’s business, house, or other property, 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. Buying property of the estate often triggers feelings of inequity in beneficiaries, so it is important to communicate with them, explain that they are still getting a fair share of the estate and that they are actually getting more money than they would have if not for you buying them out because of cost savings on transaction costs such as paying a broker. It is important that there is a feeling that the executor fulfilled his responsibilities to 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 does that, it is important to 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.
To sum up, executors should not buy the property of the estate, unless it is for fair market value and with either signed consent from each and every beneficiary or an order of the court authorizing the executor to transfer the property to himself.
The executor should place all estate funds into an estate account.
The executor can only use estate funds to pay the legitimate expenses of the estate, taxes and legal fees.
Whether you are a beneficiary who thinks that the executor is buying property from the estate for less than fair market value, or if you are an executor and you feel that you are falsely accused of doing so, you can speak with New York estate attorney Albert Goodwin, Esq. He can be reached at (212) 233-1233.