It is common practice in estate planning for an individual to make specific gifts of property. Perhaps you wish to leave your house to your children or a particular family heirloom to a sibling. But what happens if the property described in your will is no longer part of your estate at the time of your death? In such cases, the gift is moot; your executor cannot distribute property that is not there.
A more complicated question may arise if your will specifies a distribution of property that conflicts with actions taken during your lifetime. A Connecticut court recently addressed such a situation. A woman left a piece of real estate in her will to a local church. However, shortly before her death, she entered into a contract to sell the property to another person. The woman's executor wished to proceed with the sale. The church sued to enforce the gift made in the will.
A Connecticut appeals court ultimately ruled for the church. Although the woman signed a contract to sell the house, the terms of the agreement were not fulfilled by the time of her death. Specifically, the putative buyer failed to secure mortgage financing. This meant the woman still owned the property on the day of her death, and Connecticut law required it be distributed in accordance with the terms of her will. The executor could only sell the property with the consent of the church, which was the designated beneficiary.
Planning Ahead to Avoid Confusion Later
California probate law requires an executor to follow the instructions contained in the deceased individual's will. Even if the deceased expressed his or her intentions to dispose of the property in a different way prior to death, what matters post-death is the signed will. The executor, after all, is acting as a fiduciary for the deceased under the terms of the will.
If a will does not direct a specific distribution of real property, the executor must petition a probate court for permission to sell during the administration of the estate. In some cases, this may be necessary to pay the expenses of the estate. For instance, if the deceased's home was his or her only asset, a sale may be required to provide sufficient funds for the payment of any debts, taxes, funeral expenses and court costs. Even where other assets can cover these expenses, a sale may still be preferable depending on the will's distribution of the remainder (or residue) of the estate. Say the deceased had four children, and left her residuary estate to all of them in equal shares. It might make more sense to sell the home and divide the cash proceeds four ways than to convey the property to all four children as co-tenants.
As always, the executor is bound by the terms of the will. It is in your interest—and the interest of your beneficiaries—to make your wishes as clear as possible in writing. If circumstances change, such as deciding to sell a property, it is incumbent you review and revise your estate plan accordingly. If you need to consult with an experienced California estate planning attorney, contact the Law Office of Scott C. Soady today.