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Splitting the family estate – how can all concerned get a fair deal?

Cottage

What do you do when you and your siblings are all left equal shares in a property but another sibling currently occupies the home that needs to be split?

We were recently asked for advice on the following conundrum:

‘Our mother died in 2013 leaving the estate to be divided between siblings. My brother and his family lived with our mother and all siblings have allowed them to live there since her death. The time now has come where we feel it is time to sell. Unfortunately, my brother is unable to buy the property as he wouldn’t be able to afford a large mortgage. All siblings have agreed he can stay in the property for the time being having made it clear he has to find another property. As the executor, how can I make this legal without losing our individual share of the estate?’

Our advice

You’re right to think that as executor, you have the responsibility for sorting this out. On the face of it, it is a simple matter of asking your brother to leave, selling the house and dividing the net proceeds between your siblings. In practice, it is far from simple and often consumes a lot of emotion, time and expense.

As your brother can’t afford to buy the house outright, there could be an opportunity for him to purchase it from the estate over a set period of time.

You could agree on a value of the property and he could pay you monthly instalments, plus interest, until he owns it. You and your other siblings would all receive some extra (taxable) income without having to uproot him.

Court action

It is unlikely your brother will make himself and his family voluntarily homeless. His share of the house may not be sufficient to buy another property and his income may not be high enough for him to bridge the gap with a mortgage.

Nor does he have to move without the estate having obtained a court order evicting him. So, if you fail to reach an agreement and your brother refuses to leave, it’s likely the executors will have to take court action.

Estoppel

If some sort of promise was given to your brother by you or your siblings that he can stay in the property indefinitely provided he repairs, insures and maintains it, this could lead to him raising the defence of ‘estoppel’. In layman’s terms, this means preventing you from going back on your word.

That would mean the court would only grant an order for sale consistent with the promises given to him. As executor, you will need to explore what promises, if any, were made.

If your brother has paid anything towards a mortgage or carried out improvements that have increased the value of the house, he would be entitled to an enhanced share of the proceeds of sale.

A case to sue?

As the executor, you might be confronted by your mother’s estate being sued by your brother under the Inheritance (Provisions for Family and dependants) Act 1975.

The basis of the claim would be that your late mother did not make reasonable provision from her estate for him and his family. However, such a claim must be made within six months of the Grant of Probate – after that time, permission of the court is required to bring a claim.

Your brother may have lost the opportunity to make a claim, which could result in his share of your mother’s estate being increased substantially.

His wife and children may also have had a potential claim as dependents. This is something you must take legal advice on.

Whose name is the house in now?

If the house was transferred into all the names of residuary beneficiaries as tenants-in-common sometime after the Grant of Probate, then their interests would be protected as legal owners.

But more likely the title will show the house is still in the estate, or possibly the names of the executors as trustees, and this has some capital gains tax implications.

Your role as executor

All in all, this is a minefield for all parties. But as executor, you have a duty to act impartially.

If a private agreement cannot be reached, it would be wise for each party to get independent legal advice and then see if the matter can be resolved amicably or by mediation.

Litigation would be the last resort and it’s impossible to suggest what the outcome of that might be, other than that all of you may be getting a lot less than you might have otherwise received.

This is an edited extract from a longer Q&A published in This is Money. If you find yourself in a similar situation, you should seek legal advice based on your own unique circumstances.

Have you been in a similar situation with a shared estate? How did you approach it and was it eventually resolved? If you were an executor, did you have any difficulties in acting impartially?

Comments

Any litigation would involve whether the sitting sibling looked after and cared for their mother whilst in situ until her death, the state of her mind, whether there was any manipulation by the said sibling and the advice given to her by her solicitor when she made the will, if she did in fact use one.

The only other alternative would be for the remaining siblings (dependant upon how many) to each offer the sitting sibling a small percentage, at an agreed interest rate, of their rightful inheritance from the sale of the house to enable him and his family to move out, enabling him to afford to purchase another, possibly smaller dwelling. They can then claim possession of the house and and the remainder of their inheritance. The money lent to the sitting sibling would then be paid back from the appreciation on their new house say in 5 years time, dependant upon the age and health of the children and how long before they are old enough to fly the nest.

Not an enviable situation for any family to have to face, but any court action would most probably put the needs of any children staying put until they reach, at the very least,18 years of age. The threat of court action may be enough for the sitting sibling to agree to the said proposals set by the other siblings, but they, in turn, would expect firm assurances the money lent would be paid back. In any event there is going to have to be compromises made by everyone concerned in this sorry saga.

You seem to have covered the options comprehensively in your introduction. Once probate has been granted the legal responsibility of the executor/s is to execute the will in the terms stated there in. Informally, the family can agree to change this, provided all the beneficiaries agree to this at the time. This appears to have happened here. What didn’t happen was that this informal agreement remained informal and was not put in writing. No one gave the brother a time limit for tenancy. Their agreement at time of death could be seen as tacit consent to remain. They altered the will in doing this. You have outlined the various procedures to restore the original wording on the will but you have also wrecked any family concord that might have existed. Such divisions are difficult to heal, showing that legality and emotional ties are often at odds with each other. Once litigation is involved one can say goodbye to thousands as costs mount. As you say, the executor/s is/are responsible for carrying out the deceased’s wishes and there is a case to be made that this did not happen. Beryl suggests that this is solved domestically, and this is the best path forward.

Patrick Taylor says:
13 February 2018

It is a shame we are not given any details as to the number of inheritors and the estimated sale value.

This might provide some sensible grounding to the case. I mention this as a local property was inherited by fourteen family members so the individual benefit was not very significant.

I note that the son and his family, one, two, three or more children , under ten or over fourteen, this all makes a difference to the best answer.

As it stands there may be good grounds for the son and family to claim that they had defrayed bills to the benefit of the parent’s estate, that they had provided care and attention to the mother and were unpaid in the role.

A potential can of worms and one might hope that the family avoids the Courts. Personally I would favour a private mortgage arrangement with the family members. Families can be very dysfunctional and in the case of the fourteen signatories to the sale locally a fight developed outside the solicitors office!

When money is left to family members it is the time they start fighting squbbling arguing about it and than just fall out How many times has that happened ? It just need one to start the whole thing off