Estates Left Unattended – Part 3
This 3rd post of 3 is about estate administration which was begun but not finished by an executor who died. As I explained last week, I first had to petition the court to be appointed administrator. The estate consisted of a house and investment accounts.
There were several issues that needed immediate attention. Because the real estate taxes had not been paid for more than a year, there was a tax lien on the property. The town had sold the lien to an investor at a tax sale. Investors buy the liens and then continue to pay the taxes. When the homeowner sells the home or otherwise pays the taxes, the lien holder must be paid back with interest.
The bigger payoff for the lien holder, however, is the possibility of foreclosing on the property after a waiting period which is usually about two years. In this way, it is possible for an investor to pay a small fraction of the fair market value for the property which can result in a huge profit when the property is resold.
My concern as administrator was that a $350,000 asset could be lost to the estate if the lien holder obtained title to the property. In that case, the estate would get nothing for the house.
Another issue with the house was other assessments and fines by the town. Because the property had been unoccupied for over a year the lawn had not been mowed and snow had not been shoveled among other things. Neighbors complained and the town issued fines which kept accruing interest.
Finally, there remained the issue of unpaid inheritance taxes. The fines and interest kept accruing, adding tens of thousands of dollars to a tax bill that was now well into the six figures. While there were some deduction that could be taken, the tax auditor said the executor had not provided any documentation to substantiate them.
Thankfully, I was able to negotiate down some of the interest and fees and provide proof of the deduction to reduce the tax bill somewhat. In the end I was able to get the home sold and paid the taxes in the nick of time and the estate was able to receive the proceeds from the sale of the home that can now be distributed to the executor’s own estate. From there taxes and bill of his estate must be paid before the net estate can be distributed to his family.
It all has worked out but just a few more months of delays could have caused the loss of a few hundred thousand dollars. So, while there is no statutory deadline within which to complete estate administration there definitely can be a risk to doing nothing or delaying for too long.