How to tell if an executor is managing responsibilities fairly.
It’s common when both parents die that they leave their home to their children. However, what happens when the sibling, who’s the executor, refuses to sell the home (which still has a home equity loan)?
nj.com’s recent article, "What happens when siblings can't agree about selling parents' home," explains that even though an executor has some discretion in administering the estate, she has a duty to settle and distribute the estate expeditiously and efficiently in the best interest of the beneficiaries.
Unless the parents' will has specific instructions for the home, the executor—at her discretion—has two choices. She may sell it and distribute the net proceeds. The other option is to distribute the home "in kind" to the beneficiaries. That means retitling a deed from the estate to the beneficiaries as tenants in common. If the property is distributed in kind, the beneficiaries will then own the property jointly and will be jointly obligated on the home equity loan. State law may dictate that this loan isn’t not paid off with other estate assets, unless specifically instructed in the will.
Creditors have a specific time period in which to present a claim to the executor. As a result, many executors won’t make distributions before that time has concluded. At that point, like in New Jersey, if there are any beneficiaries who aren’t Class A beneficiaries (grandparents, parents, children, stepchildren, grandchildren, spouses, or domestic partners) or if there is a trust, then a New Jersey Inheritance Tax Return must be filed within eight months of death. Thus, many executors won’t make distribution before a Notice of Assessment (showing that no additional tax is due) is received from the Division of Taxation.
If the parents passed away in 2017 in New Jersey, for example, and if either estate exceeded $2 million, there may have been a state estate tax return to be filed and possibly taxes owed. There is now no New Jersey estate tax for decedents dying after 2017. Even if there is no tax and all the beneficiaries are Class A beneficiaries, the state requires that a waiver be obtained from the Division of Taxation to release its lien on the property of a decedent.
However, if an estate has been open for a very long period of time and family members think the executor isn’t fulfilling her obligations, they may sue to have the executor discharged and a new one appointed. The court may discharge an executor for not obeying a court order, like filing an accounting or an inventory of estate assets. The executor may also be removed if she is found to have committed embezzlement, waste, misappropriation, if she’s incapacitated, or if she neglects or refuses to perform the required duties of the office. Beneficiaries can also ask the court to direct the executor to perform a particular action.
Reference: nj.com (October 4, 2018) "What happens when siblings can't agree about selling parents' home"
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