When someone dies, their belongings and property form their estate. If you are the executor of an estate, you are responsible for managing these assets and distributing them to the heirs. However, some situations may require you to liquidate or sell some of the estate property.
Here are a few reasons why executors end up selling one or more assets owned by an estate.
The American Bar Association explains that before you can distribute assets to heirs, you must first settle creditor claims against the estate. Such obligations often include loans and taxes owed by the decedent, as well as medical bills, credit card bills, burial costs and funeral costs. If the estate lacks sufficient cash, selling assets is often necessary to cover these expenses.
Prevent asset depreciation
Some assets incur ongoing costs, particularly real estate and automobiles. These costs include property taxes, maintenance and insurance premiums. Without these expenses, the assets could suffer a loss of value.
If the estate cannot cover these costs, the executor could sell these assets before their value diminishes over time. Still, even if the estate can currently fund these costs, they may become a financial burden later on. Selling the assets at the present time might prevent unnecessary depletion of the estate.
Ensure fair distribution
A 2020 Policy Genius survey found that wills make up the second most common estate planning tool just under having a life insurance policy. Still, this does not mean beneficiaries always accept the provisions of a will.
Sometimes heirs fight over who gets what from the estate. It is not always possible to divide valuables, investments and other similar assets among two or more people. One way to resolve this conflict is to sell the assets to create equal proceeds for all heirs.
Selling estate properties can fulfill different practical reasons. As with any estate decision, executors must consider the financial needs of the estate and the best interests of the beneficiaries when making these determinations.