I have been asked to look at a file concerning the sale of a property at an undervalue to a beneficiary. Even if the sale is justifiable (there will be a saving saving in estate agents fees) the beneficiary (one of 4) is also the executor and is not able at this stage to renounce. My understanding is that an executor may not purchase from the estate and the if they do the transaction is voidable. My problem is that despite advising the executor of this they are still insisting that the firm act on the sale to them. The other 2 beneficiaries have agreed but the third is a minor and so cannot. Can I simply refuse to act and tell the executor to go elsewhere? I don’t want a negligence claim a few years down the line when the minor beneficiary turns 18 and decides he doesn’t like what he has received. What are my professional duties here?
I stand to be corrected but my personal view is that your Client has probably been appointed executor and trustee by the Will and, I assume, has proved the will - hence not being in a position to renounce. As executor he is under a duty to call in and preserve the assets, pay the liabilities and to distribute in accordance with the terms of the Will.
Having called in the assets and paid the liabilities, he then holds these as trustee for the benefit of the beneficiaries. It is a trustee who is precluded from benefiting from the trust. I suggest that, having appointed a trustee to act in his place (if necessary) he could then retire as a Will trustee prior to distribution. As he will only be an executor at that point, he could agree to sell the property to himself at undervalue if, by cutting out the agents commission, the net proceeds of sale would be greater than the net proceeds if sold at market value through an agent on the open market, as this would maximise the value of the residuary estate. I suggest that the property should be placed on the open market to ascertain what offers may be made and to demonstrate that the sale to him would produce a higher return and that the outcome be carefully documented and retained. In that way, if when the minor beneficiary turns 18 he questions the position, if his share of residue was demonstrably increased by the arrangement he has suffered no loss and will not have a claim