Some people pass away leaving only real estate and/or some personal belongings, and not much else. Illiquid estates (estates where there is no cash) must be distributed just the same as any other estate.
Sometimes the heirs or beneficiaries of the estate would prefer cash to a partial interest in the estate assets. One way to ensure a fair administration is to sell the property and distribute the proceeds to the beneficiaries.
Under Florida probate law, the personal representative’s discretion to sell assets of the estate depends on whether the property at issue is real property or personal property. Real property usually consists of land and buildings on the land (and some immovable fixtures attached to those buildings). For the sake of simplicity, personal property is anything that isn’t real property.
When it comes to personal property, a probate court will usually defer to the personal representative’s decision. The Florida Probate Code authorizes a personal representative, “acting reasonably for the benefit of the interested persons,” to “sell, mortgage, or lease any personal property of the estate or any interest in it for cash, credit, or for part cash and part credit, and with or without security for the unpaid balance.”
Real estate is trickier. Ideally, the decedent would have left a Last Will and Testament that includes a “power of sale clause.” Even a vaguely worded power of sale clause is sufficient to allow the personal representative to sell or lease real property without seeking an order from the probate court.
If the decedent died without a will (intestate) or with a will that lacked a power of sale clause, the personal representative can still sell real property, but he or she must first obtain court approval in order for title to be transferable.
Any authorized sale of real estate – including court-sanctioned transactions and those occurring under a power of sale clause – transfers title to the buyer free of claims of creditors and beneficiaries of the estate, with the exception of existing mortgages and liens against the real property.
When it comes to sales of estate assets, it is important to remember that all of the personal representative’s actions must be for the benefit of the other parties involved (such as beneficiaries of the estate and creditors). The role of personal representative is a fiduciary role, meaning that the personal representative owes duties of loyalty to these other parties. Even if the personal representative is also a beneficiary, he or she should ensure that any sale of estate assets is in the best interest of the other beneficiaries.
If there is any question regarding the reasonableness of selling the assets of an estate, it is good practice to get court permission before doing so. This protects the personal representative from a claim by other beneficiaries or creditors that the sale of the asset was unnecessary or for less than market value.
Taken together, this means that a Florida personal representative should seek a court order before selling real estate in three situations:
- When the decedent did not leave a valid will;
- When the decedent left a will that doesn’t have a “power of sale” clause authorizing the personal representative to sell estate assets;
- Any other circumstances where the personal representatives actions are likely to be challenged by an heir or beneficiary.
The personal representative must also be aware of the restrictions on sale of Florida homestead. A deed conveying a Florida homestead would not be effective unless the will directs that the homestead be sold. (Note: It isn’t usually a good idea to leave a will directing that the homestead be sold. Doing so will forfeit the protection of Florida homestead exemption.)
If court approval is required, the court will oversee the terms and conditions of the sale. Creditors and other beneficiaries must be given advance notice of the sale, and some Florida probate judges require the real estate to be appraised before it can be sold.
If you have questions regarding Florida probate, take advantage of our free Florida probate consultation.