Executors Can Be Surcharged For Selling Real Estate Over The Objection Of The Residual Beneficiary
In the estate litigation and estate administration case of In Re Estate of Kuntz, PICS Case No. 15-01262 (C.P. Lycoming, July 16, 2015) the Honorable Marc Francis Locecchio ruled that notwithstanding having the power to sell decedent’s real estate under the will, co-executors might be subject to a personal surcharge if they did so over the objection of the residual beneficiary who offered to purchase the property and pay the estate debt.
Kay Kuntz died on May 25, 2014 leaving a specific bequest of $1,000 to each of her four grandchildren, a specific bequest of $1,000 to her church and the remainder of her estate to her daughter, Lori Kuntz.
Patricia and Richard Hull were appointed as co-executors of her will. According to the will, the co-executors had the power and authority to sell any estate real or personal property.
According to an inventory filed by the estate on Aug. 19, 2014, decedent’s real property was listed as having a value of $28,600. On or about July 30, 2014, however, an appraisal on the property indicated that it was valued at $273,000.
A dispute arose between the co-executors and the sole remainder beneficiary, Lori Kuntz. The dispute centered on the estate debt, what information was being provided by the estate to the remainder beneficiary, the value of the real estate and whether the remainder beneficiary could purchase the real estate. Kuntz filed a motion for a protective order directing that the estate not be permitted to enter into an agreement of sale for the real estate, requiring the estate to provide a specific letter of assurance, an informal accounting and any other information necessary to obtain a mortgage.
The estate asserted that according to the will, it had the power to sell the real property. Pursuant to 20 Pa.C.S. §§3351 and 3355, because the will gave the co-executors said power, they could not be restrained from doing so by order of court.
While the will gave the co-executors the power to sell the real estate and while the statutory provisions relied on by them validated that authority, the court found those statutes and will were not determinative in the issue at hand.
Case law would support a surcharge against the co-executors personally if they chose to sell the real estate over the objection of the residual beneficiary and in light of the offer of the residual beneficiary to purchase the property in kind and to pay the estate debt. In Halfpenny Estate, the court upheld a surcharge against the executor for entering into an agreement of sale without consent of the residual beneficiaries. The sale was vacated via a prior injunction but the surcharge involved realtor fees. The will did not specifically devise the real estate and the co-executors were empowered to sell the real estate. The court imposed a surcharge against the executor because the executor had a fiduciary obligation to deal with the heirs with utmost fairness and “those interested in an estate, have ordinarily a right to furnish necessary monies for the purpose of payment of a decedent’s debts and thus remove the cloud on their title to the land arising out of its liability to be sold for debt.”
In Minichello Estate, the Pennsylvania Supreme Court held that the request of a beneficiary to take property in kind must be honored if the sale of said property is not reasonably necessary to pay debts or to make distribution. The court further noted that this was the law regardless of a provision in the will granting the executor the discretionary power to sell.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 38 PLW 774 (August 18, 2015)
Filed Under: Estate Litigation; Executor Surcharge; Wills; Executor; Authority to Sell Real Estate
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