Our latest informative blog is authored by Jim Sisson, Chief Financial Officer at Tower Street Finance.
When someone dies, the beneficiaries may want to make improvements to the property to increase its value and their inheritance. This begs the question – can improvements or upgrades be made to a property during the estate administration process? In our latest blog, Tower Street Finance’s Chief Financial Officer, Jim Sisson, answers this question by covering:
✓ The responsibilities of a Personal Representative
✓ Things to consider before making any home improvements
✓ How beneficiaries should proceed
✓ The options available to Personal Representatives
People leave behind a variety of possessions and treasures when they pass away. Managing property is a top priority for individuals tasked with handling an estate because it is frequently one of the most valuable assets.
There are, however, never any assurances as to the state of the property. While some might have been kept up to high standards for years, others might have deteriorated. So, these concerns prompt the question: Can (or even should) an estate property receive modifications or improvements?
Consider the function of a Personal Representative with regard to property in order to answer this query. In essence, they must preserve the asset in the same state that it was in at the time of the decedent’s passing by collecting, safeguarding, and maintaining it.
As a result, they are not accountable for making improvements to the property. They would be expected to handle more common maintenance problems, such as roof repairs and water leaks. In these situations, they must, for instance, fix the leak as well as any other damage to ensure that the property is returned to its original state.
It is not the Personal Representative’s responsibility to make improvements to the property that will increase its sale value. Therefore, the legal obligations of the Personal Representative would be to dispose of the property in another method, such as with a cash buyer, if (for example) the property had a low Energy Performance Certificate rating and potential buyers were unable to secure a mortgage.
Therefore, a Personal Representative must strike a balance between their obligations to each beneficiary individually and their obligations to the estate as a whole.
To be clear, the legal process of estate administration does not prevent any upgrades from taking place. However, such works are not a testamentary matter. As a result, there are a few things that need to be kept in mind:
- As upgrades could incur costs and impact on the timeframe of sale, all beneficiaries should formally agree that the work is in their collective interests.
- If some beneficiaries do not agree with the work, the other beneficiaries could ‘pay them out’ of their share. If this is not possible, the property may need to be sold in its current state and there are products available to help if this is required.
- Any upgrade would be an action by the beneficiaries. Personal Representatives could assist in some capacity, but it would not be related to their legal duties.
- Personal Representatives may also be uncomfortable with extended delays to the administration process arising from any property works (especially if they are personally liable for any Testamentary Expenses). Products exist to fund these expenses and remove liability from the Personal Representative if required.
In all cases, all parties need to agree before proceeding.
Making the upgrades
So, how could beneficiaries ultimately proceed? There are two potential avenues they could explore:
- The Personal Representative would need to confirm that all beneficiaries agree to any works (to ensure any risks and delays are acceptable). Unless individual beneficiary objections can be properly resolved, the works must not progress. Costs of any works could be met by an inheritance advance loan (to an individual or multiple beneficiaries). Properly constructed, this product allows beneficiaries to access a portion of their inheritance sooner, with repayment coming from distribution of inheritance from the estate.
- Alternatively, the beneficiaries could request that the Personal Representative handles the work. It is possible for all beneficiaries to agree that the Personal Representative may recover these costs from the estate before distributing their inheritance. This may therefore allow a Personal Representative to use an estate funding product, taken out in their name and repaid from the proceeds of the estate.
Consider your options
While upgrades to an estate property are not a testamentary matter, that does not necessarily mean that they cannot be arranged.
There are potential approaches that can be taken on the issue, so it is well worth considering your options if you are in this kind of situation.
If you’d like to find out more or have any questions, please get in touch using the form below: