Will, executors, and life estate

[alceryes]

Thanks guys. I will go along the lines of getting a contract written up. I am already waiting to hear back from a lawyer I have hired but in the 'rural' area that this is they are very slow to respond - even after getting paid.
The co-executor's (persons B and C here) fear that as soon as the house sells, persons E and F will say that they aren't beholden to any debt.

From what I've heard so far, even from a lawyer, is that a life estate doesn't give the deceased person's debt to the 'life estators' and they can basically walk away with a huge portion of the profit from the house. [link removed] This would leave the executors all the outstanding debt and no way to pay it off.

@LdiJ, if what you say is correct, and all monies from any sale of the house/property must go to pay off all of person A's outstanding debt, then that makes me very happy! Person A was extremely proud of their accomplishments and the executors want to make sure everything gets paid off as it should.

 

[LdiJ]

Are you suggesting that a contract created between beneficiaries can change the directives in a will?
I don't think that's what you meant, is it? Or, did you mean that the beneficiaries are free to do what they want with whatever property they own and/or that they can refuse the bequest outright?

I meant the latter. Although in this case it appears to be kind of a moot point since the estate has debt and the house appears to be the only significant asset.

 

[alceryes]

Notarization doesn't affect the validity of a contract.

Okay. Thanks.

You can't change the will with a contract, but you can certainly contract with others to transfer the property once you own it. Alternatively, you could simply refuse to accept your portion, at which point the will would still control what happens, but exclude you.

It's more the monies that come from the sale of the house that we are concerned about. I want to 'contract' those proceeds to make sure persons E and F don't just walk away with it and not allow the executors to pay off all debt.

 

[alceryes]

@LdiJ, yes, the house/property is the only thing of value from the estate.

 

[Zigner]

The debts of the estate must be paid before the property is transferred. If the house is the only thing in the estate, then it's quite likely that the house will need to be sold to settle the debts. Since there is no house, there is no life estate. TALK TO AN ATTORNEY who specializes in probate in your state to confirm.

 

[PayrollHRGuy]

I will go along the lines of getting a contract written up.

That will be a waste of time. Please read @Zigner posts.

 

[Stephen1]

The debts of the estate must be paid before the property is transferred. If the house is the only thing in the estate, then it's quite likely that the house will need to be sold to settle the debts. Since there is no house, there is no life estate. TALK TO AN ATTORNEY who specializes in probate in your state to confirm.

So, if I'm understanding everyone correctly, Person A dies, then Person A's debts are paid (up to the amount of the estate), then two things happen with anything left over (1) ownership is transferred to Persons B, C, & D and (2) a life estate is granted to Persons E & F. The life estate allows Persons E & F to use the property during their lifetime or they could sell their right to someone else to use the right during Persons E's & F's lifetime. When Persons E & F die or otherwise give up their rights to Persons B, C, & D then Persons B, C, & D can do with the property anything they wish, including selling it.

 

[LdiJ]

So, if I'm understanding everyone correctly, Person A dies, then Person A's debts are paid (up to the amount of the estate), then two things happen with anything left over (1) ownership is transferred to Persons B, C, & D and (2) a life estate is granted to Persons E & F. The life estate allows Persons E & F to use the property during their lifetime or they could sell their right to someone else to use the right during Persons E's & F's lifetime. When Persons E & F die or otherwise give up their rights to Persons B, C, & D then Persons B, C, & D can do with the property anything they wish, including selling it.

I think that Zig's analysis a couple of posts up from yours is the more likely scenario. Since the house would be gone (sold to cover the debts) there would no longer be a house for a life estate to be held.

 

[PayrollHRGuy]

So, if I'm understanding everyone correctly, Person A dies, then Person A's debts are paid (up to the amount of the estate), then two things happen with anything left over (1) ownership is transferred to Persons B, C, & D and (2) a life estate is granted to Persons E & F. The life estate allows Persons E & F to use the property during their lifetime or they could sell their right to someone else to use the right during Persons E's & F's lifetime. When Persons E & F die or otherwise give up their rights to Persons B, C, & D then Persons B, C, & D can do with the property anything they wish, including selling it.

Unless I got your letters mixed up I don't see anything wrong with that paragraph.

 

[bcr229]

It's more the monies that come from the sale of the house that we are concerned about. I want to 'contract' those proceeds to make sure persons E and F don't just walk away with it and not allow the executors to pay off all debt.

If the executor does his or her job properly then B, C, D, E, and F won't receive any distributions from the estate until after all of the estate debts are paid off. The money from the sale will go into an estate bank account, not directly to any beneficiary.

 

[alceryes]

If the executor does his or her job properly then B, C, D, E, and F won't receive any distributions from the estate until after all of the estate debts are paid off. The money from the sale will go into an estate bank account, not directly to any beneficiary.

It is the co-executors plan to have all debt taken care of. The thing is, the life estate allows the ownership of the house to avoid probate, from what I understand. So, nothing is in probate.
From what @Zigner says, the house can't be sold without all other debt taken care of BUT all other debt can't be taken care of without the sale of the house. Is this a legal precedent that the house can't be sold at all before other debt is taken care? Or is it just that, if the house is sold, the executors immediately become fully responsible for all the debt? The house will be sold for more than all the debt (or it won't get sold), so no one is worried about that. The executors plan is to sell the house and, immediately, pay off all debt. Once all debt is gone there will be a final split of the remaining sum. It will be a paltry sum, and not worth this headache, but there will be some left over.

So, can we legally sell the house and just immediately become responsible for all debt?

Thanks again, everyone!

 

[LdiJ]

It is the co-executors plan to have all debt taken care of. The thing is, the life estate allows the ownership of the house to avoid probate, from what I understand. So, nothing is in probate.
From what @Zigner says, the house can't be sold without all other debt taken care of BUT all other debt can't be taken care of without the sale of the house. Is this a legal precedent that the house can't be sold at all before other debt is taken care? Or is it just that, if the house is sold, the executors immediately become fully responsible for all the debt? The house will be sold for more than all the debt (or it won't get sold), so no one is worried about that. The executors plan is to sell the house and, immediately, pay off all debt. Once all debt is gone there will be a final split of the remaining sum. It will be a paltry sum, and not worth this headache, but there will be some left over.

So, can we legally sell the house and just immediately become responsible for all debt?

Thanks again, everyone!

I am sorry but your understanding is wrong. A life estate, given via a will does not allow the ownership of the house to avoid probate at all. If the house was owned by more than one party with rights of survivorship or as tenants by the entirety it would bypass probate. If a Transfer on Death Deed was written it would pass outside of the estate as well and bypass probate, but A life estate given via a will does not bypass probate at all.

You cannot sell the house without opening probate either unless the estate qualifies under one of these exceptions:
https://www.nolo.com/legal-encyclopedia/virginia-probate-shortcuts-32176.html

 

[bcr229]

Zigner's post #20 is correct. The Will stipulates how the house is to be passed to the heirs so it is considered an asset of the probate estate. Post #27 lists methods of keeping the real estate out of the probate estate but you have indicated that the deceased did not use any of them.

The probate estate should pay the creditors of the deceased before distributions go to the heirs. If there are not enough other assets in the probate estate to cover the expenses then the house needs to be liquidated. Any money left over would go to the heirs. If the executors distribute assets to heirs without paying off the creditors first, they can be personally on the hook to cover those expenses.

You really do need a probate attorney to advise you.

 

[alceryes]

Thank you all for your answers.