Can you buy out a beneficiary if you have both inherited a property?
For further guidance on whether you can buy out a beneficiary contact our free legal helpline on 0808 139 1599 or send an email to us at [email protected]
When a property is left to two or more individuals it is usual for the executor to sell the property on the open market and then distribute the sale proceeds to the beneficiaries. But what is the situation where one of the beneficiaries wants to keep the property?
First, there in no general entitlement for a beneficiary to insist that a property is retained if another beneficiary does not want to keep the property. We often receive enquiries from siblings who are in dispute about what to do with their deceased parent’s house. People often have a great deal of sentimental attachment to a property, so its not surprising that children will frequently want to keep their parent’s main residence, or perhaps a much loved family holiday home. However, while those sentimental ties may be strong, there is nothing in law that requires a beneficiary to keep a property which they have jointly inherited. If they don’t want to retain it they can insist that the executor sells it so that they receive payment for their share of the value of the property.
If one beneficiary wants to retain the property then they can look at buying out the other beneficiary’s share. This can usually be accomplished on amicable terms if the beneficiaries can agree on a fair valuation of the property and their respective shares. If there is uncertainty about the value, arrangements can be made for an independent valuer to be appointed. There is no obligation on a beneficiary who is selling their share to offer preferential terms, such as payment by instalments, or to wait for an unreasonable amount of time while the buying beneficiary arranges finance. If agreement on the terms of the sale cannot be reached then the executor should simply put the property on the open market and sell to the highest bidder.
Matters can become particularly complicated where one of the beneficiaries is living in the property at the date of death. In these situations it is usual to allow some leeway for them to make alternative arrangements, though the executor can insist that an occupation rent is charged to reflect the value to the beneficiary of being allowed to remain living in the property for an additional period of time. Consideration may also need to be given as to whether the residing beneficiary is entitled to make a claim under the Inheritance Act if the terms of their inheritance leave them at a disadvantage; for instance where their share of the sale proceeds will be insufficient to rehouse them.