Executors prioritise sale of specific gift so residual beneficiary can keep property

[Violeta]

My friend has been left a property, to be held in trust for 5 years and then transferred to him absolutely. The Will states clearly that this property must go into trust free of mortgage, debt, or tax.

At present there is still a substantial mortgage on the property. The estate doesn't have much liquidity but includes other properties — but 17 months after death (and 7 months after probate), the executors/trustees have failed to sell any of them properly. They have already agreed not to sell one of the other properties because the residual beneficiary wishes to keep it — that beneficiary was allowed to start using the flat before probate, make renovations, and is renting it for short-term lets (though not openly advertised).

The executors are now considering selling the specific gift property to pay off its mortgage — saying they will “recover it from the residue later.” But the sale would now be rushed, in poor market conditions — and there is real fear that the funds would not in fact be recovered later, because the residual beneficiary seems to be controlling decisions on the other assets.

My friend is trying to get legal advice and instruct a solicitor to prevent a premature sale of his gift before proper appropriation to the trust.

Any advice on what action can be taken — or experience of similar cases — would be very welcome.

Thank you!

[Pezza54]

Why haven't the executors attempted to generate income such as rent from the property held in trust for 5 years? Not an insignificant sum of money these days. 5 years rent may pay off the mortgage

[atticus]

Is the issue that the executors - possibly at the behest of the residuary beneficiary - are proposing to sell the property that has been left to your friend to pay debts of the estate, so as to preserve the residuary estate as far as possible?

What is your friend's relationship to the deceased? Does he live in the property in question?

[Violeta]

Is the issue that the executors - possibly at the behest of the residuary beneficiary - are proposing to sell the property that has been left to your friend to pay debts of the estate, so as to preserve the residuary estate as far as possible?

What is your friend's relationship to the deceased? Does he live in the property in question?

Yes, exactly — the executors are proposing to sell the property that was specifically gifted to my friend, in order to clear debts (mainly the mortgage on that property), while allowing the residuary beneficiary to keep and control another valuable property — and negotiate the sale of the other properties directly with potential buyers, setting the price and conditions seemingly with no supervision from the executors. As far as I understand also with little will to sell any of it.

My friend is the stepchild of the deceased, and does not live in the property in question (it is currently let to tenants) — but it is to be held in trust for her for 5 years, and then transferred to her absolutely. The Will says very clearly that the gift is to go into trust free of mortgage, debts, or tax.

[Pezza54]

Does the trust deed state what type of trust it is?
Maintaining a property in trust involves a lot of work for the trustees

5 years of dealing with property maintenance, tenants and rental income, utility bills, council tax, income tax
Keeping records for the above made more difficult by companies going paperless

[atticus]

Problems such as this arise when the estate is not in fact in a position to do what the testator desired. Your friend is right to take legal advice - she can provide more detail than can be posted here.

[Violeta]

Does the trust deed state what type of trust it is?
Maintaining a property in trust involves a lot of work for the trustees

This is a specific gift under the Will — the Will leaves this particular property to my friend, to be held in trust for her for 5 years, then to pass to her absolutely. The Will says the property is to go into trust free of mortgage, debts or tax.

The issue is that the executors are now proposing to sell it (before appropriation to the trust), to pay its mortgage — while leaving the residuary beneficiary in control of other estate assets.

[Pezza54]

This is a specific gift under the Will — the Will leaves this particular property to my friend, to be held in trust for her for 5 years, then to pass to her absolutely. The Will says the property is to go into trust free of mortgage, debts or tax.

The issue is that the executors are now proposing to sell it (before appropriation to the trust), to pay its mortgage — while leaving the residuary beneficiary in control of other estate assets.

Yes, but what about the rental income, trustees expenses etc?
The trust document should cover more than what is normally included in the will

[atticus]

Is the OP's friend able to offer some money to help, e.g. towards clearing the mortgage, in order to secure a transfer of this property to her?

[Violeta]

Problems such as this arise when the estate is not in fact in a position to do what the testator desired. Your friend is right to take legal advice - she can provide more detail than can be posted here.

Thank you, it's a pragmatic instinct, but neither possible or desirable. Can I ask: is the reason you suggest offering funds because in practice it may be very difficult to force the executors to follow the Will as written, if the estate is under financial pressure? I would really like to understand how this situation is likely to be seen in practice — especially when the Will seems so clear.

[atticus]

The situation of the estate may not permit the executors to follow the will as written. Tough decisions may be necessary, and it will generally be expected that the interests of the residuary beneficiary will carry more weight.

But do take that legal advice.

[Violeta]

Thank you .- I do understand that sometimes estates are complicated. But in this case, there are enough other assets (from the residuary estate) to cover the debts and still leave some to the residuary beneficiary - and they are also inheriting much larger assets abroad (not subject to UK law).

I had thought that the normal order of abatement would apply here - and that specific gifts should only be used to pay debts after residue and general assets. Since this particular property is a specific gift (and the Will even says it is to go into trust free of mortgage or debt), it seems wrong to me that the executors are now prioritising the residuary beneficiary’s wishes instead.

But I do take the point that proper legal advice will be needed.