A family inherits their parents’ home on Long Island. The will names one of the three children as executor, and the instructions are simple: sell the house and divide the proceeds equally. But one sibling has lived in the home for years, rent-free, and refuses to leave. The executor is now caught between her fiduciary duty to the estate and a difficult family dynamic. This is a situation we see often, and the path forward requires a clear understanding of an executor’s authority and obligations.
Selling a property is a commercial transaction. Selling an inherited property is a human one—often complicated by grief, memory, and competing interests among beneficiaries. As an executor or administrator, you are not just a seller; you are a steward, tasked with a legal duty to act in the best interests of the estate. This responsibility requires deliberation and care.
First, Confirm Your Authority to Sell
Before you can list a property, you must have the legal authority to sell it. This authority is not automatic. The New York Surrogate’s Court grants it through a document called Letters Testamentary (if there is a will) or Letters of Administration (if there is no will). Without these “Letters,” you cannot sign a listing agreement, enter into a contract of sale, or transfer a deed. Any attempt to do so is invalid.
The will itself may also place specific conditions on the sale. Does it grant an heir a “right of first refusal” to purchase the property? Does it direct that the property be held in a trust for a certain period? These are not suggestions; they are legally binding instructions. Ignoring them can expose an executor to personal liability for breaching their fiduciary duty.
Occasionally, an estate’s circumstances require court permission to proceed with a sale, even after an executor is appointed. SCPA Article 19 outlines the proceedings for the disposition of real property. This can become necessary if, for example, the sale is needed to pay the decedent’s debts and the will does not explicitly grant the power of sale. Knowing when you can act independently versus when you must seek the court’s approval is a critical first step.
The Step-Up in Basis and Tax Implications
A significant financial aspect of selling an inherited property involves capital gains taxes. Many beneficiaries worry about a large tax bill, but federal law provides a considerable advantage known as the “step-up in basis.”
For tax purposes, the property’s cost basis is “stepped up” to its fair market value on the date of the owner’s death. If you sell the property shortly after for that same market value, there is typically little to no capital gain—and therefore, little to no capital gains tax. For instance, if a home was purchased for $100,000 decades ago but was worth $1.2 million when the owner passed away, the new basis for the heirs is $1.2 million. A sale at that price results in zero capital gain.
If you hold onto the property and it appreciates further, you will be responsible for capital gains tax on the appreciation that occurs *after* the date of death. The timing of the sale can be an important strategic decision. We work with accountants and appraisers to document the date-of-death value properly, creating a clear record for the IRS and protecting the estate.
When Beneficiaries Disagree
An executor’s job is to be impartial and act for the benefit of all beneficiaries equally. But what happens when the beneficiaries themselves do not agree? This is where the role becomes most challenging.
One heir may want the highest possible price, another may want a quick sale, and a third may want to buy the property from the estate. These are legitimate but conflicting desires. In these situations, communication and a transparent process are paramount.
- Setting a Fair Price: The executor must obtain one or more professional appraisals to establish a fair market value. This is not negotiable. Selling the property to a family member for a “discount” is a breach of fiduciary duty to the other beneficiaries.
- Buyout Options: If one beneficiary wishes to own the property, they can often buy out the other heirs. This requires a formal agreement, a professional appraisal to set the price, and a plan for financing.
- Forcing a Sale: In a complete deadlock, such as a co-owner refusing to cooperate, an executor or another heir may need to petition the court to compel a sale through a legal action known as a partition. This is a last resort—it is costly and can permanently damage family relationships—but it is sometimes the only way to settle the estate.
Acting as the custodian of a family’s most significant asset is a profound responsibility. It requires a plan for the property and a strategy for managing the expectations and emotions of the heirs. Stewardship.
If you have been named the executor of a New York estate that includes real property, your first priority is to understand the scope of your legal duties. We often begin by reviewing the will and estate assets to provide a clear roadmap for how to proceed, both with the court and with the family.
