In probate proceedings, a personal representative or executor is appointed to settle the decedent’s liabilities and distribute the estate’s assets. The personal representative has a duty of care to act in the best interests of the decedent’s estate, and a fiduciary duty to prudently manage the estate’s assets. While most probate cases are informal and require no court supervision, the personal representative will be required to submit a final accounting report to the court, and he or she will be held responsible for their actions.
Generally speaking, it’s not a good idea for the personal representative to purchase any estate property—whether it’s a car, house, or personal possessions—as that may raise concerns of self-dealing and conflicts of interest. There are situations where a personal representative can legally purchase an estate asset, but even these permissible circumstances can lead to trouble if a beneficiary to the estate files a complaint or objection with the court.
When can the personal representative legally purchase an estate-owned car?
The most common scenario that permits private transactions in an estate is when the decedent explicitly allows them in the will. If the will broadly authorizes private sales or specifically allows them for particular assets and/or beneficiaries, then those transactions are legal as long as the purchase price meets or exceeds the fair market value.
Outside of private transactions that are provided for in the will, the personal representative should consult with an attorney before taking any actions to purchase estate-owned assets. If the attorney determines that the sale is appropriate, he or she will likely advise you to take the following actions and precautions:
- Serve notice of the intended action – you’ll need to inform the court and the estate’s beneficiaries of the prospective sale and provide them with enough time to respond to the notice before the sale takes place. Providing 30-days’ notice should be acceptable.
- Receive authorization – in informal probate proceedings, only the beneficiaries will need to approve of the sale. In formal probate, the court may need to directly authorize the sale. In either case, it’s best to get approval in writing.
- Make it a public sale – list the car for sale on a public listing website or place an ad in the local newspaper. Allowing third parties to bid on the car ensures that the asset is sold for the highest possible price, which satisfies the personal representative’s duty of care to the estate. Failure to list the car for public sale may qualify the transaction as a private sale, and that could raise red flags for self-dealing by the personal representative.
- Purchase the car at or above its fair market value – determining a vehicle’s fair market value through an online service such as Kelley Blue Book will usually suffice for a third-party sale, but it may not be enough due diligence for a sale to the personal representative. In this case, it may be wise to have the vehicle appraised, and it’s ideal to have multiple bids for comparison purposes. Note, however, that car dealerships typically offer less than you may receive through a private sale, so you shouldn’t base the car’s fair market value on quotes from a car dealership.
Failure to take these measures and precautions may leave the personal representative personally liable for damages if the vehicle sells for significantly less than its fair market value. If the court finds evidence that the transaction qualifies as self-dealing or a significant conflict of interest, the judge will dismiss the personal representative and appoint a new representative.
How to sell a car in probate
Selling an estate-owned vehicle to a third-party in a public sale is quite similar to how you would sell your own car. The only difference is that the personal representative will be signing the title on behalf of the decedent, and the representative will want to take extra care to document the transaction in case an interested party files a complaint in court.
- Determine the fair market value of the car – using a professional site like Kelley Blue Book should be sufficient due diligence for most vehicles
- Place an ad for sale – if you need to sell the vehicle quickly, consider posting the vehicle for sale on multiple listing sites and newspaper classified sections
- Collect and assess bids for the car – resist the urge to jump on the first offer that you receive. Try to get a few bids to ensure that you’re getting the best possible price for the car.
- Record a bill of sale – type up a simple bill of sale that you and the buyer can sign to document the transaction. You should be able to find a free template for a bill of sale online with a simple Google search.
- Collect the proceeds – when you sell the vehicle, have the buyer write the check out to the estate. If you get cash for the sale, deposit the funds in the estate checking account as soon as possible.
- Sign over the title – the personal representative can transfer the title by signing his or her own name followed by “personal representative” or “executor.”
- Have the title notarized – both parties should sign the title in the presence of a notary public to have the title transfer notarized.
- Cancel the insurance – after the sale is complete, call the decedent’s auto insurance company to cancel the insurance policy. The agency will probably need to see a copy of the death certificate along with your Letters Testamentary to validate your authority.
What to do if there is a lien on the car
It’s not uncommon for an estate to sell a car that has an outstanding loan or lien, so don’t worry if you come across this scenario. If there’s a lien on the vehicle, you’ll just need to settle the loan note and obtain a clear title before you can sell the car. To do that, identify the bank or finance company that’s carrying the note and deliver a copy of the decedent’s death certificate and your Letters Testamentary.
Request a payoff quote and submit the appropriate payment amount to satisfy the outstanding lien. Upon receiving the check, the bank will issue a clear title, made out to the estate. If you don’t have sufficient liquid funds in the estate to pay off the vehicle loan before the sale, make arrangements with the buyer to meet at the bank or financial company to complete the transaction.
Do You Need Help with Probate Matters?
As you can see, AZ probate laws can be complex. It requires a number of steps and without the right approach, it’s easy to get lost in the details.
At JacksonWhite, we can make probate a clear, easy-to-understand process. If you’d like help with probate matters, call the talented team at JacksonWhite Law today.
We can help explain your legal options and direct you to the probate solution that works for you and your loved ones.