By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Probate Administration Attorney
I have found over the years that a strong majority of all executors are thorough, conscientious and honest. In addition they are diligent to their responsibilities and want to do the right thing for the benefit of the Estate. And then you have certain co-executors! Co-executors often create problems. That’s why I discourage their nomination. The following is a case in point.
Dad owned a house but died leaving a Will that divides his Estate between Dad’s four children. All 4 kids are appointed executors (unbelievable but true). 3 of the 4 are not cooperating and real estate taxes are going unpaid. One of the children has offered to buy the house for more than anyone else has offered and has paid all the property taxes up to now. He is a co-executor and a beneficiary, and now a creditor for the taxes he has paid. Notice was just received about a pending tax sale for unpaid water and sewer liens. Is there any reason the executor can’t buy the municipal tax sale certificate at the municipal tax sale next month?
This good guy co-executor who has paid the taxes is an interested party. It’s possible the law would prohibit a co-executor from purchasing the tax sale certificate. Even if the statute(s) do not prohibit the purchase it may be inadvisable because this will place the co-executor in the position of a conflict of interest and create grounds for removal, potentially, especially if he tries to foreclose the tax certificate.
The best (safest) practice is for the co-executor to file an OTSC with verified complaint seeking: (1) removal of the three recalcitrant co-executors for cause pursuant to NJSA 3B:14-21(f); (2) request to list property for sale (assuming this is the end game); (3) approval of reimbursement to the co-executor for expenses paid; (4) in the alternative ask for advice and instruction.
The municipal tax sale is not a sale of the property; it is the sale of the tax lien. But it will cost the estate the additional interest accrued on the certificate the longer the property remains unsold and taxes unpaid.
One other thing that can be added to the executors verified complaint is; (1) request that the co-executor (good guy) be allowed to purchase the property at arms-length for its fair market value. This will require at least one appraisal (preferably two) to persuade the judge the sale is bonafide and in the estate’s best interest.
If the tax certificate is purchased, there does not have to be interest to redeem. Bidding on tax sale certificates starts at 18% by statute. If there is competition, the bidding goes down, not up, based on what interest rate the bidder is willing to accept on redemption. So the fiduciary who is willing and able to bid can bid to the lowest level necessary to protect against a third party bidder (even to 0%) or, alternatively, not bid down (i.e. because there is no competing bids), but waive collection of the interest when the estate redeems if the waiver is necessary to avoid conflict of interest issues.
To discuss your NJ Estate Probate Administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.