Land and inherited by a group of misfits? POA to the rescue!
Probably one of the worst things that can happen in a decedent’s estate is for a group of beneficiaries who don’t get along to inherit real estate. Under North Carolina law, beneficiaries under a Will are generally vested with title to the property as of the date of the decedent’s death, which means the beneficiaries, and not the executor, have the authority concerning sale of the property. Although Wills often include a provision addressing the executor’s authority to sell real estate, the exact language of the Will is usually insufficient to allow the executor to handle the sale of real estate without involvement of the beneficiaries. That is, if the real estate is not left to the executor with directions to sell the property as part of the estate administration, then the beneficiaries will inherit the property as tenants-in-common as of date of death.
This means that if the beneficiaries desire to sell the property they must all agree on the terms of the sale and they must all be involved in the execution of the documents. Imagine the prospect of involving numerous owners in a sale negotiation and then getting them to agree. Have you ever tried to pick a place to go out to eat based on input from a group of people? Any interested buyer is going to lose patience pretty quickly unless the decision-making can be delegated.
A power of attorney (POA) is the solution. The beneficiaries can appoint one individual (known as the attorney-in-fact) with full authority to negotiate the sale of the property and execute all documents including the deed. This delegation eliminates any required involvement of the beneficiaries — the actual owners of the property. The attorney-in-fact may be the Executor of the decedent’s estate or one of the beneficiaries or some other party; the key is to find someone who can make a good decision about a sale of the property and who is trusted by all the beneficiaries.
It is important to make sure that all of the beneficiaries as well as the beneficiaries’ spouses sign the POA; this is required under NC law to convey good title to the property. Also the POA will need to be duly recorded in the county where the real estate is located. The POA document should ensure that the attorney-in-fact is authorized not only to execute sale documents but also to receive proceeds of the sale on behalf of the beneficiaries. This will ensure that the attorney-in-fact can direct the closing attorney to dispose of the proceeds in the most efficient manner.
So what happens if the beneficiaries can’t agree on what to do and are unwilling to appoint an attorney-in-fact? A mess…a big mess happens. As tenants-in-common, each beneficiary will effectively have a veto right over any decision concerning the property. More importantly, any one beneficiary can initiate legal proceedings to force a sale or a severance of the property, in which case the value of the property will likely be reduced for all concerned. In this case, the POA may still be an option if cooler heads can prevail.