If you are like a lot of people in Kansas, Missouri and Oklahoma, you have probably been to or heard of estate sales in your area. But how do estate sales relate to estate planning? Do you have to have an estate sale if you die and leave behind property? How will you pay for the sale? Who will conduct the sale?
Today we’re going to take a look at estate sales to get a better idea of the role they play in estate planning.
An estate sale is a sale of personal property that typically takes place over one or several days. The goal of an estate sale is to liquidate (turn into cash) a large amount of personal property quickly.
While many, if not most, estate sales take place after someone dies, that’s not the only reason they occur. Estate sales can also be conducted after someone relocates, downsizes, gets divorced, or otherwise needs to sell a lot of personal property in a short amount of time.
Estates and Estate Settlement
When someone dies and leaves behind property (called an estate), that property has to be distributed to new owners. A trustee, administrator, executor, or personal representative will become responsible for managing estate property and using it to pay estate debts or to distribute it as inheritances.
When an estate has personal property that is not otherwise accounted for or distributed through the estate plan, the administrator will often decide that it needs to be sold. He or she will typically hire an estate sale or auction company to conduct the sale.
Estate Sale Companies
Estate sale companies specialize in conducting estate sales or auctions. Once hired by the estate administrator, the company will organize the sale, arranging for everything from the date and location, to transporting items to the auction facility, if necessary, to pricing individual items and advertising the sale. As its fee, the estate sale company typically takes a percent of the proceeds generated through the sale.
Let’s say an estate administrator contacts an estate auction house and hires the company to conduct an auction. The company will list the items to be sold (called a bill), advertise the sale, and then conduct the auction. The company will take a pre-determined percentage of the sale proceeds as its fee. Most companies take about 30 to 35 percent of the total sale or auction proceeds as their fee, so if the auction generates $250,000 in revenue, the company’s fee will be around $75,000. Once it has taken its fee, the company distributes the remainder of the proceeds from the sale or auction to the estate to be distributed by the administrator.