selling hi-fi equipment for an estate in probate

An audiophile in La Crosse, WI, died earlier this year and his brother and sister-in-law contacted me (the deceased was unmarried and unattached). As I was the owner of now closed hi-fi shop in La Crosse for 21 years, they came to me to first appraise and then possibly move his gear. I'm finishing my valuation of his equipment (he had very nice stuff, which I'll reveal here assuming I get the gig to sell it) and will sit down probably next week with my contacts and another sister who is the executor of the estate to go over my appraisal and plan to sell his equipment. The man died without a will so his estate will take the slow boat through probate court.

I want to start selling his gear through various Internet forums, including this one. What doesn't sell there will go to Audiogon. If it doesn't move on Audiogon, the last resort will be Ebay. I think his heirs will be realistic on the price of his equipment but we'll see. If they think they stumbled into a gold mine, I'm out of here.

While I will earn commission selling the deceased's hi-fi and plan on reporting that income to the IRS, I don't want to take a hit on the gross amount of the sales. I expect there will be at least $20,000 in sales in moving all his gear.

Here are my questions:

1. Without setting up a separate legal entity, can I sell his gear under my name and write a personal check to his estate for the proceeds minus my commission? Can deduct that cost, plus any expenses I have along the way, from the gross sales so I will just have to pay taxes on that commission? Would this even be legal?
2. I assume his executor has a checking account to wrap up her brother's affairs. They have already sold his guitars and other goods, and are getting ready to sell his house. Would it be better open a Paypal account tied to that checking account so that all gross proceeds go directly into a court recognized fund? The executor could write checks to me for the commission and to reimburse me for any expenses. Would this be the best way to handle this legally?
3. As a third alternative, assuming I have the deceased's Social Security number, can I open up a checking account for his estate which is tied to the Paypal account? I like this because it gives me control. I would then write the estate a check for the net amount of the proceeds, minus my commission and expenses. It would be easy to show accounting which started with nothing in the checking account and ended a few months later, again with a zero balance. I would have receipts and invoices for all sales and expenses. Would this be legal and/or wise?
4. Do I need to get court approval for any of this? Should I run my plans past the estate's lawyer? Is the executor's agreement enough?
5. Any thing I'm missing here? Are there concerns I haven't foreseen? This is unchartered territory for me. I already know I'm going to write up a contract between the deceased's estate and me, detailing the terms of the sale of his equipment. I don't want to get taken by folks who all of a sudden get greedy. I am also planning on doing a complete inventory. I know one has not been done. It will take a day or two as there are boxes and boxes of parts, accessories and spares, but an accurate inventory will cover my ass. I don't want anybody to say I cheated his estate.

 

Whenever you open an account to be an online seller, you are instantly your own business. I don't know if your home state requires you get a business license from your local authorities, but most people don't for a strictly on-line business. Rather than take on the dodgy mess of being a representative of the estate, you should just sell the stock on a consignment basis, with a written agreement from the heirs of the estate. Keep records and get the proper tax forms (Schedule C and Self-employment) to keep out of trouble with the IRS and state/local revenue.

 

Please define consignment in this case.

If I consign a piece to a local store for sale, the store makes the sale and pays me a portion of the proceeds.

If the estate consigns the deceased's gear to me, does that mean I make the sale and pay the estate their share of the proceeds?

 

Yes, you would be selling their goods on the internet on a consignment basis, they would be the consignors, you would be the facilitator. Often the cut is 30%, it can be as high as 50%, you can negotiate whatever cut you will take, you pay them their percentage when the payment clears (specify a grace time to allow for possible returns) and you keep your cut for selling their goods.

 

Thank you for the advice, @Lord Hawthorne. I was scared of mixing my personal finances with the estates but as long as the arrangement is covered by a contract and I document everything, from what you say, I should be OK. I like this arrangement in that I'm in control of the situation. I have to meet with my accountant sometime over the next few weeks to begin the tax season and I think I'll do that sooner rather than later. I'll get advice and guidance from her, too.

I am a bit limited as to the consignment rate I can charge by the sale of the deceased's guitars. That business only took 20% or so for their share. To compensate for that, there are two McIntosh pieces in the system that are only a couple of years old and will bring in around half of the money I'll collect. If anything will sell itself, it's these two Mac boxes. I was going to offer a 5% commission rate on those two, giving the estate a big pay day, but a 30% commission on the rest of the gear. Some of that is nearly 30 years old, will require multiple listings to sell, and dozens of individual postings, considering all the boxes of parts that have to go. There is real work there. I can justify a higher commission rate moving that stuff. In fact, once I do my inventory, I might propose three different levels of commission: 5% for the Mac gear, 30% for the remaining hardware and major interconnects, speaker wires and power cords, and 50% on the small stuff. There's a lot of that. For example, there are five large cardboard boxes filled with just vacuum tubes.

 

I can see coming down a little on the Mac stuff (maybe to 15 if you're doing 20 for the rest) but they're too heavy to carry across the room, let alone ship for 5%. The guitar store who charged 20% probably didn't have to ship the stuff, you probably will. I'd go for 30 across the board.

Be sure you agree in writing ahead of time how to handle returns, catastrophes, unsold items and the like. And make sure they know your slice comes off the gross, then all selling expenses like shipping and commissions, then they get the rest.

 

I think that approach would bugger the whole gig. I know La Crosse. It's a blue collar town with cheap prices. You can still buy a nice starter home for under $70,000. It will need work but will be livable. For $95,000, you can get one that won't need work. My favorite club has a great selection of craft beers in bottles for $2.50 each. I have no problem giving the heirs a big payday on the Mac pieces. They need no work beyond a nice cleaning. They are both relatively new, two years old or less. The boxes and all accessories are here. I can sell them on Audiogon for a total of around $10,000 right away. At 5%, that's still a $500 payday. I'll take that if it will get me access to the other goods which will take some work and for which I will get well paid.

There's one other issue. The deceased's brother, who is heading up the cleaning out of the house, is deeply suspicious of being taken advantage. The crown jewel is the deceased's LP collection. The brother knows nothing about records except that they are hot now. His sister-in-law owned a record store for 15 years. She could help him out grading and appraising the collection. She hasn't been able to even see the records yet and they are on excellent terms. I've seen them together. There is much warmth and affection between them. Still, it hasn't overcome the brother's inherent caution. I'd love to get my hands on those albums to sell them. Fat chance of that.

Oh, but they did. Some of you guitar players know of Dave's Guitar Shop. That's in La Crosse. Dave Rodgers has a Rolodex to die for. I assume at least half of the guitars went the next day to Japan or China. Now Dave is not working shipping and receiving. Jeff Sherin, my favorite guitar player in town, is. But Dave Rodgers made the sale.

One time I tried to buy a well used and wonderful sounding vintage PRS that I knew a buddy sold back to Dave. When I called the next morning, it was already gone. In this deal, one of the guitars Dave got was a mint 15 year old PRS. For some unknown reason, the deceased had played it for less than a day. The guitar spent its life in the case. I'm sure Dave sold that right away to someone well outside of La Crosse.

Agreed on all points. I will have a contract detailing these and other issues signed by the executor and me or I won't do the work, period.