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Monday, August 22, 2016

Executor who wouldn't give info to beneficiaries to pay own costs of $80,000

The number one complaint I hear about estates is not about the cost or the time it takes. It's about the fact that executors refuse to part with information about the estate, even to beneficiaries with a legal entitlement to the information. Some executors hug estate information tightly to their chests as if they're being asked to give up their first born, and when pressed they become hostile and defensive.

We all know this leads to lawsuits but they do it anyway. Not all executors do this, by any means, but there certainly does seem to be an awful lot who do.

Beneficiaries who are tearing their hair out trying to find out information from an estate should take heart. There is a brand new case from Ontario in which the court refused to allow an executor's legal costs to be paid from the estate. This is a departure from usual estate litigation practice in which an executor who is working on behalf of an estate may pay the legal fees from the estate, and pays nothing out of his or her own pocket.

The reason for this decision is that the executor refused to answer reasonable questions from the beneficiaries and refused to deal with their reasonable concerns. It was only after the beneficiaries launched a lawsuit against the executor that they got some information. In the reasons for the judgment, the court said that the executor had caused the lawsuit by:
- not accounting for how he administered estate assets
- not answering specific questions until after a lawsuit was issued
- not being forthcoming
- failure to "exhibit timely candour"

According to the court, this behaviour amounted to the executor acting more in his own interest than in the interest of the estate, and therefore he could not rely on the estate to indemnify him. According to the case report, the legal fees for the executor were just over $80,000.

So executors might want to re-think their position of refusing to answer questions, unless they want to get stuck with a lawsuit and a huge legal bill.

Anyone who wants to read the case in full, click here (Brown v. Rigsby).

Age gracefully and free of parasitic progeny: Ethically Speaking

The title of this article grabbed my attention right away, since it deals with exactly the same things I have dealt with over the last 30 years: the potential for estate disputes and drama over Mom and Dad's estate.

The article was recently published by www.thestar.com and is an opinion piece by Ken Gallinger, who writes about various matters from an ethical perspective.

Mr. Gallinger writes in this article about adult children who are, simply put, greedy. They are already angling for a larger share of their parents' estate while the parents are alive. Click here to read the article, which I believe you will find to be blunt and to the point.

One piece of advice given by Mr. Gallinger in this article is for aging parents to sell their home and use the proceeds to pay for accommodation in a seniors' facility. For some people, living in a care facility is necessary because of medical or other needs, and for a lot of us, selling the house is the only way care can be funded. However, I like the idea of selling the house even where living in other accommodation is a choice, not a necessity.

For one thing, selling the house would avoid that ridiculous, painful, idiotic practice of parents leaving one house to several children. As if there were any possible positive outcome to that plan. Parents simply have to admit that even when their children are not the "appalling" type mentioned in the article, leaving one house to several adults who all have their own families, jobs, and lives is just not going to work. Sell it. Split whatever money is left over after you've met your own needs. Nice and clean.

The other benefit to selling the house and downsizing is that the parents will be able to distribute much of the household furnishings and personal items. These personal items are the subject of thousands of estate disputes, whether the problem is dollar value or sentimental value. Why not head off those fights by giving away items while you are alive?

A lot of children are greedy; there is no doubt about that. But even in families where that's not an issue, parents should do what they can to avoid estate disputes that will pit the children against each other.

Tuesday, August 16, 2016

How can I make sure the beneficiary has to prove she deserves the money?

Have you ever seen someone inherit a substantial sum of money and thought that they didn't deserve it? It's an interesting concept - that the law should only allow deserving beneficiaries to receive an inheritance. A reader recently wrote to me to ask about a situation which clearly causes him or her a great deal of anger and sadness because someone apparently undeserving is about to inherit from an estate. Read on to see the question and my comments. And please add your own comment below if you'd like to share your thoughts.

The spouse is getting everything from this poor guy's estate. She only stayed with him for the money. She has had multiple affairs. She really neglected his sickness 5 full days prior to his last hospitalization, and once taken to hospital, she did not go with him, instead went to the lawyer dealing with fathers estate to ask about him dying without a will. Questioned if she should push for a will to be signed that day. How can I make sure she has to prove she deserves all this money? He died because of her.

I can see that this matter is really painful for you and that it has stirred up a lot of emotions. I don't think my answer is going to comfort you at all.

The simple answer to your question is: you can't make her prove she deserves the money.

Beneficiaries do not have to prove that they deserve their inheritance. I can't even imagine the mess that idea would make if we tried to implement it. Who would you prove it to? What evidence would you have to call? How could you prove something like "she only stayed with him for the money" when there is probably no evidence except for her thoughts? And how on earth would anyone ever set the standards for who deserved what? Whose moral code would we follow?

Our criminal law system is set up to judge and punish behaviour that elected legislators have made illegal for the protection of society. Even that has its limitations, since not visiting your husband in the hospital or staying with him for the money are not illegal.

I realize that you believe it is unfair for her to inherit from her husband, but inheritance law can't help you there. A legal right to inherit is not based on moral fitness. It is based either on the fact that you are a dependent (such as a spouse or minor child) or that the testator wanted you to have a share of the estate as evidenced by a will. Even though she might have been a really terrible wife, the fact that this fellow married her and stayed married to her is the evidence the court would consider relevant. If  he had felt that her behaviour was beyond what his moral code could accept, he could have divorced her, separated from her, or made a will leaving at least some of his estate to other beneficiaries.

We have a legal system, not a moral justice system. You'll have to hope she gets run over by the karma bus because it isn't the job of the probate courts to decide her worthiness.


Friday, August 12, 2016

Markham woman dies penniless after son steals life savings

In June, David Klimitz was convicted of stealing his 90-year-old mother's life savings. He had been granted Power of Attorney by his mother, and he used it to steal everything she owned - about $500,000 - for his own use. He deliberately took steps to hide his activities, which took place over a 3-year period.

David's theft was revealed a few months after the money ran out, when his siblings discovered that their Mom was behind on payments to the care facility where she lived. There was $14 left in her account. David had left her nothing. The other kids took her in. An investigation was launched and David was busted.

The Mom - Royale Klimitz - passed away in 2014. Her children said that when she discovered what David had done, she was heartbroken. She was fearful about how she would live. Her other children believe that the stress and heartbreak of David's actions hastened her death.

To read the local news coverage from Markham, ON, including video statements by Royale Klimitz and her children, click here.

So here is where this very sad case stands now. Mrs. Klimitz had all of her money stolen by someone she trusted, and died heartbroken. The thief is headed to jail. His relationship with his family is destroyed. The rest of the siblings have been robbed of an inheritance. What a mess. I bet I'm not the only one hoping David gets several years in the slammer.

The possibility of this happening exists with everyone who makes an Enduring Power of Attorney. Appointing someone is a leap of faith and few parents would expect their own children to steal shamelessly and continuously from them as David Klimitz did.

In this particular case, the situation might have been different had Mrs. Klimitz included a clause in her Power of Attorney that required David to give a full, written report to his siblings each year. In many cases, the person stealing under a POA does so because they are pretty sure they are never going to be discovered. Sometimes just knowing that others have the right to see what they are doing will deter would-be thieves.

There would be nothing stopping David from presenting false records, of course. But perhaps his siblings would have found discrepancies that caused them to look more closely. Perhaps just getting something once a year would keep their Mom's finances front of mind and prompt one of them to ask for a bank statement.

Perhaps other arrangements would have been effective, such as having two people appointed instead of just one. However, Mrs. Klimitz probably saw no reason at all to do anything to protect herself from her own son.

I find it tough to persuade parents to put any protective measures into their Powers of Attorney, but I continue to try.  Nobody wants to believe their child would steal from them. Nobody even wants to think about it, and who can blame them? But I can help protect my clients from the occasional David Klimitz who pops up, if they'll only allow me to do so.

Wednesday, August 10, 2016

Questions about bankruptcy and inheritance

I receive quite a few questions on this blog about what to do when a beneficiary of an estate is in bankruptcy, and I have blogged about it a few times. Now I've found a resource that I think will be useful to those of you who need more information about bankruptcy than I am qualified to give. Start off with article called Gifts During Bankruptcy: How are they Treated?, which is found on a site called bankruptcy-canada.com.

Once there, you'll find other useful articles, as well as other resources and tools including online calculators and even a map to help you find bankruptcy trustees right across Canada. I expect this site will be able to answer a lot of questions for readers.

As always, feedback is welcome. If you find the site useful, let us know because other readers may be interested to hear how it worked for you.

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