Friday, May 22, 2015

BB King estate fight could get pretty ugly

It seems that yet another celebrity estate is headed for court. Apparently even though legendary blues artist B.B. King has only just passed away, his children are already fighting over control of  his estate. The National Post has a story about this, which you can read by clicking here.

Celebrity families are just like regular families, except that they have different assets to fight about, and their dirty laundry gets aired in public. The National Post story mentioned that Mr. King's business manager, LaVerne Toney, had also had power of attorney while Mr. King was alive, and that some of the kids accused him of stealing money and alienating family members. Sound familiar? It's a scenario we've all heard before. Many a person acting under power of attorney is accused of a dozen kinds of misbehaviour, sometimes with good cause and sometimes without. However, it seems to me that if Mr King had 11 children and still wanted someone outside of the family to have control over his assets, he probably had his reasons. He could probably predict that his kids were winding up for a brawl long before it happened.

It is still too early to tell how ugly and prolonged an estate battle in this case might be. However, it could be bad, considering that members of the family have already proven that they are quite willing to use the courts. Prior to Mr. King's death, some of the children unsuccessfully tried to have LaVerne Toney removed so that they could control the assets. When that didn't work, one of the daughters remarked that they had lost the battle but they hadn't lost the war.

Spoken like someone who thinks the estate is going to pick up all the lawyers' bills. Litigious people sometimes end up draining estates just to pay the lawyers and accountants, and unfortunately that could happen in this case. People have long since forgotten that the courts are supposed to be the last resort when other methods of working things out have failed.

The attached photo of B.B. King is credited to AP Photo.

If your spouse dies, leaves you nothing and gives it all to his kids, should you contest the will?

If your spouse dies and leaves you nothing and leaves everything to his/her kids from a previous marriage, should you contest the will? What if you're unwell and can't work? This is a question I hear frequently from many readers, with a thousand different fact situations. One reader put the question very succinctly, and I thought many of you would be interested in reading the answer. The question and my reply are as follows:

"My mother-in-law was widowed recently and was left no money to live on. She is physically unwell and we don't know if she should contest the will or not. Her stepchildren will receive money, but not her or her children (from a previous marriage) Any idea of what we should do?"

On the face of it, I would think your mother-in-law is a good candidate for a claim against her husband's estate. As a general rule, a person cannot leave his or her spouse out of their will completely, but the answer is not that simple.

A person CAN leave his/her spouse out of their will if:
a) the two of them signed a pre-nuptial agreement that specifically stated that each would not leave their estates to each other. Pre-nuptial agreements are not always iron-clad in these situations, but they are a good starting point.
b) the person gave assets to the spouse outside of the will, such as a life insurance policy, RRSP, or joint property that adequately provide for the spouse. Again, it's not iron-clad, but it's about as strong a case as the person could have.
c) the spouse left behind is independently wealthy and doesn't require anything from the deceased spouse's estate.

It appears from your question that none of these circumstances apply to your mother-in-law, and therefore it's probably a good idea for her to make a claim against the estate. This is not quite the same as contesting the will, because she wouldn't be trying to invalidate the whole thing; she would just be trying to get a share of the estate for herself before it's divided among the stepchildren. This type of claim is called "dependent's relief" and exists in every province and territory of Canada. It's done pretty frequently and most experienced estate lawyers have dealt with them numerous times.

It's possible for a spouse to get some of the estate, or all of it. The judge hearing the case would decide what is appropriate based on a number of factors. Some of those factors are:
- the length of the marriage.
- the value of the estate - in other words, how much is available to go around.
- the financial needs of the spouse who is claiming - this would include, for example, the fact that your mother-in-law is unwell, which probably means that she needs care and/or medications, and cannot earn a living.
- any competing claims - in other words, there may be other dependents who are trying to get a larger share of the estate, such as any of the stepchildren who are still minors, or who are disabled.

As a suggestion, your mother-in-law could hire a lawyer to write to the executor and advise that your mother-in-law is going to make a "dependent's relief" claim against the estate. If her case is as strong as it appears to be, the estate lawyer may suggest to the executor that he make a settlement offer. This would end up being cheaper and easier and quicker for the estate than going to court to fight it out. These days, beneficiaries are getting pretty sick of seeing their inheritance eaten up by court costs, and they just might be ok with settling it without a court battle.

It's not a good idea to wait too long. The executor should wait six months after probate before distributing the estate (because of your mother-in-law's right to claim) but it's better to get moving quickly to ensure estate assets don't disappear.

Sunday, May 10, 2015

8 steps to take if you've been widowed

Once the shock of being widowed has worn off a bit, it's time to take some steps to get your own affairs in order. It's important that you straighten out legal matters to reflect your new situation, in order to avoid issues and complications for yourself and for those who may become involved in your care in the future.

Making plans as an individual can be quite different from making plans as a couple. All of a sudden your usual go-to person is not available and you have to involve others in your legal affairs. It can be much more complicated and sometimes upsetting, and not surprisingly, many of us put it off.

Here is a list of 8 important things for you to think about:

1. Update the title to your home and cottage. If  you and your spouse owned the property as joint owners, you now have the right to own it as sole surviving owner. However, this does not happen automatically. The Land Titles Office won't take any steps to remove your spouse's name if you don't submit paperwork. This is more important than people realize, because the failure to remove the deceased spouse's name will likely mean that your executor will have to probate not only your will but your deceased spouse's will as well.

Many people like to downsize their homes once they become widowed. If this is what you decide to do, you will have to remove your spouse's name from your home before it can be sold. If you decide to deal with the cabin, do NOT put the cabin in the joint names of all of your children. Talk that through with your estate lawyer and you will clearly see what a terrible idea it is. Your lawyer should be able to present you with some options.

2. Check on life insurance beneficiary designations.  You may have named your spouse as the person who would receive your life insurance proceeds on your death. Now that your spouse has passed, you may be wondering whether you should change the designation. If you don't change the designation, on your death the policy proceeds will be paid to your estate and be distributed under your will. If that's what you want, there is no need to make a change.

Having your insurance proceeds go into your estate rather than directly to your children may provide the funds needed to pay capital gains tax on a cottage or revenue property. Even if the funds are not needed for cash creation, there may be advantages to having them distributed to your children as part of your estate, if your will contains trusts for the children or grandchildren.

3. Consider RRSP or RRIF designations. Most likely, you will have named your spouse as the beneficiary of your plan, since there is a distinct tax advantage to doing so. Without a spouse, there is no equivalent tax treatment available to you. At this point in time, many widowed people decide to name their children as the beneficiaries of the policy. Before doing that, it's a good idea to talk through the options with your estate planner to make sure you understand the tax implications,

4. Update your will. Your existing will most likely names your deceased spouse as your executor. It's now time to re-think who should be named to take on that role. Many people will choose one or more of their children, but also consider a trust company if you have any concern at all about the burden you may be placing on the kids, or about squabbles between them. Talk through your options with your estate planner, and be realistic about the abilities and attitudes of any of your children that you are considering for the executor role.

If you own a pet, you may wish to make some arrangements in the will for the pet, since your spouse will not be around to take care of it.

5. Update your incapacity documents. As with your will, you are going to have to revise your choice of representative for both financial decisions and health-care decisions. Resist the temptation to name all of the children to all of the roles, and give some real thought to who can best do the job the way you want it done.

6. Update your private pension plan. Make sure you contact any pension plan to which you or your spouse belong, to let them know about your spouse's passing. You will be asked about who should be named as beneficiary of the pension plan if there is a benefit that will pay out on your death.

7. Update your joint bank accounts and investments. If you and your spouse held non-registered accounts together, advise your bank or financial advisor of your spouse's passing. It is not difficult to have the name on the account changed while you are alive, but it may become problematic if you pass away yourself while your spouse's name is still on the accounts. In addition, it's important for tax reasons that income on the accounts be allocated to the proper person.

8. Start preparing a written list of your real estate titles, insurance policies, accounts, prescriptions, doctors, safe deposit box locations, passwords, and other vital information. You may find it convenient to use a booklet published for that purpose (click here to get one). This will be very helpful to your executor when the time comes, but it may also be a Godsend if one of your children ends up acting under a power of attorney on your behalf.

Saturday, May 2, 2015

When parents get older, sometimes the vultures win

Here is a question that I'm asked often, in various forms. I have to say, it's my absolute most-disliked question, because I feel that the parents of those asking have lost all autonomy and are losing their basic legal rights. I know right now that this answer is going to be a rant...

Here is the question: "Is it possible to liquidate part of an estate before death if both beneficiaries agree to it?"

My answer is simple: No, of course it's not possible. Not legally, anyway.

How could it be possible if the person who owns it is still alive? Nobody is a beneficiary while the person is still alive. The "beneficiaries" have no legal right to anything.

The will that apparently names these two as beneficiaries says that they get something when the owner of it dies. Since the owner hasn't died, the will isn't in effect yet and they're not beneficiaries yet. Call me judgmental, but it upsets me to see people trying to get their inheritance before the owner has even passed away.

The question is usually posed innocuously as a mere request for legal information. However, the thought process behind the question should be examined more closely. It's usually along the lines of "I'm going to own it one day anyway, so I'll just take it now." Why are the kids so often able to rationalize jumping the gun this way? Is it really reasonable that a person might have the right to take someone else's property or money just because that person is old? It bothers me that instead of thinking of ways to protect the parent who is elderly or sick or frail, the family members are thinking about material gain.

If one of the "beneficiaries" has Power of Attorney for this person and thinks that gives them the right to liquidate assets for the beneficiaries, they are wrong. A POA  may legally sell property owned by the older person but it must be keep invested in that person's name while that person is alive. The "beneficiaries" simply can't have it. Period.

The unfortunate part about the fact that two people appear to be complicit in the idea of stealing some property from someone, probably a parent, is that they may get away with it. When there's nobody out there who cares more about the parent than the assets, sometimes the vultures win.

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