Real Time Web Analytics

Tuesday, October 18, 2016

Do I need probate when the bank issued cheques to "the estate of..."?

Legal procedures are not familiar to most people, and can be really confusing if you aren't working with a lawyer. Recently a reader sent me this question asking about whether he needed to get probate to access the deceased's bank accounts. I think this situation is one that several readers will find interesting, because it describes a useful alternative to going through probate. Read on:

"My brother recently passed away. He left a will naming my sister and me. My sister is named as the executor and I'm the 2nd executor. He only had money in 2 bank accounts which upon proof of death, notarized will, notarized I.D., notarized indemnity and notarized letter of direction they released the cheques in the estate of. Do we need to probate this account as we are both the beneficiaries and the executors?"

The process you have described is one that many banks use in some instances instead of requiring you to go through the probate process. They offer this when the deceased didn't have other assets outside the bank and where the accounts are small enough that paying probate and legal fees would pretty much wipe them out. The process essentially replaces probate for the bank's purposes.

Depending on the facts of the case, a bank might offer to do this in order to help the beneficiaries avoid losing the entire estate to fees. The fact that the two of you are the only beneficiaries and the only executors would make the bank's decision easier, because there is not much risk that there is anyone else out there expecting to inherit the money.

If you had applied for probate, the probate order would have required the bank to release the accounts to the executor. Since they have already released them, applying for probate is not going to be of any help to you with respect to these accounts.

Your next step should be to open up an executor's bank account. This account is in the name of the estate, so you will be able to deposit the funds you described above. The notarized will should be enough for you to prove that you are authorized to operate such an account, especially if you open it in the bank where they have all of your paperwork already on file. Because you and your sister are the executors, you will have full access to the funds and the legal right to spend them.

Remember that as executors, you are legally bound to ensure that any debts owed by your brother or by his estate are paid in full before you take out any of the money for yourselves. If you skip that step and simply take the funds without paying bills, you shouldn't be surprised if a creditor decides to sue you in the future for an unpaid bill. You will be personally liable for any such unpaid bills or liabilities.

Wednesday, October 12, 2016

Am I entitled to ask the executor for more detailed financials?

Do you ever wonder how a general legal rule or principle actually works in your situation? A reader who obviously knows the general rule that beneficiaries can see financial statements wrote to me to ask for specifics about how that rule works. This is something that beneficiaries ask fairly often so I thought it would of interest to many of you.

"I an wondering if I can request an executor to show me the Financials up to date. In what format should he dhow them or can he come up with a figure and a list of items not sold. I would like to see a list of sold items with the price he got, invoices and receipts for pay outs and work others have done. What am I entitled to see?"

The first question for me is whether or not you are a person who is entitled to see anything at all. If you are a residuary beneficiary of the estate, you are entitled to request financials, and the next part of my answer will go into more detail about that. If you are not a residuary beneficiary, you are not entitled to see anything.

Assuming you are in fact a residuary beneficiary, you are entitled to see a full accounting. There is no one format that applies everywhere, though there are certain elements that must be contained in an accounting no matter what format is used. The minimum of what you are entitled to receive is:
- an inventory showing what was in the estate when the deceased died
- a list of expenses, bills, etc that have been paid from the estate (including any amounts paid to beneficiaries and any amounts taken by the executor as fees)
- a list of all money coming into the estate, which is usually from the sale of assets (house, vehicle), cashing in of accounts and investments, and various small sums (CPP death benefit, refunds of subscriptions, cash lying around the house)

An executor doesn't usually produce copies of all invoices and receipts automatically, mostly to save time and money. However, you are fully within your rights as a residuary beneficiary to request copies of them. You can ask for any details that help you determine the current position of the estate, or to help you determine whether the estate is being handled properly. You can make this kind of request at any time during the administration of the estate.

Many executors seem to get upset when they are asked for details. I think they feel as if someone is questioning their honesty. But you are well within your rights to request details even if you have no reason to fear dishonesty on the part of the executor. The transactions on the estate determine what you are going to inherit so it's in your best interest to keep an eye on it.

Tuesday, October 11, 2016

Acting under an enduring power of attorney doesn't allow you to change someone's will

If you're acting under an Enduring Power of Attorney, you may have been faced with a legal or financial situation that you're just not sure how to handle. It's not always easy to know where your authority ends. A reader recently wrote to me to clarify her authority to deal with her mother's will. Her question and my response are below:

"I am POA of my mother who is ill. Her will has estate shared equally among all children. One of my siblings has undischarged bankruptcy. As POA can I adjust the Wills so that her portion goes to her adult daughter instead? Our mother is non-verbal and paralyzed (stroke)."

I'm really glad that you asked this question before taking action, because far too many people think that the authority of an Enduring Power of Attorney extends beyond what it actually does.

No, you cannot adjust your mother's will. You simply have no legal right to do that. Nobody does except for your mother. Even if you were a court-appointed guardian or trustee you would not have that right.

The law has accepted for many years that a will is an expression of wishes, thoughts, goals, feelings, and knowledge that is unique to the testator (the person whose will it is). Nobody can ever step into a testator's shoes except for a judge when an application is brought to him or her regarding the will. Even then, the courts themselves sometimes struggle with having to change what a testator has said in a will. They do absolutely everything they can to stick to what the testator intended.

People acting under Enduring Powers of Attorney have made mistakes such as changing the beneficiary on a RRIF or life insurance policy. Some, such as yourself, do so with good intentions while others make self-serving changes because they think nobody will notice. Sometimes they get away with it and in other cases, they don't. There are potential civil and criminal sanctions when someone under a Power of Attorney takes these fraudulent steps.

You have, correctly, obtained your mother's will and made yourself familiar with it. This is an important step for someone acting under an Enduring Power of Attorney to take. If you are familiar with the will, you are less likely to accidentally disrupt an estate plan by selling or disposing of an asset for which the testator had plans in her will.

However, that is the extent of your involvement with the will. You cannot change it or adjust it in any way, even when it seems to you that it would help someone if you did. It's just not your call. It's not your money or your will. Changing the will would be fraudulent as you would have to pretend that your mother made the change in order for the will to be valid. When your mother passes away, your obligation is to hand over the will and account to the executor for what you've done with your mother's assets.

Sunday, October 9, 2016

Home-made estate planning strikes again

I often give warnings in this blog to parents about adding their children to their bank accounts as joint owners. It's one of those steps that people take without legal advice without realizing that things are not going to work the way they expect. It happens every day. A reader recently wrote to me to ask why her sister was required to apply for probate when she was a joint owner of their father's account. Here are her letter and my comments:

"My dad left over 60,000 to my older sister and I, she is his POA, executor or his estate and is joint on his bank account, when she went to bring his death certificate to the bank they put a hold on his money saying it had to go into probate. If she is joint on his account and was his POA and executor does the money not go to her? my dad only made a holographic will which he thought would suffice. He did have other children but has given them and their mothers money over the years, he did not give any to our mom or to us and wished to make up for that by leaving us the money he had left. Does it have to go into probate? Or can my sister take it out of the bank legally? we live in Ontario"

Home-made estate planning strikes again.

Unfortunately, things would have worked out better and run more smoothly if your Dad had sought legal advice before taking steps that he thought would be effective. Plenty of people are in the same boat, that is, having parents or grandparents who accidentally brought about the opposite of what they intended.

The bank is correct in saying that the funds in the account belong to the estate and not to your sister. The law says that when a parent adds a child to an account or any other asset, that account or asset is held in trust for the parent's estate. This has been the law since 2007 but many people don't seem to be aware of it, or are aware but somehow think they will slip below the radar.

The funds in the account must be distributed according to your Dad's will.

The reason the bank is insisting on seeing a probate order before they release the funds is that they are not about to release the money to anyone without the protection of a court order. From the bank's point of view, there are risks here. For example, the will is holographic and the bank doesn't know whether it's valid, and therefore they don't know whether your sister is legally the executor. Also, there is the fact that there is a lot of money in that account and if they release it to someone who is not legally the executor, they are liable for that error. In addition, there is the fact, as I already mentioned, that the funds are supposed to be held in trust for your Dad's estate. The bank is simply not willing to end up in a lawsuit.

Your Dad could have clarified matters by confirming his intentions for that specific account in his will. Any decent estate-planning lawyer could have warned him about the complications of leaving an account like this in joint names with his daughter.

Being the person appointed under your father's POA does not help your sister because a POA becomes invalid as soon as the person who granted it passes away. Being appointed as the executor does not help your sister at the moment because of the reasons stated for the need to apply for probate.

You are certainly not the only family in this situation. Unfortunately, home-made estate planning is pretty common because people simply don't realize that they don't know what they're doing. Your Dad probably had the best of intentions but didn't think he needed to find out how the law applied to him.

Friday, October 7, 2016

Listen for me on VOCM radio today at 2:00 NL time

Listen for me on VOCM's Backtalk today at 2:00 Newfoundland time. I'll be chatting with Pete Soucy about Wills Week, about why people need to do some planning, and about wills in general. Tune in or give us a call. If you're not in the local listening area, you can tune in by going to and clicking on "listen live".

You might also like

Related Posts with Thumbnails