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Saturday, April 29, 2017

Does an executor have to account for an insolvent estate, and do the beneficiaries have to pay for that?

A reader recently sent me a question which made me think about real life situations in which legal theory meets reality. Though we have all kinds of rules and guidelines in place for how estate administration is supposed to go, the fact is that sometimes situations don't fit neatly into them. An insolvent estate is challenging because it can be tough to follow all the rules. Read on to see the reader's (excellent) question, and my comments:

"If an executor claims an estate is insolvent, contains no real estate, and claims there is no need to probate, does she still need to provide an accounting to the residual beneficiaries? Or at the very least, can she provide a handwritten or typed list of assets and liabilities? Are residual beneficiaries supposed to just take her word for it? Can she charge the beneficiaries money in order to provide the estate information to them?"

An executor is entitled to make the decision about proceeding to probate, based on the assets of the estate , the requirements of third parties such as banks and land registries, and legal advice. She does not have to defend that decision to the beneficiaries.

An executor must always account to the residuary beneficiaries. No, I do not think that beneficiaries should simply take an executor's word for it that there is nothing in the estate. The residuary beneficiaries are entitled to the full story and to have it presented in a logical way that tells the whole story of the estate finances. In my view, an accounting should always be in writing because then there is no denial or embellishment or confusion. It says what it says and everyone has the same information. If necessary, it can be made an exhibit to a sworn affidavit.

As for how fancy or extensive the accounting should be, let's stay realistic here. I don't see the problem with a hand-written or typed list of assets and debts, as long as it's legible, accurate, and complete. I don't think it makes sense to try to force the executor of an insolvent estate to hire a lawyer or book-keeper to prepare a fancy accounting if that costs money the estate simply doesn't have.

It's also fair for the beneficiaries to ask questions of the executor based on what they thought the deceased owned. For example, if they thought the deceased owned a vehicle that doesn't show up anywhere on the accounting, it's a legitimate question to ask about it. Many executors find endless questions from the beneficiaries to be exasperating, but that's part of the job.

Your question about charging money for the accounting is an interesting one. Normally my answer would be a very quick "no". A beneficiary should receive the accounting without paying anything out of pocket, though to be realistic, if the executor has paid for photocopies or printing, those expenses will be recovered from the estate before the beneficiaries get their shares. In other words, the beneficiaries indirectly pay for the paperwork.

However, here we are balancing the rights of the beneficiaries with the rights of the executor. The general rule is that an executor is indemnified for his or her legitimate estate expenses. It is not fair to request the executor of an insolvent estate to pay out of her own pocket to prepare paperwork. So what is the solution? Perhaps the accounting can be done electronically and emailed to everyone. That would cost the executor nothing in terms of out-of-pocket expenses (though the time would still be spent, of course). If done that way, the beneficiaries could choose individually if they wanted to print the accounting.

Keep in mind that an executor's accounting is usually a detailed summary. It does not normally include copies of each and every receipt, cheque, and bank statement. In my view, in this particular case, a beneficiary who insists on having all of that should pay for it himself because the estate cannot pay for it.


Thursday, April 27, 2017

The Law Show Episode 4 - the perils of joint property

Did you catch today's episode of The Law Show? We talked about the perils of joint property (both real estate and bank accounts). It must have struck a chord with a lot of people because my phone has been ringing steadily with calls from people who want to discuss their own joint property arrangements.

For those of who didn't catch it or who live too far away to hear it, click here to listen online. The episodes are listed by date. The topics covered so far are:

April 6 - probate
April 13 - the main building blocks of an estate plan
April 20 -  using a trust company in your estate planning
April 27 - the perils of joint property

Wednesday, April 26, 2017

A (very) light-hearted approach to estate planning topics

I'm going to tell you a nursery rhyme. The first verse will be familiar to all of you. The second and third verse will not.

Humpty Dumpty sat on a wall.
Humpty Dumpty had a great fall.
All the king's horses and all the king's men
Couldn't put Humpty together again.

Though Humpty's life was sadly short,
His widow didn't go to court.
For Humpty had wisely thought ahead
To what would happen when he was dead.

Humpty Dumpty had made a will
In case a wall or cliff or hill
Should suddenly rob him of his life.
Humpty Dumpty took care of his wife.

Last year I wrote a book called "Cinderella's Trust Fund", in which I used characters from fairy tales and nursery rhymes to talk about estate-related topics. No, the book is not entirely in rhyme, as the above poem might suggest. But at the end of each chapter, I do re-tell the applicable story or rhyme the way that I imagine it would have been told if it had been written by an estate planner.

Some of the chapters include "Cinderella's Trust Fund", "Baa Baa Intestate Sheep", "To Grandmother's Long Term Care Facility We Go", "Humpty Dumpty Had a Great Will", "The Emperor's New Executor", "There Was a Homeowner Who Lived in a Shoe", "Beauty and the Bequest", "Puss in Business", and "Love's First Lawsuit", among others.

In the book, I cover real topics such as intestacy, the role of the executor, blended families, and mental incapacity. The fairy tale characters are used as examples of what can happen when there is no planning. They are a light-hearted way of approaching serious subjects, as I like to re-imagine how their stories would have been different if only there had a been a will or a trust in place.

This is the most fun I've ever had writing a book.

If this approach appeals to you, drop by my office to pick up a copy, or click here to buy one online. As always, I appreciate your feedback, especially if it contains more verses...


Monday, April 24, 2017

Babe Ruth's will is on the auction block


I heard once, not long ago, that celebrity cemetery tourism is a real thing now. Apparently, so is buying the wills of celebrities. I became aware of this when I saw that the original 1933 will of Babe Ruth is to be auctioned off. Click here to see more details about the will and the auction. Last time this will was sold (in 2015), it fetched $100,266.

I suppose that the attraction of a will like this is that it reveals something of the personal life of the celebrity. Personally, I find wills of famous writers to be fascinating, but I thought that was just me getting carried away after 30 years in the wills industry. Apparently a career writing wills is not necessary for celebrity will-gawking!

Certainly there is a full signature that should make an autograph-seeker happy, but the real value must be the fact that the document reflects the wishes and thoughts of Babe Ruth. We like to know that celebrities are people just like ourselves, and a will would certainly do that. Even celebrities die and must pass their estates on to their families.As with all of our wills, this document probably states who was important in Babe Ruth's life. By making a will, he was ensuring that his plans for his loved ones were carried out.

The image used here accompanied the article linked above on www.beckett.com. It did not attribute the image to a photographer.

Friday, April 21, 2017

Latest episode of the Law Show available for listening online

The latest episode of The Law Show is available for listening now by clicking here. This is the third episode, in which we chatted with our special guest, Greg Youden from CIBC. We talked about how we non-millionaire, ordinary folks might want to use a trust company in our estate planning.

Next week we'll be spending the entire program talking about joint property and how it is used and misused in estate planning, so don't miss it!

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