Friday, October 9, 2015

Can my lawyer "fire" me?

This post was inspired by a comment a reader left on my blog this week. In attempting to get information about an estate, the reader (a beneficiary) contacted the estate lawyer's office and was told they no longer worked for the executor. A call to the executor revealed that the estate lawyer had fired the executor.

I suppose it seems logical to most people that because the executor hires the lawyer, the executor can fire the lawyer, as would be the case with anyone hired to provide a service who didn't meet your expectations. But did you know that the reverse is true as well - that the lawyer can fire his or her client?

This is not something that lawyers do often. After all, we want and need clients. Without clients, we don't work, and we don't get paid. It's in our own interest to keep clients happy. So why would a lawyer fire a paying client?

The tipping point at which a lawyer decides to fire a client usually happens when the relationship between the lawyer and the client has deteriorated badly. There has to be a rapport between lawyer and client. There has to be trust on both sides that each can be relied upon to be truthful, to carry out promises, and to work together toward a common goal. If that relationship is damaged, it becomes impossible to work together.

A lawyer may well decide to fire a client who simply does not follow his or her advice. This doesn't mean that you have to do everything the lawyer tells you to do. But if the lawyer advises you not to do something because it would jeopardize your case, and you do it anyway, don't be surprised if the lawyer is frustrated with you. If you consistently and repeatedly ignore the lawyer's advice, you should expect that lawyer to back away and terminate the relationship. From the lawyer's point of view, there is no way to please the client, and the lawyer ends up looking incompetent because the client keeps making poor decisions.

I've done this myself a few times. Not many, of course, but I have in the past had to let clients go because they simply wouldn't follow my advice. Despite my exercising my best judgment based on knowledge and experience, they would choose to act according to what their friend Betty's neighbour's boyfriend's hairdresser said. I knew that when the time came, they'd be upset about my bill because they would feel they didn't hear the advice they wanted. They'd be upset again when I had to change strategy in mid-stream to accommodate whatever mistake they had just made, causing yet more billing to be necessary. There's just no good outcome to some lawyer-client relationships, and so I have chosen to terminate a couple of them.

In terms of estate work, some executors are ideal clients, and others less so. Some executors are secretive and coy, if not downright deceitful, when they talk to the lawyer about the estate. This is usually something the executor does to cover up mistakes such as borrowing from the estate or spending some of the estate money improperly. Most of the time, an experienced estate lawyer can tell which details are "off". And you know what? Clients don't like it when you expose their secrets and demand an explanation. This too, may cause the lawyer to fire the client. Nobody wants a client who fudges the truth.

And as with anyone who provides a service, if our bills don't get paid, we'll eventually stop providing services to the client.

What I hope to point out in this post is that clients have a responsibility to be good clients, just as we lawyers have a responsibility to be good lawyers.

Tuesday, October 6, 2015

Can someone under POA move into the house rent-free?

The only thing that seems more confusing to people than how to be an executor is probably how to act under a Power of Attorney. It's not surprising, really, since there is not much reliable information out there on which specific things a person can or cannot do, unless the person consults a lawyer. A reader recently asked me a question about Powers of Attorney that I've heard a number of times before. The question and my comments follow:

"On a home owned by a surviving parent (suffering from Dementia), can one of 3 children (who was been named POA) take it upon himself to move in rent-free to avail himself of his own debts and financial obligations? Presume that the other two siblings object to this. All three are named as equal beneficiaries when the homeowner passes away."

In situations such as this, lines are not always clear. Issues, questions, emotions, legal rights, moral obligations and personal agendas all overlap. It can be difficult to untangle them from each other to determine who can do what.

Here are two of the factors that would go into your question:

- Does the parent still reside in the home? While this would not on its own be a deciding factor, it does make a difference. For example, if the parent resides in a long-term care facility and is not expected to return to live independently in his or her home, it would probably be a good idea to sell the home, or at least rent it out, with all proceeds being invested for the parent or used to pay the care facility's bills. That way, the parent's asset would be maximized for the benefit of the parent. It would be the job of the person under the POA to sell the home, not to move into it. That situation is much different than a case where the parent still lives in the home, and the addition of one person to the household does not have an enormous effect on the parent's finances.

- Has the power of attorney be activated? It's one thing to be named under a POA that is not yet in use, and quite another to be acting under the document. Since you said that the parent has dementia, I'm going to assume that we are talking about a properly activated document. It's problematic for a person acting under a POA to gain financially from his position, as he  is a fiduciary who is bound to act in the interest of the donor (the parent) and not himself.

You can see how these two factors can combine in different ways, to much different legal effect. You could have a person who will one day - but not yet - act as his parent's POA being invited to live there by the parent to save money.

The other end of the spectrum is a person currently acting under a POA and seeing the opportunity to live in a house for free rather than do his legal duty and sell it. I can only assume this latter scenario to be your case, as it would explain why the other siblings object to the arrangement. If that is the case, the person acting under the POA does not have the right to use the parent's home as his own because a) it does not benefit the parent, and b) it's an abuse of his fiduciary role under the POA to take financial benefits from the parent for himself.

Unfortunately, if the other two siblings have verbalized their objection to no avail, they are stuck with using the courts to protect their parent's rights. While they do have some standing with the court as future beneficiaries of the property, the real issue at hand is not their rights but the parent's rights. The offending POA could be removed from the role, or the court could order other arrangements such as the payment of rent, the sale of the property, etc, based on the facts of the case. As the court system can be slow and expensive, the three siblings might consider mediation to hammer out how they will carry on from here.

One law firm trying a new way of billing clients - will it work?

There's an interesting article in the Globe and Mail that talks about how tough it is for law firms and accounting firms to innovate in terms of how they deliver their services and how they bill for them. Click here to see the article. I found it interesting because I've worked in traditional law firms for my whole career and have seen for myself the disconnect between how lawyers bill and how clients want them to bill. Generally speaking, I think the billable hour concept works a lot better for the lawyers than it does for the clients.

When I set up my current firm, I deliberately set up a menu of services and prices that has nothing to do with the billable hour. I charge a set price for wills, for consultations, for mediation sessions, etc. I encourage clients with questions who don't necessarily want to start a lawsuit to book a one-time session to talk over their situation with me. They still gain solicitor-client privilege. They still have access to an experienced lawyer. But they aren't obligated to start a lawsuit, or to hire me to do anything else if they don't want to.

I also make the distinction between legal advice and legal information. I have books, kits, and information packages that people can buy to get legal information. The difference is that legal information is not tailored by a lawyer to a specific set of facts, but is general information that applies to everyone. This works for people who already have a lawyer but need more background information and context, or who don't want to work with a lawyer.

I set it up this way because I've heard from so many people in my work, on this blog, in seminars, and pretty much everywhere I go that clients feel that lawyers bill too much, and too mysteriously. I'm trying out my new system of set prices for set jobs. The people who attended our Open House and who call us to chat have said that they want to try this new arrangement because they feel it is client-oriented and transparent.

I admit that my little firm is brand new and only time will tell whether it will work. If it does, I hope that other lawyers will follow suit. I'd love to hear some comments from readers about whether you think this is a system that will work better for clients than the usual method of billing.

Monday, October 5, 2015

Our seminar schedule is now posted

You'll notice that I've added a new tab  labelled "seminars" to the top of this site. On it, I've posted the schedule for the seminars I'll be holding at my office during the months of October and November. I'll update it here as we expand the schedule. Please take a look, and if those of you who live nearby would like to attend, we'd love to see you.

So far the topics offered are:

Executor in an Hour
Basics of Estate Planning
Top 10 Things Not to do in Estate Planning
Estate Planning for Seniors

Saturday, October 3, 2015

Does an executor have to agree to beneficiaries' requests to see expenses and statements?

Does an executor have to agree to beneficiaries' requests to see expenses and statements?  This seems to be an ongoing struggle in way too many estates. I'm not sure whether executors are not seeking legal advice, or ignoring legal advice, or simply getting inadequate legal advice, but the conflict between executors and beneficiaries carries on. A reader recently asked me a question about the requirements of an executor. Here is his question, followed by my comments:

"Is it legal within Canada that the executor can refuse to let beneficiaries know what their expenses are, and also refuse to show bank account statements unless the beneficiaries sign release of funds documents? My brother is saying that he is not obligated to show any accounting until he is ready to disperse money. Is he lying?"

I couldn't say for sure whether he's lying, or whether he's simply mistaken, but in either case, he's wrong. An executor must be prepared to produce an accounting for residuary beneficiaries at any time. By "any time" I don't mean that the executor must produce it five minutes after being asked, but he or she should be able to provide it to the beneficiary in writing within a reasonable number of days.

The requirement to account arises from the fact that the executor is a trustee and fiduciary. The executor doesn't own the estate or the assets of the estate; he or she is simply a custodian and manager of the assets. The estate belongs to the beneficiaries and therefore they have the right to ask what is going on.

In my view, the beneficiaries have more than a right to ask what's going on; I believe they have an obligation to ask. There are no executor police. There's nobody at the court or in the government whose job it is to check up on what executors do. It's up to the beneficiaries to ensure that the executor named in the will is actually doing what he or she was appointed to do.

Having said that, let's look at it from the executor's point of view. It's not reasonable for beneficiaries to ask for every receipt and expense as the executor carries out his daily tasks. There are not enough hours in a day for an executor to report on each and every step he takes, as he takes it. Nobody has time to make or receive that many calls and emails. I always urge executors to set up an email mailing list for the beneficiaries, and to send a summary every two weeks, or once a month once things slow down, to keep everyone informed.

While an executor is not entitled to keep bank statements secret from residuary beneficiaries, the beneficiaries do have to let him get on with the work with some level of trust.

The normal procedure in most estates is for an executor to provide a full accounting at the end of the estate when he is ready to write the cheques. Perhaps when your brother was told this by the estate lawyer he took it to mean that he doesn't have to do anything different.

This doesn't mean that he can do as you said, which is "refuse to show bank account statements unless the beneficiaries sign release of funds documents". He has to show the statements and the rest of his accounting first. How on earth could a beneficiary approve of his transactions if the beneficiary isn't told what those transactions are? He has that bit backwards. Generally the accounting and the release document arrive together, at the end of the estate administration, but beneficiaries should not sign releases without studying the full accounts first. If he does not provide an accounting first, he can be compelled by the court to pass his accounts.

The fact that you asked if your brother is lying is proof of something I tell executors constantly - hiding what they're doing only causes suspicion and speculation. They just need to be open about it.

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