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Monday, February 13, 2012

An automatic right to inherit doesn't mean executor has nothing to do

Today I'd like to clear up a common but dangerous misunderstanding of language that causes a lot of trouble for a lot of families when dealing with estates. The problem arises from statements such as "the assets automatically go to the deceased's spouse".

When I and other lawyers say that an asset automatically goes to a certain beneficiary, we mean that the beneficiary has the legal right to inherit that asset. Generally that means that the right to inherit exists even without probate being obtained, and without anyone having to go to court. We do NOT mean that nobody needs to do anything to make it happen.

I hear over and over again from family members, beneficiaries and especially executors, that they think they don't need to take any steps because the inheritance is "automatic". Yes, the legal right arises automatically, but in every case the executor - or someone else - has to take steps to enforce that right.

To illustrate what I mean, let's look at some of the assets that commonly "go automatically" to a surviving spouse, or other surviving beneficiary. One of the most common is a jointly owned home. As you have read here in my blog and in other places, when one joint owner dies, the other joint owner will automatically own the entire house. That means the surviving joint tenant has the right to own the whole house and probate is not required. Think about the logistics of this. Whose name is on the title? There are two names. When one dies, there are STILL two names on the title if nobody gives a death certificate to the Land Titles Office and fills in the paperwork to take one name off. The Land Titles people don't know that someone has passed away, and even if they did, they aren't going to take steps without instructions from the person legally entitled to give them.

Let's look at a joint bank account. Same thing. There are still going to be two names on the account if nobody advises the bank that one of the owners has died.

Another asset that "automatically" transfers legal ownership is a life insurance policy. It is "automatic" because the deceased person named a beneficiary of the policy and probate is not required. But if you just sit and wait for your cheque to arrive, you will be disappointed. Someone has to provide notice and paperwork to the life insurance company to make the claim.

The executor is not necessarily the person who has to do all of the paperwork in these situations. However he or she should at the very least make sure that he provides copies of the will and death certificate where appropriate, and lets beneficiaries of joint property know of their right to inherit. The beneficiary can then notify the bank, the Land Titles Office, the pension office, or life insurance company. If an executor isn't sure that he or she has covered all the bases, he or she can consult a lawyer, or find an executor's checklist from a reliable source.

I cover this topic in my book, "Alberta Probate Kit", but the principles discussed here are not limited to Alberta.

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