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Friday, October 5, 2012

Why does a beneficiary not receive money until ALL have signed Releases?

When an executor is ready to distribute an estate, she will send out an accounting to the beneficiaries that tells them what has happened with the estate so far, and let them know exactly what each of them will receive. If the beneficiaries agree with the accounting, they will sign their Releases. Once all of the Releases have been signed, the cheques are sent out.

One part of this process causes problems for both executors and beneficiaries. That's the part about waiting for ALL Releases to be signed before anyone gets their inheritance. This reader wrote to me to ask why she has to wait for other beneficiaries to sign their Releases. I thought the question and the answer would be useful to many of you, so here it is:

"The executor we are dealing with says that we have to wait for the 3rd person ( The estate was divided between 3 people) to sign off before she can give us our part of the money. The tax clearance certificate has been dealt with. But for some reason the executor keeps saying that we need to wait for that 3rd person to sign off on the papers. And the problem with this is that the 3rd person is apparently in Europe and they cannot get ahold of her which is completely delaying the process of me receiving the money. I was wondering if she was allowed to do this ? I dont understand why I need to wait for another person to sign off on their money for me to get mine."

In this case, the executor is following the right procedure.

All beneficiaries must agree to a certain distribution before the distribution can be made. The beneficiaries aren't just signing off on their own money; they are approving of all that the executor has done so far, and agreeing to the payout the executor is proposing for everyone.

Let's look at it this way. Say the estate was $30,000. The executor  divides the estate three ways so that each beneficiary is going to get $10,000. Two of the beneficiaries agree, so she sends them $10,000 each. There is $10,000 left.

The third person, however, doesn't agree. The third person challenges the executor's accounting and refuses to sign the Release, so the executor has no choice but to apply to the court to pass her accounts. The court and legal fees add up to $5,000. The executor now has to divide an estate of $25,000 rather than $30,000 among the three people. That means each would get $8,300. She has overpaid the first two beneficiaries and now only has $5,000 to pay the third one. The balance of $3,300 would have to come out of the executor's personal pocket.

Until the third beneficiary signs the Release, the executor doesn't know whether there is going to be a costly dispute, so she is right to wait to send out the money. It's too bad that the person is unreachable at present, but every estate has at least one wrinkle to deal with.

The Clearance Certificate that you mentioned is issued by Canada Revenue Agency to certify that the estate does not owe any more tax. It should be reassuring to the beneficiaries that this has issued, as it will give them information that they need when considering signing the Release.

It sounds to me as if this executor is taking her time and completing one step at a time. It sounds as if the right steps are being followed. This can be frustrating for a beneficiary as sometimes it seems as if you are waiting an awfully long time, but that can easily happen when you don't see what's going on behind the scenes. I don't see anything wrong in the executor's actions based on what you've told me.

15 comments:

  1. My (no-good) grandson will get 10%, my granddaughter will get 90%. What can I do if he objects?

    ReplyDelete
    Replies
    1. You don't say what your no-good grandson is getting 10% of (yes I know that's bad grammar). Either you're the executor of an estate, or you are talking about your own will.

      I honestly can't decide which you are talking about. I would have thought you meant your own will, but does it make sense for you to leave 10% to someone you obviously don't care for. Please reply and confirm whether you are talking about your own will (and tell me why you are leaving him anything at all), or confirm that you are looking after an estate in which these two people are beneficiaries.

      Lynne

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  2. This comment has been removed by the author.

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  3. My ex common law has me and his children as beneficeries. How does one go about looking into this and where? We havent been together for 9 years. But him and I remained good friends before he passed away last month.

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    Replies
    1. The only place I can think of to "look into it" is the probate court. You could do a search there to see whether your ex's will was sent to probate by the executor. I'd wait a bit though. Most wills contain a clause that says that beneficiaries must survive the deceased by 30 days, meaning that the will cannot be probated for at least 30 days. And to be realistic, it takes most executors longer than that to find and verify the assets and debts.

      If you happen to recall who was named as executor in your ex's will, you could call or email that person and ask whether you are still beneficiaries or whether a new will was made in the last 9 years.

      Lynne

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    2. I didn't mean to say like that, "look into it" I only meant I didn't know how to go about it. Not that it matters to me but to my children. I don't want their uncle to try and take what doesn't belong to them. So I would have to take this to court or go to the court house to do a probate? He doesn't have a will it was just some forms he filled out at work and he put me as a Beneficiary. it has been well over 30 days since his passing. I don't think he had an executor on hand? He worked in a Cannery for years. And thank you for getting back to me on this.

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    3. If you are the beneficiary of a life insurance policy or a pension...go see the HR department where he worked. All of that stuff is not part of the estate nor probate.

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    4. Oh okay. Thank you for letting me know this. I will be sure to do that

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  4. My sisters and I are beneficiaries of our mother's estate, 2 of us are executors and all 4 of us are equal beneficiaries. The estate is ready to be dispersed except that one beneficiary refuses to sign the release based on her disagreement with the executor's fee of 1.5% and some of the accounting of the estate which we carefully reviewed with our lawyer and an accountant; however the sister who refuses to sign has had a pattern of delaying and controlling tactics throughout our interactions regarding our mother's placement in long term care, the selling of her home, her death and funeral, due, we believe, to our sister's unhealthy mental state and her disagreement with our mother's choice of her two eldest daughters as executors and unresolved issues stemming from childhood. What would be our approach as executors to settle the estate? I expect we'd be required now to take it to court???

    ReplyDelete
    Replies
    1. Yes, you would have to apply to the court to pass your accounts. By doing so, you will dispense with the need for that one beneficiary's signature. The court will decide whether your 1.5% is appropriate.

      Passing of accounts is generally not as complicated or long as a full trial, but it still costs money. Perhaps you could explain to the one dragging her heels that if you pass your accounts and the court rules that your accounts are fine, you'll be asking for an order that SHE pay your legal fees.

      Lynne

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  5. I am my mothers executor, I'm about to send out release forms to all necessary . What happens at the end , do all have to be handed in somewhere at the end of the process or do I just keep files on it? Does someone check on theses things ?

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    Replies
    1. You have the choice of filing the releases at the court along with the other probate documents, or simply to keep them on file. Though you are not required by law to file them, it's a good idea. It doesn't cost money. It creates a full court record of what happens. You can't lose the documents once they're filed. No, nobody checks up on them.

      Lynne

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  6. I am a beneficiary. I am only in acknolwedge of this becauase of my father. My aunt who is the executor will not tell us any details of the estate. My grandpa is the person who is passed and been passed for 2 months as of a week ago. We feel as if she isnt trying to give us the money that we are supposed to be given to from the will. Could she get away with not giving us the money? She hasnt contacted us at all about any of it, the only reason why we know we are each getting 50,000 is because she told my father. Should we look into this? does she HAVE to pay out the 50,000 of the money for sure or could she get away with not sending a check to us (the beneficiaries) ? We havent signed anything at all that has to with it. We are clueless as to what is going on

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  7. My grandmother passed away 3 years ago I was told money was left in her will for me but everytime I try to find out what is going on with it the person handling the estate said he will charge me everytime he responds to my emails is it normal to take this long?

    ReplyDelete
    Replies
    1. No, this isn't a normal amount of time to respond to a question. And it isn't normal to "charge" a beneficiary either.

      Executors get so HOSTILE. And when they do, it makes me wonder what they are hiding. A normal executor doing a normal, honest job will respond to a question 3 years in, for heaven's sake. Even if the answer is not something you like to hear, at least it's an answer.

      I can think of two things to try. One is rather than asking general questions such as "What's going on?", try asking specific questions such as, have the estate assets been sold yet? Are you waiting for a tax clearance certificate? When can I expect an accounting?

      If you've done that with no luck, you might consider hiring a lawyer to write a letter on your behalf to find out what's happening.

      Lynne

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