Sunday, March 31, 2013

Home-made estate plan claims another victim

Home-made estate planning claims yet another victim. In this case, a son who believes he is entitled to keep a GIC to which his mother had added him as a joint owner is not likely to receive the GIC he says his mother wanted him to have. Here is his question, followed by my answer.

"My mother put my name on her GIC approximately 1 year prior to her death, saying that the GIC, which is about 25% of her estate, would be for my own use. This was an extra thank you for the time and energy put forth by me (and my wife) over the last 12 years. I was my mother's care giver. Both my brother and I are Executors. He lives in the other side of the country and has for over 35 years. Due to him being an Executor and living so far away, he hired a lawyer to act on his behalf. This lawyer says I have no rights to the jointly held GIC and must turn it in.  I do know there is a law with regard to this scenario, but is it in pure stone? I understand there would be some times when this might be necessary, but when my mother jointed them with me, she had the knowledge that they would become mine should anything happen to her. Obviously neither of us knew about this law or other steps could have been taken to ensure the outcome of her actual wishes."

I can't even tell you how common this is. All over the country, parents are adding their children to their accounts, investments and real estate. And as those parents pass away, the children are being disappointed and pitted against each other to fight over the assets.

And to think that five minutes with an estate lawyer could have prevented the whole thing. If only people realized that taking steps that affect your children's legal rights without talking to a lawyer is simply a bad idea. The kick of it is that the parents generally don't even know they've left a mess behind for their kids to fight over.

The law in Canada says that when an asset is jointly owned between a parent and child (or other inter-generational arrangement such as grandparent and grandchild) and the money originally belonged to the older person, on the death of that older person the asset goes back to the estate.

If you are the parent in a situation like this and you want your child to receive the joint asset on your death, simply adding the child as a joint owner isn't going to be enough. You must also leave written instructions that the joint asset is actually intended to go to that child. The written instructions should be made around the same time you made the asset joint.

The son who wrote me this note might contact the banker who took the mother's instructions to put the asset in joint names. If the banker happened to ask the mother about her intentions, and happened to record them, that would go a long way to establishing what the mother intended for this GIC. Most banks don't keep paper files these days, but they all have customer management software that allows for  notes to be kept. You just might luck out.

If  you are a parent made the asset joint some time ago, you can still salvage the situation by  making a will that confirms that you want the joint asset to go to that child for his or her sole use. The son who wrote to me should double-check his mother's will to see if she says anything about the GIC in her will.

Once you pass away, it's too late for the child to do anything about it. It doesn't matter what the child says about the parent's intentions, even in cases like this one where there is a perfectly reasonable explanation for the child to receive extra funds.

I really feel badly for the thousands of people who have put themselves and their children in this situation. An estate planning lawyer could have given you some advice on how to record your intentions regarding the joint asset, and if it was already in joint names, could have advised you on how to set up your will to carry out your intentions.

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