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Sunday, April 13, 2014

Executor is charging the beneficiaries to live in the house they inherited

Does your will contain trusts that affect your children? Are those trusts complete and clear enough to avoid problems? Have you really thought through how it's all supposed to work after you're gone? I received a note from two young people whose parents passed away, and who are now dealing with the executor on their own. Their question and my response are below. Parents, think about whether these could be your kids looking for help with your estate.

"My brother and I have have lost both our parents. Our mother and father were divorced so we lived with our mother in the family home. 5 years ago our mother passed away and she left a family friend as executor as my brother and I were only 13 and 15. Our father moved back in to care for us but last month he passed away. We are now 18 and 20 and the executor wants to charge us $1600 a month to live in our own home we inherited. Is this legal?"

To know where you stand in this situation, you must have more information. You must get a copy of the will. In particular, you need to find out whether the house is being held in trust for you and your brother. If it is, you also need to know how long the trust is supposed to continue, and whether the trust contains any terms that deal with mortgage or expenses. You need to know whether there are other assets also held in trust that can be used to pay the mortgage, pay for insurance, and cover maintenance. Find out whether the mortgage was life insured.

Finally, you need to know what is supposed to happen with the house once the trust ends. The most likely answer is that the house is supposed to be transferred to you and your brother, but it's not a good idea to assume that.

All of these factors will affect the answer to your question. You could, for example, find out that the trust says that either of the children who has attained the age of majority must pay rent until the end of the trust if he or she lives in the house. I personally have never seen a clause like that, but it's possible. More likely, the trust might say that the beneficiaries are responsible for all costs while they live there, but even that might only be the case if there is no estate money to pay for the mortgage or upkeep.

If there are no trust terms allowing the executor to charge you, he should not be doing so. If there is no money in the estate to maintain the house, the executor has the option to approach the court to ask that the trust be collapsed.

I strongly suspect there is a trust in place for two reasons. One is that the executor hasn't simply transferred the property to you already. The second is that it's common for parents who make a will while their children are minors to try to make sure the kids will be able to stay in the home as long as possible. Your mother was probably trying to ensure that you two would have a roof over your heads.

One other important factor is whether you live in a province where the age of majority is 18. I am assuming that you do simply because you don't mention a guardian, only an executor. If you and your brother are adults and the trust allows it, you could ask the executor to transfer the property to you. Keep in mind that once the house belongs to you and your brother, you two will be responsible for all expenses yourself. You will also have to make joint decisions with your brother about mortgaging, selling, taking tenants, insurance, and maintenance.

It would probably be a good idea to take a copy of the will, as well as any other documents you have concerning your mother's estate to an experienced estates lawyer to find out exactly where you stand. Find out how the terms of the trust will affect you and your brother, and for how long. I'm afraid there is no simple answer to your question without all of the additional information I've mentioned here, so your first step is to find out more.

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