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Sunday, May 18, 2014

Does my sibling still inherit even though I paid all the bills?

Families, estates, and money. Together they can be anything from mildly confusing to explosive. One of the hardest things about administering a parent's estate is reconciling the will with what the family members left behind believe is fair. The difficulty lies, in part, in the different interpretations of what is fair when it comes to money. A recent question from a reader raised all of these issues:

"My father passed away in July. Before that he was too sick to work so I paid the mortgage and all the bills for 2 years. After his passing I continued to pay everything. My brother and I have been named executors of his estate and beneficiaries. We decided that the house was too much for me to pay alone so we probated the will and sold the house and the closing date is next month. My question is: if one of the beneficiaries has not helped pay any bills and doesn't work and is home all day does he/she lose their right to half of the money that is left once property taxes, lawyers, realtors, and outstanding mortgage is paid?"

The quick answer to this question is no, but let's look at the situation a little more closely.

Both of you are residuary beneficiaries, meaning that you are equally entitled to share your father's estate. Your brother doesn't lose any rights because of his lifestyle. Inheritance is a legal right provided by the will, and is not contingent on whether a beneficiary "deserves" the right because he doesn't work or chip in. You must split the residual estate equally.

However, this doesn't mean that you can't recover some or all of what you've spent. The residual estate includes whatever is left after all bills and debts have been paid. You may decide that the amounts you paid are a debt to you from the estate.  If they are, then they would be reimbursed to you before the balance (if any) is split. In theory, this makes perfect sense. You paid the mortgage and bills to keep the house in good standing so that it could be passed on to the beneficiaries.

You will have to have consent of  your brother to the repayment of the bills that you paid after your father's passing, not because he is an executor, but because he is a residuary beneficiary. All executors must have the approval of the beneficiaries to the financial transactions of the estate. This is normally done by presenting an accounting to them. Beneficiaries can object if expenses seem extravagant. Even though  your brother is also an executor, you can still present  him with your accounts. Claim the full amount of the mortgage and bills in writing. Ask him to sign off in writing.

He may not like the idea of receiving an inheritance that is significantly smaller because you are claiming repayment. I can't imagine why on earth you continued to pay bills for almost a year after your father died. In most estates, an executor who continues to pay the bills on a parent's home for a year and then wants to be repaid is going to have an uphill struggle, but in your case I think it's reasonable.

I can't tell from your question who lives in your father's house, but I get the impression that both you and your brother live there. If so, it's going to be pretty darn hard for him to argue that you should not have paid the very bills that allowed him to continue to live there. Your chances of getting that repayment should be good.

The expenses that you paid before your father died are in a different situation legally, but will require more or less the same solution. As executors, you and your brother would have prepared an inventory of the estate as it stood at the date of your father's passing. This is part of the probate process. On this inventory, you should have made a list of your father's assets and a list of his debts. As executors, you two would have decided which debts to include. You should have added up the amounts you paid prior to your father's passing and asked that this be added to the list of debts. At that point, your brother, in his position as co-executor, would have had the chance to assess whether this was a reasonable claim or not.

If the amounts you paid prior to your father's death were listed there, then go ahead and reimburse yourself.

If you didn't include those expenses at that time, you can still ask your brother if he will agree to you being repaid. The difference is that if he doesn't agree, I believe that  your chances to reclaim those expenses will be smaller than your chances of recovering the post-death debts. After all, when you and your brother signed off on the inventory, you swore that those were all of the debts owing, so you are on shaky ground if you now come up with another one.

If you and your brother are getting along well, and it sounds as if you are, you may be able to make all of this happen without too much trouble. The part that worries me is that you say your brother doesn't work, so he may feel that he needs every cent of his inheritance to stay afloat. This may make him stubborn about agreeing to your repayment.

If this issue turns into a dispute between you, you can try mediation to resolve it. If that is not available, you can ask the court to pass your accounts and give you permission to reimburse yourself for the amounts you spent.

2 comments:

  1. I was raised from birth by my maternal grandparents. I was never actually 'adopted' as I guess that just wasn't done in those days (nearly 40 years ago). They have two children, my biological mother, and my uncle (we refer to each other as brother and sister though). My biological mother made some terrible false accusations a few years ago and has been estranged from my parents, my brother and I. I am the child that my 'parents' have always relied on for everything, making arrangements, input into decisions etc... I'm fairly sure they haven't made any changes to a will from decades ago, so it likely references properties that don't even exist now or they no longer own. Given I was not legally adopted, would I even be considered their 'child' when they die, in matters of inheritence? My 'brother' and I have an amicable relationship, but I have concerns that the estranged sibling (my biological mother) and her husband would be out to see what they can get.

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    1. If their will refers to you by name as one of their children, then you will be entitled to the share they leave you. However, if the will simply says "my children" without naming names, you are not automatically entitled. The fact that your bio mother is estranged from her parents won't cause her to be left out. While the will is, as you say, probably sadly out of date, it will stand up as the proper will to be followed, assuming it was validly done at the time.

      You don't mention which province you live in, but BC has "fairness" legislation that the rest of Canada does not, so things could turn out differently there.

      Lynne

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