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Thursday, September 15, 2016

Things don't happen automatically. That's why we have executors.

Today I met with a client who was upset and angry that the stocks and bonds owned by her father had never been transferred into her mother's name. Her father had died without a will and there was nobody in charge of the estate. My client was mad at the transfer agent who registers and trades stocks because they hadn't changed the name. When I asked how on earth the transfer agent would even know about her father's death and why the transfer agent would presume to know what to do about his shares, my client asked, in complete surprise, "doesn't it happen automatically?"

I hear similar things relating to the land titles registry. When a husband or wife dies, nobody changes the title at the land registry into the name of the surviving spouse, and then when the second parent passes away, the kids get mad at the land registry for not having up to date records. Again, I've been asked "doesn't it happen automatically?"

Is this common misconception a result of wishful thinking or misinformation from advisors? Perhaps a bit of both. I myself have been guilty of explaining joint ownership with right of survivorship by saying that when one owner dies, the surviving owner automatically gets the property. Perhaps that does sound as if everything happens on its own without anyone having to actually initiate the process. I'm sure similar explanations are offered by lawyers, accountants and bankers everywhere. The gist of the legal arrangement is communicated, but the logistics of bringing it about are not.

In reality, it does require involvement by either a beneficiary or an executor to bring about these "automatic" arrangements. This is because while a right might arise automatically, the paperwork to document that right doesn't do itself. When a spouse dies without a will and his wife automatically "gets" his estate, that means that she has the right to own the  assets. It doesn't mean that the assets will find their way to her like a magnet to a fridge. Someone has to actually notify the holder of the assets, prove the death of the owner, and arrange for the asset to change hands.

When a joint owner of property dies, the surviving owner has the right to own the whole property. But that survivor also has the responsibility to prove that the other owner died and to document the change using the proper paperwork. The land titles registry, the courts, the corporate registry, the life insurance company and Canada Revenue Agency are all relying on you or your legal representative to do your part and let them know that someone has passed away.

There is some element of wishful thinking, too. These days people seem to want things to happen very quickly, if not instantly, preferably with a click or two on the internet. There is very little tolerance for paperwork, which unfortunately is a part of estate administration.

Nothing happens automatically. That's why an essential element of your will is the naming of an executor to carry out the paperwork and the legwork involved in giving everyone the property they have the right to inherit. We have executors for a reason.


9 comments:

  1. Super excellent article! Great way to neatly explain in plain English that 'automatic' still requires a nudge.

    The main reason for all this "ignorance" is that people never encounter the situation. Most people will only ever encounter this once or twice in their lives. For many, not even that.

    You'd be surprised how many people do not know how to assemble the parts for a washing machine, - one of the easiest things on the planet.

    But if they've never had occasion to do it before . . . . . .

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    Replies
    1. Good point, Noah. I sure wouldn't know how to assemble a washing machine.

      Lynne

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  2. Haha, that's like what happened when Dad died without a will, though mercifully my folks had everything in joint.
    As my elderly mother explained to the bank manager, "Next time I bury a husband I'll know all about these things". :-)

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  3. What happens in the case of a co-executor that passes away before the testator. Does the other executor automatically become the sole executor? Also what happens when a sole executor dies before the testator. This is a situation with both of my parents.

    ReplyDelete
    Replies
    1. Yes, if co-executors are named but only one is alive when the testator dies, that surviving one can and should act alone as executor.

      If a will names an executor who dies before the testator, anyone who is named as an alternate executor should step in. If there is no alternate executor, someone will have to apply to the court to become an "administrator with will annexed" - in other words, the will is valid in all ways except for having someone to act as executor.

      When I say "someone" has to apply, it's not just a free-for-all. There are rules about who has first priority to apply. In the absence of an executor, residuary beneficiaries have the first right to apply. If none of them are willing to do it, there are further rules about who has the right to do the job.

      Lynne

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    2. further to the above post....in the case of the co executors....the will reads "my husband, if he is not living I appoint my son and my brother or the survivor of them as executors of my will." Is it still the case if one of the executors has passed the other takes over - would this wording mean that the surviving executor and the survivors of the other co executor

      Delete
    3. No, you are misunderstanding the meaning of "the survivors". The wording you quoted means that the son and brother are co-executors, but if one of them dies, the other one (the survivor) acts alone.

      Lynne

      Delete
  4. This is not necessarily relevant to this blog, but we are in a sticky situation. My father recently passed. My sister and I are named co-executors in the will. His wife (remarried) is attempting to act as executor by filing documents etc. She is out of the country (snowbird), and has had the locks changed on their primary residence. As executors we need access to the property in order to give a proper and full accounting as to assets etc. (My father has an office in the house). She is denying us access to the house. How can we gain access so we can perform our duties as executors?

    ReplyDelete

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