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Monday, November 28, 2016

Not as they intended: Estate plans gone wrong

Estate planners like me are always telling people to make their plans and get them onto paper in the right way. But even planned estates occasionally go off the rails. Sometimes it's because of an essential detail that got lost in the shuffle, and at other times (okay, let's be real here, MOST times) it's because beneficiaries behave badly after the death of a testator.

I recently came across an article in which www.financial-planning.com talked to a number of legal and financial advisors to find out the worst estate disasters they had seen. It's actually very eye-opening because it shows that no item is too small (a recipe box, for example) or too large (such as a big trust fund) to be the cause of an estate dispute. It also demonstrates very clearly that you don't have to be super-wealthy to get benefit from proper planning.

Click here to see the story.

5 comments:

  1. I know you deal with wills, but I am wondering about an intestacy.
    PART 1:
    The last surviving parent gives the assets away (fairly as thought possible) before death.
    A - gets the family business because A had always helped run it. The business was turned over to A years earlier.
    B - gets the money - bank acc, bonds, investments, etc (transferred & gifted over time, except for the old person's daily account for pension cheques), because B has more need of cash than anything else.
    C - gets the house (transferred) and with no house of Cs own, moved in & cared for the old person until death.
    D - gets the cottage, boat, cars (again, transferred or gifted) because C has a family which can enjoy all this.

    Sounds great. All assets are split up roughly equally according to preference, aptitude and inclination. C has time & disposition to keep the old person out of an institution and able to remain at home until the last, - and that is the one thing the old person wanted most. So on the surface, everybody wins.

    But then what happens when a few years later B has squandered the money and starts to want a share of the remaining assets, claiming they had always been "worth much more"?

    I am not looking for a "this is why you should all get a will", but can a recipient (not a beneficiary because there never was a will) after several years go looking to claw back an asset transferred, gifted, or otherwise given to another sibling?

    If the business is expanding leaps & bounds, is B entitled to a share at this point?
    Can B demand the house be sold and divvied up to get a share that way?
    What about the cottage, boat, cars, - can they be fought over? If these items have been sold by this time, can B insist on a quarter of the sale prices?

    That's if everything was more or less of equal value.

    PART 2:
    What if one of the assets, like the business, was in fact worth much MUCH more, not least because it continues to generate a substantial income?
    What if the house was in North Van and in the last few years quintupled in value from when it was transferred?

    Would any of that change the outcome and if so, how?


    (I am writing from the province of BC if it makes a difference. )

    ReplyDelete
    Replies
    1. In my view, there is no way one sibling can demand assets from another in these circumstances. These gifts were given by a parent who supposedly had full mental capacity given the care and planning that went into the division. There is absolutely no obligation on parents to give their kids equal or similar gifts during their lifetime.

      Your question isn't really about intestacy because the assets had already been given to others while the older person was alive and were therefore not in his or her estate.

      Lynne


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    2. Thank you for that super-fast reply, and for taking the time to consider my rather lengthy query.

      "Intestacy", hmmm, well that may be the wrong word, or maybe I don't see it the way I should, the way a legal mind does. :-)
      What I meant was where there was no will after the person died, no document to hold up and refer to.

      I had wondered about this and whether something like a business, or a house, would 'legally' be considered the same as the 'toys' like cottage, cars and boat.

      Also, with all the assets given away over time except the "maintenance" account for the pension cheques, there really is no estate either.
      Would that be right?
      When someone has given it all away, there is basically no estate?
      Even the maintenance account would be in joint, so that would leave pretty much nothing solely in the deceased possession.

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  2. Hi there,
    I have been enjoying going through your blog. I was hoping you are able to answer a question for me. If someone contests a will. Are all involved be notified? My MIL has passed away and she has a will that was done with a lawyer and signed in 2013 and we have been told that while she was in the hospital she contacted a notary to do up a new will but passed before signing. My husband and I are joint owners with her on our home we all lived together for over 10 years (when we purchased the home we were told when his parents passed away the house was ours). In her will 2013 will she added that she was gifting the house to my husband and for that reason he is getting nothing from her estate. His sibling have told him that his mom wanted to add her portion of the house to her estate. They are now asking us if we wish to honor her last wishes and divide everything if we don't they are going to contest the will. A day after she passed his sibling starting going through her stuff and either keeping, selling or gave to good will. Nothing is left. they cancelled all the bills in her name and removed her name from the home insurance. Now there is no communication between us we don't know if they are going to contest or have her will go through probate. Since my husband was not a benificary will he be notified if the will goes through probate and if they are contesting? Thank you for your time

    ReplyDelete
    Replies
    1. That sounds like a really upsetting family situation. They may be making a big deal about "honouring her wishes" but as far as the law is concerned, what is in writing contains her last wishes. I understand that perhaps she was going to change her will, but she never did, so the one that stands is the valid will.

      This family is out of control. My guess is that it was them, and not your MIL, who contacted the notary to try to change the will.

      I don't know which province you're in, but most do not require executors to formally give notice to the beneficiaries. However, in every province you can find out what's going on in the probate court simply by doing a search there. Contact the clerk of the court by phone, ask for the probate clerk, and say that you want to do a search under your MIL's name. They'll give you instructions or do the search for you. It won't cost much. When they ask which documents you want, ask for ALL of them. That will give you the will, the inventory, etc.

      I assume that one of the family members has been named as executor. Does he plan to take both sides in the argument by probating a will (i.e telling the court he supports the will) and at the same time contesting it? Should be interesting.

      The other issue to consider here is that you and your husband were joint owners with her. Assets that are jointly owned pass to the survivors when one joint owner dies. Now, this can be a confusing area when one of the joint owners is a parent and the other is an adult child. On the face of it, it's not a true joint ownership and the house is in the estate. But the facts as you've presented them are that you, your husband, and your MIL all bought the house. That is very different from a parent who already owns a house adding on one of the kids. If I am correct in reading these facts, the house isn't even controlled by the will. All you have to do is complete a document for the land titles office and present a death certificate. Please be careful doing so that the facts of the ownership support you - remember I haven't discussed this with you, only read a brief paragraph about it and I don't want to lead you astray.

      Lynne

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