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Friday, September 29, 2017

Why won't the bank let a "joint and several" executor open an estate account?

A will that appoints "joint and several" executors is rare. This is because that type of appointment is generally unworkable and of questionable legal value. A reader recently wrote to me to express his frustration with trying to act as executor when he was named "jointly and severally" with his sister. Read on to see his question and my comments.

"Simple question. My dad passed. His will states my sister and I are jointly and severally executors. My understanding of this wording is that I can do some stuff and she can do some stuff and we don't need to jointly sign. The bank wants her to sign documents as well as me. She lives 2,500 km away. Why won't they honour the "severally" part of the will? They say since it says both. I say no. What can I do? I want to put $50,000 of my dad's funds into an estate account."

Usually when someone starts off by saying it's a "simple question", it means they expect a simple answer. That isn't going to happen in this case.

In 31 years of reading, writing, and probating wills, I have NEVER made a document appointing executors jointly and severally, and I likely never will. I don't see it in wills made by other lawyers either. The main reason is that it creates problems exactly like the one you are experiencing right now. It leaves the question open as to whether both of you are executors or only one of you is an executor, and that's just not clear enough for a will.

Though it may seem simple to you that the word "severally" is in the will, you have to read it in the context of estate law. This isn't just a grocery list; it's a will and it has hundreds of years of wills and estates law supporting it. Being named as an executor and trustee comes with a whole lot of legal rights and legal responsibilities which you may not know about because they are not all spelled out in the will itself. When the owner of assets dies with a valid will, his or her assets vest in his or her trustees. If more than one is named, this means the assets vest in both of them. Therefore, one on his or her own does not have the legal authority to deal with the assets of the estate.

There is also the fact that an estate is a trust; the executors/trustees hold the estate assets for the benefit of the named beneficiaries. Therefore it must follow the rules for the creation of a trust. A trust can be negated it if is administratively unworkable. In other words, if it is impossible for the trustees to do their work because the set-up of the trust makes it impossible for them to know what the job is, then the trust will fail. It can be argued that having a trust where the trustee is you "and/or" your sister fails to make it clear who is to do what.

It's possible - and legal - for joint executors to take some steps solo, but they are minor, procedural steps. For example, one could write a receipt on behalf of the estate, or pick up a cheque for the estate from a third party, but the account into which the funds are deposited must be within the control of both of the executors. Neither of them is allowed to exercise unilateral discretion; they must act together.

It appears that you are trying to open an executor's account and in my opinion, the bank is right to insist on both signatures. It is absolutely wrong to have an estate account holding estate funds when only one of two executors has access to it. The executors' rights aside, the bank doesn't want to get in the middle of any possible dispute between executors. Neither do they want to be held liable when the executor who is not on the account believes that funds are missing or improperly invested or finds some other issue.

I expect your father wanted the will set up with "jointly and severally" because he thought that meant that one could do everything and the other would simply be in the loop. This is something I often hear from my own clients. Unfortunately, it just doesn't work. I don't think this is the answer you wanted.

You have asked what you can do. As I see it, here are the options:

1. Send documents to your sister and get her signature, just like you will have to do for the probate application and other documents.
2. Ask your sister to renounce her executorship so that you can be the sole executor.
3. Continue to fight with the bank until it reaches court and the money in the estate goes to the lawyers instead of your family.

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