Pillow talk: the executor's spouse and who really makes the decisions?

This brief but common-sense article was published by ERAssure, the folks who provide executor's insurance. It talks about how something simple, such as the executor enlisting his or her spouse to help with the estate, can cause huge problems. If you're looking after a parent's estate, don't underestimate the negative optics of having your spouse (an "outsider") looking after your parent's assets or having access to your parent's home when your siblings don't have similiar privileges.

Click here to read the article.

Can the estate lawyer act against one of the executors?

I received an interesting question today by way of my Facebook page. I think it's interesting because at the core of the question is the role of the lawyer for the estate. This is a very poorly understood role. The beneficiaries think the lawyer works for the beneficiaries. The executors think the lawyer works for the executors. The lawyer may not do a good job in explaining it.

Here's the question:

"There are three executors on an estate. A directive in the will states that one of the executors who lives on an estate property must vacate the property by April 2012. She has stalled and has received a letter about this from the estate lawyer. She is ignoring the directive in the will and the lawyer is dragging his heels. What can the other executors do to get her out?"

My guess is that the letter from the lawyer did not include any demands that she leave the property, or even a request that she do so. It most likely simply reminded her of what's in the will and of her obligation to act on behalf of the estate and suggested that she keep that in mind.

Why?

The estate lawyer works for the executors. The lawyer can't act for the executor on the estate as well as against her on the same estate. Legal ethics and common sense both preclude that. So the estate lawyer isn't in any position to demand that she leave. He/she should have explained that when agreeing to write a letter.

I hope that the first thing that was done was to check the will to see whether it contains a clause saying that the executors can make decisions based on a majority vote. Without that clause, all decisions must be unanimous by all three. This is yet another major drawback of home-made wills (which I assume this was, to appoint three executors. Why on earth did this person appoint three, anyway?). Any lawyer who has been around the estate-planning block knows to include a majority vote clause when there are three executors. If that clause is present, the two executors can simply out-vote her on the question of whether they are going to evict her forcibly.

In the absence of the majority vote, if the executors of this estate want this person forced out of the property, they are going to have to hire a separate lawyer to do that. Other legal issues will come into play, as they are only two of the three people with the legal right to give legal instructions on behalf of the estate. Unfortunately one is being selfish and ignoring the law, and this will probably end up involving an application to remove her as executor based on her detriment to the estate.

Another bit of fall-out is that the estate will likely end up needing a new estate lawyer. The general rule when one lawyer acts for several people is that if those people end up in a fight, everyone has to get a new lawyer. The first lawyer can't represent any of them any more. If the probate has already been granted, this is probably not a big deal.

Of course, communication between the executors is going to deteriorate even further if one is evicted as discussed above. Hopefully she will be removed entirely from her executor role, as otherwise future decision-making between the three is going to be a nightmare. None of this is good for the estate, but this is the kind of thing that happens when people make a poor choice of executor.

Attorney accused of stealing $300,000 from a friend's estate

Yet another estate has made the news because of alleged dishonesty. This one is in California. In this case it's a lawyer friend of the deceased who is accused of theft. The case was brought to light by a beneficiary who didn't receive the expected inheritance.

It's not clear to me from reading this article just who is the executor of the estate. Apparently it was not the accused lawyer. Click here to read the story. Note that in the US the word "attorney" in the title means a lawyer, unlike here in Canada where it means a person acting under a Power of Attorney.

Often beneficiaries approach me to ask about their rights when an estate is not being dealt with, or information is being withheld by the executor. Of course they are worried; this story is an example of what sometimes happens when a dishonest person is tempted by estate assets. I sometimes remind beneficiaries that they have both a right and an obligation to watch what is going on in an estate.

Some beneficiaries tell me they feel greedy if they ask outright for their inheritance or ask for explanations for missing funds. But if the beneficiaries aren't going to monitor the executor's actions, who is? Insisting that the estate be wound up in a reasonable time and that you receive your entitlement under the will doesn't make you greedy; it means you are ensuring that the executor carry out the duties as the deceased intended.

Fortunately, most estates that take too long or are conducted in unnecessary secretiveness do not end up with large sums of money missing. They are simply a dog's breakfast because a first-time executor doesn't know what he or she is doing. However, the beneficiaries won't know everything is ok unless they ask.

Attached graphic from http://www.dreamstime.com/.

Who qualifies as a grandchild or great-grandchild under a will?

Check your will. Does it say that some part of your estate is to be left to your grandchildren or great-grandchildren? If so, is it your wish that the estate be shared with step-grandchildren, or just among those who are blood relations? It might be clear to you just who you intend to benefit, but perhaps it's not so clear to others who have to rely on your will for instructions.

Megan Connolly, a Toronto lawyer, has analyzed the recent Lang Estate case from BC, in which the court made a decision about who qualified as a grandchild under a will. Click here to read Ms. Connolly's post.

Litigation involving the estate of the Godfather of Soul

To read a summary of the issue in the estate of James Brown, which is still going on since the singer's death in 2006, click here. It's yet another example of an estate ending up, sadly, in the courts. The story is from http://www.allaboutestates.ca/ .

Strategies for lawsuit-proofing your estate

While we don't always know for sure which issue or item is going to cause a problem in our estate once we've passed away, some are by their nature volatile, such as blended families. Others may not be obvious to you but are familiar to estate litigators as common causes of friction. This article by Rania Combs, who blogs at http://www.texaswillsandtrustslaw.com/ , will alert you to many of the causes and what you can do to avoid them. Click here to read the article.

Don't leave your "real" wishes separately from your will

Annie made a will leaving her estate to her five children in equal shares. When Annie died, the child who was named as executor began the process of probating the will.

The family fighting began almost immediately after Annie's death. Why? Because Annie had told her family that what she "really" wanted done with her estate was different from what was in her will. Verbally, she directed that specific assets be divided among certain people, some of whom were not her children.  She then made matters even more complicated by transferring her home into joint names with two of the children even though the will directed that the home be sold and the money divided among all five children.

This kind of thing happens more often than it should, to the detriment of the children left coping with the mess. I've seen two examples of it just this week alone. Parents leave their children verbal instructions that are different from the will, placing the executor in an impossible situation. The executor is legally bound to follow the will, but morally wants to follow what they believe to be the parent's "real" wishes. The will is legally valid; the verbal instructions are not, but carry moral weight.

The siblings then take sides. Accusations are made. Chaos ensues. The estate is delayed and often ends up in court.

If you change your mind about what's in your will, then change your will. This is a must. It is simply unfair and unreasonable (not to mention illogical) to leave a valid will and at the same time leave contradictory verbal instructions. You might as well toss your lighted cigarette into a barrel of gunpowder.

I believe people do this because they have faith that their children will figure it out and do what the parent "really" wants. But even children who want to follow the parent's "real" wishes can't usually do so because they are bound by the will. The children can't ignore the law, or a valid will.

I don't believe parents have any idea of the pain and inconvenience they put upon their children when they contradict their own wills with verbal instructions.

Fight over autographed baseballs leaves Pogofsky family battered

This story from the Chicago Tribune illustrates what can happen when an estate contains an unusual, valuable item such as a collection of autographed baseballs. In this case, the autographs were collected over 30 years and included those of Babe Ruth and Lou Gehrig. The owner of the collection passed away, and now his children are fighting - in court - over who should get the baseballs. My heart goes out to this family, who will likely never really recover from this fight. If only the father had given clear instructions in his will for his collection. Perhaps, like millions of other parents, he felt that the kids would "work it out" without a problem. Click here to read this story.

The attached photo is from Zbigniew Bzdak, Chicago Tribune, July 5, 2011.

Ringling Brothers heirs give new meaning to family feud

Looking at the goings-on in famous families is just like looking at our own families, just with less money and less publicity. The issues are the same. Click here to read this story about the children of the late Irvin Feld, who owned the Ringling Brothers Circus and other similar assets.

Will your executor be able to handle family pressures?

When you chose the executor of your will, did you specifically consider your candidate's ability to withstand family pressures and politics? If you're like most people, you didn't. In my view, this is a factor that more people need to think about.

Many people choose their child or their children as their executors without giving it any thought at all. That's probably ok if you only have one child. If you have more than one child, or if you have a blended family, you need to put more thought into it. When I push my clients to talk out their reasons for choosing a particular child, the most I ever get is that the child "gets along with" the others.

That's important, yes, but there's more to it than that.

Ask yourself some of these questions about the child that you've chosen as your executor, in each case imagining that you've passed away and your child is in charge:

• If a sibling telephoned or showed up in tears or in a rage about a perceived problem with the estate, how would your executor handle the situation?
• If a sibling is not in agreement with the others on an estate issue, causing arguments, and it appears that the problem is the sibling's spouse, would your child be able to deal with that spouse?
• If a sibling accused your child of deliberately or negligently taking estate assets, how would your child react?
• If all of the siblings ganged up on your child, demanding that the estate be done differently in some way, would your child be able to calm the group and stay in control?
• If one of the siblings took your child aside and asked for special treatment from the estate, such as a larger share, forgiveness of a debt or an advance on their inheritance, could your child stay strong and say no?
• If the estate lawyer called your child and said "we have a problem with the estate", would your child be clear-headed and confident enough to make important decisions?

When choosing your executor(s) you must consider not only what works for you now, but whether your choice is going to be a good one after you've passed away. You must consider how your executor is going to handle the job. One of the dangers is that the estate will bog down in delays and arguments. Another danger is that your executor will get so fed up, he or she will stop acting as your executor, leaving you with someone you didn't choose.

If your family is populated with strong personalities, or for any reason you worry that there will be too much pressure on your executor, consider using a trust company as a neutral executor.

The perils of keeping money under the mattress

In this article, Paul E. Trudelle of Hull and Hull LLP discusses the recent Ontario case of Barrick vs. Lilliste. What a perfect example of why not to keep bundles of money around the house. Click here to read the article.

What if the executor and beneficiaries can't agree on an executor's fee?

In some places in Canada, the amount of fees that an executor can expect to receive from an estate is decided by a formula based on the value of assets. In other parts of the country, there is no formula in place, simply a direction that the pay be "fair and reasonable". Both of these approaches are valid, but both sometimes result in a dispute over the amount to be paid.

The "fair and reasonable" scenario seems to be based on the type of estate where everyone is getting along, the executor has done a fair, efficient, honest job, and the beneficiaries appreciate the amount of work the executor has put in. In other words, an estate unlike the ones most of us run into.

When an executor is paid, the funds come out of the residue of the estate. Residuary beneficiaries of the estate realize it's coming out of their pockets. They become quite possessive of the money, even though up until now it belonged to someone else. They forget that a year's worth of work adds up, usually to thousands of dollars. The number seems large and they feel they are personally losing that amount of money. So they don't find the number proposed by the executor to be "fair and reasonable".

Not that executors are blameless in all of this. Most executors have never done the job before and end up learning as they go. Even the honest ones make the occasional mistake or cause the occasional delay. And the dishonest ones, well that's another story.

Even the formulaic approach to deciding on compensation has its drawbacks. As soon as something as material as a fee is to be based on the value of an asset, that value becomes debateable. The one receiving the fee always thinks it's higher than the one paying the fee.

So, we've established that agreeing on a fee is tough. Now what is to be done about it? It's up to the executor to have the fee set, so if the beneficiaries don't agree, the executor must ask a judge of the superior court of the province to set the fee. The executor will take all of his or her records and paperwork along to describe his work and efforts to the judge, who will decide on a fair fee.

The part that the beneficiaries sometimes forget about is that the cost of the executor's lawyer to do this application is paid by the estate. So not only are the beneficiaries not going to get the amount paid in executor's fees, their shares are further reduced by the amount of the legal fees.

If you're thinking that there simply must be a better way, you're right. The best way to head off all of these arguments is to state in your will what you want your executor to be paid. You can state a dollar amount, but most people choose to use a percentage. If the beneficiaries or the executor wanted to dispute the amount, they would have a tough time of it in court, as judges will try to uphold the directions given in the will.

Including an executor's compensation clause in your will can save thousands of dollars and months of time by short-circuiting disputes.

Five ways to punish your beneficiaries

Want to create the most confusion possible when you pass away? Do you want your kids to have to fight each other for their inheritance? Are you interested in losing chunks of your assets to lawyers and the CRA? If so, you're not alone. Plenty of people set things up in a way that makes things tough on their kids and other beneficiaries. Read on for a list of the most popular things you should do if you want your estate to be truly memorable for its disputes and delays.

1.  Lend one of your kids a big chunk of money during your lifetime, and tell him he doesn't have to pay it back. But don't tell this to the other kids, and definitely don't mention it in your will. Let them figure out whether it's to be paid back or not. Your children will all have a chance either to gang up on the one who received the loan, or to take sides and duke it out. Fun!

2.  Name ALL of your children together to represent you on your will, your Power of Attorney and your Health Care Directive. That way nobody gets to decide anything and it will take ten times as long for things to be wound up, prolonging the agony. If a couple of your children don't get along that well, they'll have to deal with each other every single day. Everyone will be upset all the time. There are few things as satsifyingly contentious.

3.  Leave the title to your house or cottage to all of your children as joint tenants. While you're at it, place a bet on how long it will take this arrangement to fall apart. To make absolutely sure that this is as problematic as possible, leave no funds in trust to pay for maintenance of the building. This idea is great because it not only messes up the kids as beneficiaries, it spoils their relationship with each other - a double whammy.

4.  Put  a bank account or investment in joint names with one of your children. Be coy with the kids about whether the child is supposed to own the account after you die, or whether the arrangement is just for convenience. Definitely don't leave any instructions in writing! It will be fun knowing that the children will be busy for a year or two fighting over the account and won't have time to get bored.

5.  I've saved the best for last. If you really want to punish your children, don't put any documents in place at all! Let them compete over who gets to be in charge. Let them argue over who gets what and how things are to be done. That'll show 'em.

"Don't appoint your friends as your executors"

This story of the estate of Paul Penna is the ultimate cautionary tale about executors and Canada's estate system. I agree with the basic premise of the piece, which is to be careful about who you appoint as executors. Click here to read the story.

If my name is on my Dad's account when he dies, do I own it?

I notice that in the majority of questions I'm asked about parents and adult children owning assets together, the question contains the words "my name is on it".  I'm not surprised that so many people are uncertain about the ownership and ultimate destination of assets when this is the full extent of the information available to them. Your name can be "on" an asset in more than one way, and even then, there are other circumstances that may affect whether or not you will own that asset after your parent passes away.

The first fact that you must clarify is whether an asset is held jointly with a right of survivorship, or whether it's held as tenants-in-common ("TIC"). You are likely to find the TIC situation only with real estate, including mines and minerals titles, and not on bank accounts. The fact that there are two names on a land title does not necessarily mean that the title is jointly held.

To know for sure whether land is held jointly or as TIC, you must read the title itself (or a search of title, which can be done through a lawyer's office or a registry). If the title is TIC, you will see wording such as "each as to an undivided one-half interest" or some variation on that.

If you are a TIC on a title, you will own only your share of the title when the other person dies. The other person can dispose of his share in his Will, or if there is no Will it will be divided on intestacy.

If an asset is jointly held, this usually gives rise to a right to survivorship. This means that when one of the owners dies, the other owner continues to own the whole asset. This is commonly seen in bank accounts and investment accounts, as well as real estate.

Once you have established whether you own something jointly or as TIC, you have taken the first step. As mentioned above, if you are a TIC, you have your answer. But if you are a joint owner, the question is not yet fully answered.

The complication arises whenever an asset is owned inter-generationally. The usual situation is between a parent and a child, though it could also be between an aging relative and his or her niece, nephew, grandchild, etc. In these situations, our highest court has said that when there is an account held intergenerationally, and the parent is the one who actually put the money in, on the death of the parent the money is deemed to be held in trust for the parent's estate. This is drastically different from what used to happen automatically with joint accounts.

What must happen next is that there must be some written record of whether the parent intended for the money to go to the child by right of ownership. The record must have been made around the time the child's name was put on the account. If no such record exists (and in the vast majority of cases, it doesn't) then the child has to give back the money into the parent's estate.

One of the ways parents are creating written records of their intentions is by making statements in their Wills. This could be a simple statement in the Will confirming that they do or do not want the account or investment or property to go to the child as a true joint owner.

Note that the question of joint owner with right of survivorship does NOT affect husband and wife ownership. The comments I've made in this post are restricted to inter-generational ownership that is usually set up by the parent who mistakenly thinks he or she is simplifying the estate, or just wants help with the banking.

You can see how this area of estate administration is rife with disputes, misunderstandings and hard feelings between siblings. I've said repeatedly that joint assets between parent and child are rarely a good idea, and that is largely because people almost always fail to confirm their full intentions. If a parent just wants help dealing with the banking, then he or she should use a Power of Attorney and leave the joint titles for those who truly want that child to inherit that full asset.

An estate dispute of Dickensian proportions

Cesia Green, who blogs at the real/estate blog, discusses the recent case of Kaptyn v. Kaptyn, an Ontario estate dispute that has been going on for years. The problem? The deceased left his sons as executors and they simply can't get along. The resultant fight has been going on for years. Who knew that siblings can't agree! Click here to read Ms. Green's post.

Is there a down side to having the same person as executor and power of attorney?

The question of who to appoint to the important jobs of executor of your Will and attorney under your Power of Attorney can take some real time to answer. As well it should, given the responsibilities and work you're putting on someone's shoulders and the potential for things to go badly off the rails. In my view, those who take the time to really think this out - as opposed to those who seem to do no more than rock-paper-scissors to make a decision - are much more likely to end up with things running smoothly.

Typically, a married couple will name each other as their first choice of executor and attorney. Their alternate choice for both of these jobs is frequently one of the children. That way, should one of the couple become widowed or incapacitated, their spouse still has someone to make decisions.

Typical, yes, but is it a good idea?

The potential for financial disaster is actually very large when you have one of your children in charge of your finances under a Power of Attorney while you're alive, and also have that same child in charge of your estate after you pass away. It's traditionally done this way, but the world is changing and it's time to re-think the old methods.

The problem arises because the Power of Attorney gives enormous power to the person you've named. It has to do so, in order for the person to step into your shoes and make decisions for you. Unfortunately, this power is abused by a shockingly large number of children. At this point, you are thinking that it would never happen in your family. But please keep in mind that the majority of financial abusers of seniors - some studies show as many as 3/4 of them - are the senior's own children. All of those people trusted their children too.

How does it happen? The person you've appointed might be having financial troubles of his own, or his marriage might be on the rocks and he needs to make a settlement. Maybe he sees a great investment opportunity but doesn't have the funds right now so he "borrows" it from the estate. Maybe he figures he's going to inherit some of it one day so what the heck, he'll just take some of it early. And in some blatant cases the child is simply greedy. No, we don't want to think of our children this way, but clearly it happens time and time again.

The common thread that runs through all of these scenarios is that the person is pretty sure that he isn't going to get caught. After all, nobody else has access to the accounts and the property. The crime is invisible.

There are some things you can do with a Power of Attorney to protect yourself and your estate, many of which have been the subject of previous blog posts. One of the most obvious steps is naming a different person as executor under your Will. Why does this help? Because the executor has the right to demand a full accounting from the attorney under the Power of Attorney, once you have passed away. If money is missing, the executor will find out about it. After that, the attorney under the Power of Attorney might have to repay the money, might lose some or all of his inheritance, or in extreme cases he might go to jail.

In other words, knowing that one day someone is going to see what you've done can be a powerful deterrent.

But if the executor is the same person as the Power of Attorney, obviously he isn't going to demand any accounting from himself. If there is pressure from the beneficiaries of the estate, he can delay and obfuscate and generally prevent anything from happening for a very long time.

Think of your appointment of executors and attorneys as business decisions and make the careful choice to protect yourself, your estate and your family.

With wills, simple isn't always better

In the years that I've been working with wills, I've noticed that the vast majority of clients begin their conversation with "I want a simple will".

I know better than to take this statement at face value. I'm well aware that it is client-speak for "don't charge me too much". For some reason, many clients seem to think that a simpler will is a cheaper will. Nothing could be further from the truth, if simplicity is taken too far. A will that doesn't address everything it needs to address may or may not cost a few dollars less right now, but it is pretty much guaranteed to cost you a heck of a lot of money later on.

I'm in favour of plain language. I believe that people should be able to read and understand their wills without a legal dictionary on hand to sort out "per stirpes" and "in specie" and "hereinbefore". Keeping language simple is good; leaving out important words or paragraphs is not so good.

Individuals who make their own wills tend to chop out anything they don't recognize or understand. This is really unfortuate, as it results in many of the executor's powers being removed. The end result is that when the executor tries to sell the house or wind up a business or a dozen other everyday tasks, he has to get permission or ask the court for guidance. 

The powers are there for a reason. Sure, they add a couple of pages to the will,  but they're important words, not filler. I'm not saying that having more words is always better. I'm saying that having more of the right words is better.

I've noticed that some lawyers will actually cave in to the client's demand that a will must be simple, even where it is clearly not in the client's best interests to do so. What is the point in hiring someone to do a job if you are going to second-guess every word and insist that the job only be done halfway? Would you stop a painter from finishing a room if he'd only painted halfway up the wall? Would you hire a cab driver to take you halfway to your destination then insist that he drop you off on a deserted sidewalk?

In a will, brevity should not be the first goal.

Let's look at some examples. A testator leaves his estate equally among his children. But by the time he passes away, one of his children has already died. This wasn't covered in the will because he wanted to keep it simple. The executor then has to determine who gets the deceased child's share, and pay the funds to the Public Trustee to be held for the grandchildren. The grandchildren get their shares at age 18, even though none of them are mature enough to handle it.

A woman leaves her estate to her son and daughter. She knows that her daughter has always loved her jewelry and promises her that one day she can have it, but doesn't want to clutter up the will with gifts like this. She passes away. The son wants half the jewelry to pass down to his own children. They dispute who should have the jewelry and it ends up in court.

A man passes away leaving a cottage as part of his estate. His simple will left everything equally among the kids. They fight over who gets the cottage. It's settled by a judge. The kids who don't get the cottage end up paying the capital gains tax on the cottage out of their part of the estate, as the law dictates. The rest of the kids stop talking to the one who got the cottage.

Another example is a business owner who leaves his estate to his children. He doesn't bother talking about what should happen to his business because that's too complicated. When he dies, two of his children work in the business and fight over who should run it. The third child has inherited a third of the shares of the company and wants to sell them, but the other two don't want her to do that, and the fight begins over that as well.

These are only a few common examples. In each case, the person was happy with his or her will because it was "simple", but in each case the will just didn't achieve what the person wanted. "Simple" should be way down the wish list, below "accurate", "comprehensive" and "effective".

The bottom line is that either you figure out what you want to see happen with your estate and you SET IT OUT FULLY IN YOUR WILL, or your family will end up fighting it out after you're gone.

Hearsay and estate litigation

For those of you interested in the whys and wherefores of judges' decisions (and that's everyone, right?), check out this blog post by Stan Rule. He analyzes a new case from BC (Modonese v. Dulac Estate) in which a judge describes when statements made during the lifetime of a person who is now deceased are allowable in court as an exception to the hearsay rule. Good stuff! Click here to read it.

When can you have two spouses?

In this post, Chris Staples talks about a new case (Blair v. Cooke) from the Ontario Superior Court which has said that for the purposes of making a claim for support against the estate of a deceased, the deceased could have two spouses at the same time. This is because more than one person at a time can fit the definition of "spouse" as set out in the Ontario law. Though most of us would logically think that we have only one spouse at a time, this case shows that the law may not agree with you. To read Mr. Staples' comments and the case itself, click here.