They're joint owners but his will gives away their joint assets

Recently a regular reader of this blog wrote to me with a question that illustrates that a will is only going to work properly for you if it fits in with both the law and your circumstances. Here are his question and my answer:

"A friend of mine told me a few years ago he and his wife made their wills. In their home and bank accounts they are joint tenants. He went to his lawyer and changed his will and he said his half of the house and his half of the money goes to his two sons after his death and not to his wife. My question to you is what kind of a will is that?"

The short answer to this question is that it's a will that's only going to work if the husband outlives the wife.

In your will, you can only give away what you own at the time you pass away. Though in life this fellow owns a house and a bank account, on death (assuming he is still married) those things will automatically belong to his wife because of the law of joint tenancy. Therefore the will is trying to give away assets that it can't give away.

If the wife passes away first, the will is fine because the husband will have full ownership of the assets on his wife's passing.

I can think of a few scenarios in which a lawyer might draw up a will like this for someone (and I'm just assuming that the lawyer advised the husband about the law of joint tenancy because that is, after all, the lawyer's job). One possibility is that the husband told the lawyer that he and his wife are planning to split the property between them while they're alive so that they are no longer held jointly. Another is that the husband and wife are planning to get divorced and split up their property.

And the third possibility is that the husband mistakenly believed that if he didn't tell the lawyer that assets are jointly owned, nobody would know and he'd get away with it. You'd be amazed at how often clients don't tell the lawyer the whole story because they don't fully understand how legal ownership works. Unfortunately they pay for it big time later on because the document they pay for is not the document they really need.

The worst case scenario for a will like this is that the sons will try to uphold the will, as they will understand it to contain their father's last wishes. This means a lawsuit of course, in which the very assets they are fighting about are being depleted by legal fees, court fees and accounting fees.

Nothing good is going to happen when a person's will does not work together with that person's bigger picture of joint property, beneficiary designation, insurance and family situation.

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.

I'm over 21 and competent - can my money still be held in trust just because the will said so?

This reader wrote to me to ask about his inheritance that is being held in trust. It's not that unusual for people to want to receive their inheritances outright, rather than having them held in trust. However, collapsing a trust through the courts is not necessarily easy.

Here's the question:

"When my grandfather died about 7 years ago, he left me a large sum amd specified in the will that it must go into a trust that my mother controls. However I would gain control of it once she dies. I was over the age of 21 at the time the will was created, and I am not mentally incompetent. Is it legal for my mother to still maintain control of my money just because it said that in the will? If I hired a lawyer to try to gain control of my own money, what is the likelihood of winning?"

Is it legal for your mother to follow a legally valid will? Of course it is.

Generally speaking, we can't just pick the parts of the will we like (such as getting money) and ignore the parts we don't like (such as having the money held in trust).

You mentioned a couple of common reasons that money is held in trust. One is that a beneficiary might be a minor, though the age of 21 that you mentioned seems random. Another is that a beneficiary might be mentally incompetent. However, these are not the only reasons that trusts are set up. Perhaps your grandfather was worried that you might blow the money. Maybe he worried that your marriage was shaky and he didn't want you to lose your inheritance to a divorce. Perhaps you have creditors or a gambling problem or an addiction.

Keep in mind that your grandfather is not obligated to explain to you why he wanted to set up a trust, nor does he need your approval. He gave you a gift and this is the gift he chose to give, for his own reasons.

One part of your question makes me wonder if you really understand this trust, or even if there is a trust for you at all. It's possible that the will leaves a share of the estate to your mother, and you would only have inherited if she had passed away before your grandfather did. This is how the majority of wills are set up. You talk about control of the money, which is what trustees do, not what beneficiaries do. It's odd that your grandfather would give you "control of" a trust for yourself.

It's also odd that a trust that's all about you would be focused on the death of another individual (your mother) unless you're a contingent beneficiary. By that I mean that it's possible that your grandfather did set up a trust for you by leaving your mother a life interest in some assets, with you to receive anything that's left at the time she passes away, as opposed to you "controlling" assets left at her death. I'd need a little more information to be confident that I understand your situation.

Assuming that you are correct and there is a trust for you, before making any decisions about trying to collapse the trust in court, check the wording in the will carefully. There will be clauses that impact the administration of the trust, and perhaps some that specifically address closing the trust early. For example, some trusts are written so that if the sum becomes quite small, the trust can be wound up.

You don't say whether the trust gives you a fixed monthly amount, or whether your mother has the discretion to pay money out to you on an "as-needed" basis. The amount of discretion given to the trustee is important, as sometimes the trust is written so that the trustee can decide to pay out the capital of the trust in full if she feels like it.

There might be other relevant information, such as the trust being established to pay for your education. If you've already completed your education, you might argue that there is no reason to hold it in trust any longer.

There is quite a lot of legal detail and argument involved in determining the point at which a beneficiary's interest in a trust vests in the beneficiary. The exact wording of the trust will matter. Whether there are any beneficiaries after you will be relevant too.

If you do hire a lawyer, why not start by having the lawyer read the will and interpret for you exactly what you inherited, and the terms on which it was inherited? Often the only lawyer involved in an estate acts for the executor, not the beneficiary, so you may never have received legal advice on your situation. You might just find, as I mentioned, that the will already contains wording that will help you without having to resort to long, difficult, expensive litigation.

Executor who helped himself to estate must pay punitive damages

One of the issues I hear about frequently from readers of this blog is out-of-control executors and trustees who don't seem to know or care about the rules they are supposed to follow. Sometimes the beneficiaries choose not to take action against these executors and other times they take the executors to court.

I've just read a case review that I'm going to share with you. It's a new case from Ontario where a man named his brother as executor of his estate, to look after the estate for the deceased's sons aged 12 and 16. The estate was not large, but the uncle squandered it and spent it. He didn't give the boys the personal belongings the father left behind. The boys ended up getting nothing of their father's. Instead of having their education paid for as their father intended, they had to take on debt to get through school. They sued their uncle.

This case is interesting because it goes beyond the usual remedies that are available against executors and trustees. Usually when an executor is behaving badly, he or she can be removed from the job, made to give up any executor fee, and made to pay legal costs. If things are really bad, the executor may end up paying for damages or losses out of his or her own pocket.

But in this case, the judge awarded punitive damages against the uncle. As the name implies, punitive damages are assessed against someone to punish them, much like a fine. They are relatively rare in estate litigation. In fact, the judge was so annoyed at the uncle's behaviour that he awarded double what the sons asked for (which was also more than double the full amount of the estate)! Click here to read the case of Walling v Walling.

I am so pleased with this case (and thanks to www.allaboutestates.ca for bringing it to my attention). I'm glad that the courts are taking a hard line with executors who cause not only financial problems for the very people they are supposed to protect, but heartache and frustration as well.

Executors and trustees, listen up. Do the job you were named to do, or you too could end up on the hook for thousands of dollars.

Make sure Mom knows when you visit

The recent BC case of Moore v. Drummond had a surprising result that may cause some uncertainty for lawyers and executors. The case revolves around the death of 98-year-old Dorothy Drummond. She disinherited her only son, Bruce, for not visiting or calling her for 50 years. However, there was evidence that he had visited her, and phone records showed that he called her at least once or twice every month. There were other issues with Mrs. Drummond's capacity as well, and Bruce challenged the will based on lack of capacity. However, the will was upheld by the court.

Click here to read a very good article about this case by lawyer Charles Ticker in www.advocatedaily.com.

Near the conclusion of the article, Mr. Ticker says that "this case emphasizes what I always tell my clients: you never know what a trial judge is going to do and there is no such thing as a sure winner." I couldn't agree more. Normally we give our best predictions based on precedent - what other judges have said in similiar circumstances where the law is the same. This case throws in a bit of a wrinkle.

Weak claim against the estate could cost you big time

"Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation". So said Ontario's Court of Appeal in the case of Smith Estate v. Rotstein earlier this year.

In that case, a woman challenged her mother's will on the basis that the deceased lacked testamentary capacity (i.e. didn't know what she was signing) and was unduly influenced into making the will. The woman's brother was the executor and was forced to defend the will. By the time the case made it through two levels of court, his legal bills were over $700,000.

The judge said that there was so little evidence supporting the woman's claim that she should never have brought the case in the first place. And if she had brought the case in good faith, she should have dropped it early on once she saw all of the evidence. However, the woman stubbornly carried on with the lawsuit, apparently thinking that the costs wouldn't matter because the estate would pay them.

She had a nasty surprise. The judge made her responsible for the brother's costs of $700,000, as well as $30,000 in disbursements. Ouch!

This should be a major heads-up to anyone who is thinking about bringing a weak lawsuit against an estate for emotional reasons. Yes, it's tempting to make the executor stop and pay attention to your issues. Yes, it's tempting to vent your emotions this way. And yes, you may even have heard that when estates end up in court, the estate pays all the lawyers. But this case makes it clear that pointless litigation just for spite won't be tolerated. The free ride for will contests is over. Unless there is strong evidence to back up your claim, don't count on the estate paying your lawyer.

Baronet's son claims father duped him out of his inheritance

I'm attaching a story from www.telegraph.co.uk in which a baronet's son claims he was duped out of his inheritance by his own father, when his father sold the castle that had been in the family for almost 400 years. The court did not support his claim.

I've often said that the things that happen to the rich and famous are the same issues that happen with the rest of us. Maybe for us it's a modest bungalow in the city rather than a castle, but the concept of the child thinking he's entitled to whatever the parent has seems to be found everywhere.

Click here to read the story. The reporting/writing is pretty shaky, but the story behind it is great. The attached photos of the baronet's son and the castle in question are from the story linked above, and are credited to Nevile Ayling/Alamy.

Sherman Hemsley estate battle rages on

I know that many people think that estate lawsuits only happen when there is plenty of money at stake. That just isn't the case. If you think you're likely safe from your kids (or previously unknown relatives who come out of the woodwork) suing each other and your estate because you don't have much to fight over, you could be wrong. I'm attaching a link to a story about Sherman Hemsley, best known to TV-watchers as George Jefferson, whose estate is worth only $50,000. His body is still in deep freeze months after his death while his survivors battle it out. Click here to read the article by Charles Ticker in www.advocatedaily.com.

You don't have to like what's in your parent's will

I wonder why people feel they have the right to decide what is "fair" in another person's will. Where does the sense of entitlement come from? The following note I received recently from a reader of this blog is typical of many I receive. It reveals an unhappiness with the terms of another person's will, and a willingness to jump in, question, judge and possibly force a change.

"My father (deceased) married the woman he had an affair with, and one of the executors (my brother) has claimed that all the grandchildren from both sides will inherit equally according to the will. Is this fair as the second wife has more children, who in turn have more children, and my father's blood grandchildren stand to get a very diluted inheritance, if any. Do they have any rights as beneficiaries and should I try to see the will for myself to review it?"

The father has every right to leave his money to anyone he decides and nobody has to like it. It's his money. His will. His choice. The father isn't obligated to leave any of his money to his "blood grandchildren" or even to his own children for that matter, so nobody should feel that they have the right to question his will on the basis that the blood grandchildren will receive less. If he wants to make an equal distribution among grandchildren, so be it.

The contents of the will appear to have come as a surprise to the reader, and I can guess why. If the father had told anyone that he was planning to benefit all grandchildren equally, he would have been under unwanted pressure to change the will. Pressuring someone to change a will to favour you or your children is elder financial abuse, no matter how you rationalize it.

This wouldn't appear to be a case of a son protecting a vulnerable older person against a recent friend who has coerced a senior into changing the will. I can certainly understand interference where it appears a senior is unwillingly being influenced by someone. In this case we are talking about a marriage and there is nothing to suggest it was a recent marriage. Also, the will is not particularly one-sided, as it sets out an equal share to everyone.

The reader's desire to see the will for himself (and presumably make a decision about the accuracy of the executor's statements regarding the grandchildren) is interesting, as the reader would appear not to be a lawyer or anyone else trained to interpret wills. If the father has passed away and the reader has not been given a copy of the will, I assume this is because the reader is not entitled to see the will. You don't get to see someone else's will just because you want to see it. The fact that the deceased is a parent doesn't entitle an adult child to see the will. If you're a residuary beneficiary, you'll get a copy. If not, you won't. Again, nobody has to like it, but that's the rule. 

I get the impression that the reader would like to read the will, make his own decision about who gets what, then attempt to force the executor to do things his way. This may also be why he was not named as an executor.

Where a parent has mental capacity to make a will, and takes all legal and moral obligations into consideration when making that will, the parent's wishes as expressed in the will should be respected.

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.

All this will be yours one day: Are testamentary promises enforceable?

The Ontario courts have recently dealt with a case that I believe will be of interest to many readers.

The case concerned a father who kept promising his sons that one day the farm and substantial monetary assets would be given to the sons. However, despite the sons doing all that he asked and making choices and sacrifices specifically to hold up their end of the deal, in the end the father left the sons very little. He gave his assets to his new wife.

The question for the court was whether the bargain between the father and the sons would hold up legally. In this case, it did hold up, at least in part. The sons received the farm. To read more about this decision and the reasons given by the court, click here to see a blog post at www.allaboutestates.ca.

I find the case interesting simply because so many people tell me that someone - a parent, relative or family friend - promised them something from an estate but the promise wasn't upheld. Back in the days when I did estate litigation, I heard this frequently. People weren't happy when I told them I didn't think suing the estate would work out for them.

This case clearly sets out what needs to happen in order for a promise like this to stand up legally. If your elderly uncle casually mentions one day as you sip a beer in the backyard that he is thinking about leaving the house to you, and that's the last you hear of it, then don't count on receiving it. In order for your claim against the estate to be successful, you would have to show that you believed you'd own the house, and that you relied on this promise to your own detriment with your uncle's full knowledge.

As the author of the www.allaboutestates.ca blog post said, people are allowed to lie about the contents of their wills.

Kinkade estate fight will be hard on the family

A general rule of wills is that the most recent valid will revokes any wills made earlier. But what happens when the validity of the more recent will is in question? This can make a huge impact if you named different beneficiaries in the recent will than you did in your earlier will. In a case like this, you can certainly expect an estate fight.

This is what has happened in the estate of Thomas Kinkade, an artist known as "the painter of light". He left not one, but three, wills. The earliest one named his former wife, while the second and third named his girlfriend. There is some controversy about whether or not the second and third wills (which were home-made and had some problems) are valid. This pits the former wife against the current girlfriend in court.

A large part of the problem in this case is that there is some evidence that Mr. Kinkade was an alcoholic and that such addiction affected his ability to make the second and third wills. This is what the court will have to determine. I can just imagine the circus this will become, once witnesses begin to testify.

It's so unfortunate that Mr. Kinkade didn't see a lawyer to have his will changed properly. All of this litigation could have been avoided. Now not only will his estate be publicly exposed and picked apart, so will his personal life. His girlfriend and his former wife will be involved in this costly, unhappy mess for a long time to come.

A sad adjunct to estate litigation is the pain, humiliation and loss of privacy for the family members left behind. It's worth it to get professional advice to protect your own family from this kind of trouble.

Click here to read more about this story from American lawyer Kyle Krull.

Girlfriend gets graveyard in UK estate dispute

The world of estate litigation is never boring, as you will see from reading about a recent case from the UK. Though it's a case about a woman suing an estate for support from a man she claimed fathered her child, the details are truly bizarre and touch on everything from Princess Diana to hired hitmen. Click here to read it. This one has me shaking my head.

Judge says feuding siblings can pay their own lawyers if they want to keep fighting over the estate

I found this story to be one of those car wrecks where I couldn't look away, even though I knew what I was about to see was going to be ugly. It's the story of a father who left 75 million dollars to sons who couldn't get along. Five years after the father's death, the sons are still fighting over the estate and the legal bills are over five million dollars. The legal fees were being paid out of the estate until a judge got sick of these feuding siblings and told them they'd have to pay their own lawyers if they wanted to keep fighting (well done judge, I'm with you on that one). Click here to read this story, which applies to all of us even if our estates don't amount to 75 million.  The story and the attached photo are from http://www.capitalmagazine.ca/.

Well, that didn't work

This new blog post from http://www.allaboutestates.ca/ talks about the challenges of the very rich when trying to hand down large legacies without sparking family fights. The failures are often spectacular and make the headlines. Click here to read the article.

The author, Elaine Blades, touches on a concept that is very important in estate planning. That concept is that the children equate equal treatment under the will as meaning the parents loved them equally. Money equals love when it comes to wills and estates.

You might be surprised to know how much planning, discussing and special drafting go into making sure that in a parent's will, the children don't believe themselves to be less loved than a sibling. This doesn't only apply to rich people; the same concept applies where an estate is more modest.

I don't believe this forces a parent to leave equal amounts to all of the children where, for example, the parent has already helped one child financially. In those cases, I often recommend to clients that they have a clause in their will giving a brief explanation for the different treatment (e.g. "Johnny is getting less than the others because I gave him a down payment for a house that I didn't give to the other children"). Including this explanation should help ensure that Johnny's feelings aren't hurt.

I've noticed that when this type of clause is used, many clients prefer the wording to start with "...I love my children equally but have treated them differently under this will because...". That certainly spells things out.

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 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.

Mom makes one child beneficiary, hoping he'll share, but...

A mother made a will, leaving her estate to her oldest child. She tells her children that she has done this with the intention that the oldest child will pay the bills then share the estate with his siblings. But what if he doesn't share? This is the situation one of my readers is dealing with right now.

Now, I don't know why the mother in this case made such a disastrous will. Perhaps she was ill and in a hurry to get something - anything - onto paper. Perhaps she was trying to save a few dollars on the cost of a professionally prepared will, not realizing she was putting her children into a situation where they might have to endure costly estate litigation. Perhaps she was just overly trusting of her oldest son. Very few parents are able to admit that one of their children would ever behave badly to his siblings.

I also don't know why the oldest child is refusing to share. Maybe the mother told him something about the distribution that she didn't tell the others and he feels he really is carrying out her wishes. Maybe he feels that since he's looked after her during her lifetime he's entitled to more. He certainly wouldn't be the first executor to start legal fireworks by re-writing the will he was supposed to be following. Or maybe he just feels that he is going to rely on the letter of the law that says the inheritance is his.

There are both legal responsibilities and moral responsibilities in play here.

The siblings say that their mother intended the estate to be shared among them. Let's take a purely legal look at this. What record exists of her intention? Her will actually says the opposite - that she is leaving the entire estate to one child. A will is supposed to record the last wishes of the testator, isn't it? So on the face of it, the will should stand as an accurate record of what she wanted. She didn't set up a trust and put the oldest child in charge. She didn't divide up the estate among the children herself. She simply left it all to one child. The only proof of her intention of splitting the estate comes from those people who would benefit financially from the split.

The other side of the equation is the moral obligation of the oldest child to carry out the mother's intention, if she did in fact tell him that she expected him to divide the estate. This is an area that is changing thanks to recent cases, many from British Columbia, in which a moral obligation is relied upon to change the division of the estate. The likelihood of success will rely in large part on the provincial or territorial laws of estates that are in place.

But if the other children take the oldest child to court to force him to divide the estate, haven't all of them  - the oldest child included - already lost? Just the fact that they are spending money of their own and are partially depleting the estate reduces the value of the prize they are fighting over. And this doesn't even take into account the damage to the family relationships that will likely never recover from a lengthy, costly, nasty court battle.

The initial mistake was made by the mother, who left a will that any lawyer worth his or her salt would have told her straight up was a disaster in the making. Your will should reflect your actual intentions. No parent should leave everything to one child, assuming or intending for the child to decide what is right. That's the job of the testator, not the executor. Why pit one of your children against the others?

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.

Elizabeth Edwards' revenge from beyond the grave

This story from the Mail Online discusses the Will left by Elizabeth Edwards, wife of former US presidential candidate, John Edwards. Mrs. Edwards died of breast cancer last month. The story describes the situation of a cheating husband being cut out of a $25-million estate. Click here to read it.

I don't pretend to know American estate law, but I doubt this is over yet. As I understand it, the Edwards were still legally married at the time of her death. In most jurisdictions that alone would give the husband the right to make a claim against the estate. Guess we'll see what happens.