Lost Wills - Part 2 - Hull on Estates and Succession Planning #179
Listen to: Lost Wills - Part 2 - Hull on Estates and Succession Planning #179
This week on Hull on Estates and Succession Planning, Ian Hull and Jordan Atin continue their discussion about the importance of Wills and the emotional nature of evaluating the assets of an estate.
If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.
Ian M. Hull - Click here for more information on Ian Hull.
Lost Wills – Part 2 - Hull on Estate and Succession Planning #179
Welcome to
Ian Hull: Hi and welcome to Hull on Estate and Succession Planning. You are listening to and watching our podcast which is being launched on the internet on September 1st, 2009.
Well I am proud and pleased to continue with our mini series with Jordan Atin, Barrister and Solicitor but heavy on the solicitor. He does a lot of work in the area of Wills and Estates, is quite famous, has regular appearances on Business News Network and at the end of the day, a great, close friend of mine. We are here to, well, unfortunately Suzana is not here to join us but we’re here to continue on some of our discussions that we’ve had in this mini series. And what we have talked a little bit about in the first two podcasts was the control and custody of that important document, the Will. (a) It’s an important document and (b) treat it like it’s an important document and (c) if something goes wrong, how do we fix it?
Jordan Atin: Right.
Ian Hull: So we talked about losing the Will and so on. At the end of the last podcast, we wound up the discussion of lost Wills. And today I want to talk a little bit more about some of the emotions behind valuations and assets in an estate. But before we do that, apropos our expectations that we have to always give some good practice points. Before we do that, I’d like to talk a little bit about the idea of…a practice point that you have in regard to lost Wills.
Jordan Atin: So I was just going to mention to you about this practice point and it ties into the idea of the lost Wills. One of the things that I tell my clients that if they’re panicked about losing their original Will, if they ever lose their original Will, if they’re moving and then they can’t find it and they don’t know where it is, that they should foot me an e-mail or write a letter or something saying look, I’ve lost it, I don’t know where it is, I did not intend to destroy it and revoke it. So that will buy them some time until we do a new one. So that’s just…
Ian Hull: That’s good and I think, I mean, it’s so important to have some of these sort of technical outs, because it seems on the face of it when you lose a Will, such a crazy rule. But the nice thing is, is that it sounds to me like there are ways to fix it in a short term, technically, basis.
Jordan Atin: Emergency strategies.
Ian Hull: That’s right.
Jordan Atin: Yeah, yup.
Ian Hull: Alright, so what we promised to do was spend a bit of time talking about an estate administration issue that I know comes up with a lot of your clients, and that is the whole question of valuation. And that, like tax advice, we will never give. We don’t give business valuation advice.
Jordan Atin: That’s true.
Ian Hull: But what we do is we see the issue surface in many estate administrations. And the illustration is this: that lots of people pass away with a fixed value asset like a GIC. So when you die, you know it’s worth $100,000 and that is to be divided as the Will says. But if you die with assets that need a little bit of work to determine what they are actually worth, two problems, at least, arise. One is, what is the best mechanism of valuing it and creating that dollar amount, and so forth? And the second is, what are some of the intangible, what are some of the non-business emotional issues that overlay in that process? So I thought what we could do is talk about how we might…maybe we could just talk about sort of unique valuation issues.
Jordan Atin: Sure.
Ian Hull: And some of the family dynamics that come from it. And then finish that discussion with some solutions because one of the things that we pride ourselves on this podcast is not just talk about problems, but talk about solutions.
Jordan Atin: Those are the hard…that’s the hard part of these podcasts, right.
Ian Hull: That’s right, well that’s absolutely. So could we explore that concept a little bit?
Jordan Atin: Sure, you bet.
Ian Hull: Alright. So I’ll let you pick the asset and identify one that brings with it some trickiness to its valuation.
Jordan Atin: Right. Real estate. The cottage.
Ian Hull: Great.
Jordan Atin: Take that classic problem. So one of the things that we often put in a Will is we talk about…we may specifically say to the executors, here’s what I want you to do as far as valuing. I want you to go out and get a certified appraisal and then if we’re giving…where it really becomes an issue is where we’re giving a party, one of the beneficiaries perhaps, the right to buy it, okay? So in that situation, what we’re going to do…that’s going to cause a problem because at what price does the person buy it?
Ian Hull: Right.
Jordan Atin: Right? So that’s sort of a classic problem that we would have with the cottage. And so the Will drafter has a couple of options.
Ian Hull: Okay. So let’s break this down before we get into the options.
Jordan Atin: Sure.
Ian Hull: So we’ve got a cottage. It’s got special attachment to it for some and maybe not so special for others.
Jordan Atin: Right.
Ian Hull: It can be…all of us know how to value. We can have a real estate agent tell us what it’s worth but ultimately until the marketplace picks the value, you don’t know what it’s worth. Now, to avoid some of these problems before the explosion on the valuation process, you say you have some suggestions from a drafting standpoint.
Jordan Atin: Right.
Ian Hull: Alright, so let’s explore some of those suggestions.
Jordan Atin: Well one option is, if you’re giving an option to purchase to one of the beneficiaries, one of the kids for example, what you would do is…one option would be you designate that the executor shall retain a certified real estate appraiser and will circulate the appraisal to the beneficiaries who may have an option.
Ian Hull: Okay. So let’s stop on that one.
Jordan Atin: Sure.
Ian Hull: What problems arise, though, when you use that designated appraiser?
Jordan Atin: Well, one is the executor is the one who is picking the appraiser.
Ian Hull: Okay, good.
Jordan Atin: So if there are already bad feelings, if you’ve got one kid as the executor and the other kid is with an option. Or even that kid, the executor also having an option, there’s the issue of how fair an appraisal is it? I mean, appraisals are, by their nature, opinions, right? And one opinion may vary. The value may depend on the opinion of the valuator, the appraiser, and may also be affected by the terms of reference of that appraiser. So those are the sort of…that’s one issue about who is going to select the appraiser?
Ian Hull: And costs, of course, are always an element. When you get a certified appraiser, they quite properly should charge more.
Jordan Atin: Right.
Ian Hull: And people expect appraisals, I find, for next…they don’t want to pay anything for the appraisal.
Jordan Atin: Right, like get the agent to drive by and tell me what it’s worth, sort of thing.
Ian Hull: Yup. Okay. So I can see some of the problems that arise. But it’s a good suggestion and works well with some families and maybe not so well with others. And it depends, I think, obviously on your particular client and the particular asset.
Jordan Atin: And one way of getting around that issue and I don’t know if you want to get into that right now.
Ian Hull: I do, I’m happy, excuse me. My allergies are…
Jordan Atin: Yeah, my allergies are up and down too this week. One option is to say okay, once you’ve got that first appraisal, that goes out to the people who have an option. Now they may turn around and say, I don’t like this appraisal. It’s too high or it’s too low. So what often gets built in is the option of one of the other kids to get their own appraisal. And then what you can do is average it. Or you can build in complicated situations where if the appraisals are more than 10% apart, then we’ve got to go get a third appraisal. Now obviously if they’re not happy about paying for one appraisal, there’s options about…there’s problems with giving them the option to get additional ones. But that’s a way of remedying it. At least you, as the Will maker, have set the ground rules for your kids and said look, this is what I’d like you to do. And then it’s a little more difficult for the kids to have a free-for-all. At least there’s some structure in place.
Ian Hull: And I think that really does create a business-like approach to a potentially emotionally, highly-charged situation and that goes a long way in any estate planning. Alright, so as we wind up today’s podcast, I appreciate that. And I think we’ll need to trouble you for one more podcast because I want to just finish that thought on how we deal with some of these variables and how we can avoid some of trouble at the end of the day.
So thanks again for joining us.
Jordan Atin: My pleasure, Ian.
Ian Hull: I know. And we’re dragging you through great effort here and it’s much appreciated and we look forward to our next podcast.
You have been listening to Hull on Estates and Succession Planning by Ian
to has been provided as an information service. It is a summary of current
issues in estates and estate planning. It is not legal advice and you are
reminded to always speak with a legal professional regarding your specific circumstance.
To listen to other
