Or, listen to the audio version of Will Challenge Litigation - Part 5
This week on Hull on Estate and Succession Planning, Ian and Suzana continue their discussion on the Will Challenge Process, step by step.
They continue to discuss the process of will challenges in closer detail. What makes a good case? They talk about the five different grounds upon which a will can be challenged:
Lack of testamentary capacity
Existence of suspicious circumstances
Will not having been properly executed
Existence of undue influence
Possibility of fraud
If you have any comments, send us an email at hullandhull@gmail.com or call us on the comment line at 206-457-1985 or leave a comment on our blog.
This week on Hull on Estate and Succession Planning, Ian and Suzana continue their discussion on the Will Challenge Process, step by step.
They continue to discuss the value of the discovery process and intense investigation. The goal is to get to the mediation process as soon as possible. New evidence may lead to the next stage: the pre-trial. Ian and Suzana talk about the pre-trial process and what you can expect during this stage.
If you have any comments, send us an email at hullandhull@gmail.com or call us on the comment line at 206-457-1985 or leave a comment on our blog.
Rick Bickhram: Hello and welcome to Hull on Estates. You’re listening to Episode 119 on Tuesday, July 15th, 2008.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Natalia Angelini: Hi and welcome to another episode of Hull on Estates. I’m Natalia Angelini.
Rick Bickhram: And I’m Rick Bickhram.
Natalia Angelini: If you want to be heard on Hull on Estates you can participate in our discussion by leaving a comment. Give us a call at 206-350-6636. The number is in the show notes along with our e-mail address, hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
Today we’re going to be talking about strategies to prevent estate litigation. This is the first time Rick and I are blogging together; this should be good fun.
Rick Bickhram: Whoo hoo!
Natalia Angelini: Glad to see you’re excited, and I’m excited about our topic. I think it’s definitely something that testators want to keep in mind. So, Rick, why don’t you get us started.
Rick Bickhram: Thank you, Natalia. There really is no substitute to good planning. Good planning can go a very long way to prevent a family fight down the road when, unfortunately, someone demises and it comes time to divvy up the assets of that person’s estate. So, Natalia, what do you think are some good tools that a testator can consider when, or just before, executing his Will to help manage the estate planning?
Natalia Angelini: Well, Rick, aside from as you said, having a properly drafted Will, you say you’ve got good planning in place, and you have your Powers of Attorney in place. Aside from those kinds of things, there are a bunch of strategies that a testator can think about, particularly if they know that in their unique circumstance, they have likely got a Will challenge brewing post-death.
So some of these strategies are gifting assets before you die. And it can be somewhat of a dangerous strategy, but you know, with the proper advice and the right circumstances, it can have its benefits. So one of the first things you want to think about when you do this, that might be a good idea to think about rather, is getting tax advice and accounting advice and seeing a lawyer who can properly paper any kind of gifts that you want to give away. But it definitely can be a way of ensuring that your estate is either as minimal as possible or at least cuts out some of the contentious items because you’ve already gifted them away.
Rick Bickhram: And I think this is a really good tool because let’s say, for instance, mom dies and she has two sons. She gifts all her assets to one of the sons. The son who received nothing is obviously upset about the situation, so what does he do? He goes and challenges the Will. Well, what would he get in a Will challenge if he was successful? Really not that much. If the gift aspect was done correctly and the reason being is that all of the assets in that regard would have probably transferred outside of the estate.
Natalia Angelini: Right, and I think you’re touching on a good point there. If by gifting assets before you die, you do it in a way where, let’s say, you’re transferring ownership into joint names with your favourite children, then that is something that can still be contested. But it’s likely a type of challenge that’s harder to win than a Will challenge.
Rick Bickhram: Well, with that said, with every benefit there is a burden, and with this estate planning tool, there are many risks as Natalia pointed out earlier on. Some of these risks include, let’s say, for instance we put the subject asset into joint with the son, going back to my first example. It’s my intention here to leave this asset to my son. Upon my demise, my son and his wife separate, eventually divorce. That asset could be the subject of matrimonial litigation over the asset because it would possibly be considered the matrimonial property.
Natalia Angelini: Yeah, that’s right. And also it could be subject to attack by any creditors of your son’s, so that’s definitely something to keep in mind. But you know, there is a certain strategy to doing this and I think before a testator decides to go this route, some of the things they should think about are: number one, that they have a loving and trusting and close relationship with their favourite relative; that they won’t require these assets back for their own support; and that I guess that she or he accepts that they also won’t get back these assets unless they get the consent of the child that they’re gifting it to.
Rick Bickhram: All very good points, Natalia.
Natalia Angelini: Thank you, Rick.
Rick Bickhram: Now moving along, another estate planning tool, which is a double-edged sword here again, is videotaping. The testator could videotape herself explaining her intentions after the Will, but I must point out that a videotaped Will, in the jurisdiction of Ontario, is not considered a Will. A Will must be in writing.
Natalia Angelini: That’s true, Rick, but it can be a tool that can really help because you have an opportunity in a videotape first of all, to be seen and to be heard, and to explain exactly why your wishes are as they are, and why the bequests are set out as they are. And having said that, though, because it is a videotape, it can be very carefully scrutinized and little things like mispronunciations or forgotten names or fidgeting, that kind of thing, unusual phrasing, or other kinds of mannerisms, those can potentially be used against you by someone challenging a Will and they can perhaps assert that well, that’s evidence that she didn’t have mental capacity or that he was unduly influenced. So I think if your eyes are open to that, when you are doing that kind of a videotape, it might help in actually how it gets recorded. And, you know, those risks are some reasons why sometimes lawyers don’t recommend videotaping. But I think that it is, for the right kind of testator, it can be helpful.
Rick Bickhram: Good point, Natalia. Moving along in terms of other estate tools that can be used when managing or planning a person’s estate. One tool that is strongly recommended is known as the family meeting or the family conference. And in the family meeting or family conference, what it is really is, it’s an informal meeting where the testator here sits with her family, her children, mother and father if they’re alive, nephews and nieces if they’re included in the estate, depending on how close the family is, and what their plan is. It’s pretty much sitting down with your family and explaining to them what you’re going to do and why you’re going to do it. And Natalia, maybe you can shed more light on this because you’ve seen more cases than I certainly have. Why is this such a good tool?
Natalia Angelini: It’s a good tool because it’s really your only chance or the main way that you’re going to really speak directly to your beneficiaries, and to those that maybe you’re not intending to have as beneficiaries and really explain why it is that you have structured your estate in the way that you have. But I don’t want to confuse a family meeting with a family conference. A family conference is a formal meeting where you’ve got a third party chair; we do them at our office, for instance, and you’ve got potentially the accountant of the testator in attendance and the financial planner in attendance, and so it’s a much more structured event and I podcasted on that previously. Unfortunately I don’t have that episode off the top of my head, but if you’re interested in that, we certainly do have quite a detailed podcast on it.
So, what Rick was talking about which is a more informal family meeting, just with you and your family, you know, it’s got its risks because, of course, you can create real hostilities there. But it can also potentially avoid litigation down the road because you’re all together and there are witnesses and people that can give favourable evidence to say well, mom wanted her estate this way. So that might avoid a Will challenge down the road.
So why don’t we go to another strategic tool that you can use to hopefully prevent litigation. And I think, I don’t think that this is used often enough, but I certainly do see it more and more. And that is inserting protective clauses in Wills.
Rick Bickhram: I’m going to guess but I think the protective clause pretty much protects the testator’s wishes and ensures that they’re pretty much flushed out or carried out.
Natalia Angelini: Well I think if it’s enforced, yes. And I think, you know, that leads me to my next point, which is that this type of clause isn’t valid in every jurisdiction and even if it is, it really ought to be drafted with precision so a Court will accept it. But essentially these types of clauses either say anyone challenging this Will will lose their interest in the estate or it will say that if anyone challenges the Will and that kind of clause can also read, if you challenge a Will and you’re unsuccessful in the challenge, then you lose your bequest. So there can be two different kinds of phrasing; I mean there can be several different kinds of phrasing but those are two that I’m aware of. So it really creates a disincentive to proceed with Will challenge litigation.
Rick Bickhram: So it’s pretty much like an all or nothing scenario, correct?
Natalia Angelini: Exactly. And another way to do this more indirectly perhaps than having an actual protective clause is to give a gift directly to your grandchild. so you can bypass your child that you’re not, that you don’t want to benefit from your will and you can give the gift to your grandchild, and that can really discourage your child from challenging the Will because they will essentially be at cross purposes with their own child. And really, by litigating and challenging the Will, they’re potentially diminishing their own child’s claim and who wants to do that?
Rick Bickhram: All really good points again. Good stuff, Natalia.
Natalia Angelini: Thank you, Rick.
Rick Bickhram: The final point we would like to touch on today, the final tool that we would like to explain today is basically mental assessment. How does the mental assessment tool work? Should it be used and if so, how could it be used? What are your thoughts on that, Natalia? Natalia has more litigation experience than I do, so she could…
Natalia Angelini: Oh, don’t be so modest.
Rick Bickhram: She could provide more background here in that regard. My guess is, if an assessment occurs, just around the same time as when the Will is signed, and it is a favourable report, it could be beneficial to someone who is defending a claim against the estate that mom or dad lacked the testamentary capacity to execute the Will. What do you think about that?
Natalia Angelini: I think that’s absolutely the case. I mean, it certainly can be just one of the tools in your arsenal. If you know or you suspect that a Will challenge is going to come down the pipeline, then it’s a great idea, especially if you know that testamentary capacity is going to be an issue. It’s a great idea to have yourself professionally assessed. There are other ways to do it; you can go to your family doctor that you’ve known for 40 years and have them write a supportive letter and/or you can get professionally assessed.
Rick Bickhram: What do you think, Natalia, about let’s say for instance, I’m going to execute my Will and I go see my family doctor. My family doctor has known me for a few years obviously, he’s my family doctor. I go to him, I explain to him I’m about to execute a Will and I would like for him to write me a letter, pretty much explaining his observation as to my mental capacity. Do you think that that letter would be given much weight presuming, after my demise, there is an estate battle between the beneficiaries of my estate?
Natalia Angelini: Well, I mean, I think that’s going to depend on the particular facts of the case and what all the other medical evidence is, but it certainly can’t hurt. And if your family doctor has known you for many years and had the time and opportunity to really observe you, and their evidence really brings that out in trial, then that letter, coupled with their evidence, could be quite helpful, particularly if it’s done close to the time of signing the Will and I think that’s important, especially when you go the other route and you get a mental capacity assessment done. And that is likely, and again depending on the specific facts, an even more useful tool because someone who is hopefully, a professionally recognized capacity assessor and they are looking specifically to determine whether you have the mental capacity to not only manage your finances but also to make a Will.
Rick Bickhram: Well, Natalia, I think that brings us to the end of this week’s discussion.
Natalia Angelini: That’s right and I wanted to say it was great podcasting with you, Rick. We got some of our ideas from a great book written by Jordan Atin, Barry Fish and Les Kotzer, called “The Family War - Winning the Inheritance Battle. It’s a great book and it does cover a bunch of areas and this was one of them, so definitely an interesting read. And we look forward to hearing from our listeners. You can send us an e-mail at hull.lawyers@gmail.com or just pick up the phone and leave us a message on our comment line at 206-350-6636. Be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of estate law. We hope you enjoyed the show. I’m Natalia Angelini.
Rick Bickhram: And I’m Rick Bickhram, until next week, so long.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.
Our theme music is Upper Structure by DJ AKid and is courtesy of the Podsafe Music Network.
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss things to consider when administrating the assets of an estate and point out burdens of being and executor.
Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning.You’re listening to Episode #107 of our podcast on Tuesday, April 8th, 2008.
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by
Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.Here are Ian and Suzana.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian, how are you today?
Ian Hull: Just terrific, thanks.
Suzana Popovic-Montag: That’s good. We just want to take this opportunity before we get into the substance of our podcast to just remind our listeners that if they would like to leave us a comment, they can feel free to give us a call at 206-457-1985.
Ian Hull: And, of course, feel free to chase down our blog or send in a comment to hullandhull@gmail.com and the webpage hullandhull.com gets you a quick link to our blog which we’re posting almost every day on and had some interesting comments last week from our posts, so feel free to engage in the social media adventure.
Suzana Popovic-Montag: That’s great. Now I know, Ian, that you actually were podcasting solo last week because I couldn’t be here to join you and I thought you did a great discussion of your recent attendance at a seminar. And so I thought what we might do is to, sort of, pick up from where we had left off at the end of our last podcast.
Ian Hull: Well, that sounds great. I do want to say one thing since that podcast was launched into the internet, I’ve had some interesting feedback that seminar was well received. Talked to a couple people that actually were at it and not particular, just what, of course, I said, which was hopefully helpful. But some of the other speakers and the twists that were being put on the whole elder law scenarios that we’re going to be faced with more and more in society. So speaking of society, we have to refocus a little bit this week and talk about some issues relating to the administration of the assets of the estate and our ongoing slug through the burdens of being an executor.
Suzana Popovic-Montag: And we had at the last time spoken about the fact that we were looking at a situation where we suddenly had the Certificate of Appointment in hands, this probate document, and we were looking at some of the things that we take in terms of initial steps as an executor, once that document was obtained.
Ian Hull: So we’ve talked about this in the past and we’ve talked about personal effects, talked about the fact that we think it’s so important to make sure you document it, maybe take a video quickly of all of the personal effects or have some photos or whatever. But once you’ve inventoried it, what do we do about getting the action steps to be taken to actually transfer or sell those personal effects?
Suzana Popovic-Montag: Well, Ian, in accordance with the terms of the Will the executor is going to want to deliver the individual personal effects directly to the beneficiaries who are named in there, and then obtain a receipt from those individuals, so as to have the protection of the fact that that gift or that bequest was made and that it was received by the recipient of it.
Ian Hull: And that receipt can’t go understated in the importance of that. We… I just had an estate that I recently administered and I personally made sure that the jewellery items that were delivered and they weren’t phenomenally expensive jewellery items, but they were very personal items and ones that, you know, the sort of chain of the ring from the deceased to you to the beneficiary is so very important. And a lot of times, I’ll just say to clients, look if you’re the executor, don’t break the chain, so to speak. Once it’s in your hands, make sure that you’ve got full control of it and that you do not release it until you get a proper receipt.
Suzana Popovic-Montag: And then I guess, of course, there’s going to be personal effects that aren’t specifically spoken to and in those circumstances, an executor is going to want to arrange for the sale of those items.
Ian Hull: Absolutely. Now the sale of the items, too, can create its own spicy tension within the administration of an estate. One of the things that I tell my clients is that they want to quickly go on the internet, take a couple of minutes and search out what the sort of the star local sales avenues are. I mean, the classic one is Sotheby’s. But not all of us have, you know, John Lennon pianos to put up for sale. But, you know, Sotheby’s has an operation in Ontario, Ritchies has an operation, Waddingtons is another one.All of these houses are wonderful. They do it so professionally and most of them will do sort of the gambit. If you give them – some of the stuff isn’t worth a lot but some of it is, they’ll often inventory it all for you and give you some help on how to deal with the stuff that is more modestly priced. And then put in up for sale properly and by a third party, so you can’t get accused of messing up on the sale of selling that painting that sat over Grandma’s dining room table for 30 years, for a song. You’ll get the professional advisor telling you what its worth. They have some…like I know I just dealt with one from Waddington’s. They have phenomenal internal resources like experts on Canadian art for certain periods that they’ll bring in and they won’t throw these things into the market, sort of, willy nilly.
Suzana Popovic-Montag: That’s great, Ian. And it’s something certainly to keep in mind because there’s always going to be these things that need to be dealt with. Another thing that I try to remind people of is the fact that once you’re in this stage where you’re actually liquidating or transferring assets, you want to consider also cancelling any insurance on those assets that you’ve maintained up until the time that that transfer is actually done.
Ian Hull: Geez, that’s a good point, you know.I had an estate recently that had a bunch of art and the insurance on the art was almost an overwhelming cost to the estate and the beneficiaries were not happy that it took an extra month to cancel the insurance. So that’s a really good point.
Suzana Popovic-Montag: And I think it sort of follows from the checklist that we’ve suggested that people maintain because it sort of brings you back to think about that and you can take care of it right at that time.
Ian Hull: Okay, so that deals with personal effects. What about cars and automobiles and that sort of thing?
Suzana Popovic-Montag: I think we’re looking at the same kind of situation there where there’s going to either be a transfer to someone who’s actually named in a Will or there’s going to be the arrangements made by the trustee to actually sell the vehicle.
Ian Hull: And again, I guess, your good advice on the insurances on that one as well.
Suzana Popovic-Montag: And so if we’ve looked at personal effects, we’ve dealt with automobiles, then those are usually the big items there. Then we just are left with whatever’s ultimately left there and how we actually go about realizing those last things.
Ian Hull: And liquidating deposits and getting the, sort of, estate bank account established as quickly as possible is crucial. And that, sort of, takes us into what we’ll start to call, I guess, the business side of the estate administration. The one side of many estates that we see the most problems in and that is, dealing with the accounting.
So first of all, setting up the bank account. You need your probate typically, to get a bank account opened. So you’ve got your probate certificate, you go to a bank. You want, I tell my clients to go to a branch that’s convenient to you because you will be surprised how often you will have to actually deal directly with the bank. This isn’t always like us when people are alive, they can do internet banking, they can do, you know, cross-city branch banking, and so on.You want to establish, I tell my clients anyway, to set up an account that is easy for you to get to.
Suzana Popovic-Montag: And once you’ve done that, you also want to think about setting up your bookkeeping mechanism because as an executor or a trustee, you’ve got to maintain very good records so that at the end of the day, if you’re called upon it, you can account to the beneficiaries of the estate or the trust.
Ian Hull: And it’s really at this time that I tell my clients to think about the end game now. You’ve been so careful so far, right from the moment of death or the moment you were told you had the job, you’ve been so careful. This is really the turning point to maintain a level of almost perfection. You have to have receipts for everything, no money can go astray, obviously. But your system is crucial. And if you’ve got a situation where it is likely that you’re going to need to ultimately go to Court and pass the accounts, then now is the time to establish that system early, as opposed to remaking it at a later time when you don’t have all of the information at your fingertips.
Suzana Popovic-Montag: And so, Ian, in terms of advice, how do you usually tell your clients that they go about setting up this mechanism?
Ian Hull: Well, I think they’ve got to get good advice and accountants and lawyers know how to create estate format accounts. And it doesn’t hurt to (a) learn a bit about that and (b) set up a system that can be easily transferred into an estate format scenario. Because the estate format accounting itself is – it can be something that is new to individuals who are not, you know, savvy on this form of accounts. It’s not rocket science, but it is a different form of accounts that you need to consider.
Suzana Popovic-Montag: And my clients are always surprised, Ian, by how different estate accounts are from normal financial statements. And I think that’s part of the education process that we provide to them about how these things are maintained.
Ian Hull: And I think, really, as I say, this is such an important turning point and starting point to the process, that I think it’s worth getting some initial advice on this and it may cost some money, but its all money well spent.
Alright, so now that we’re setting up the bookkeeping, we’re setting up the estate accounts. Let’s talk about, sort of, some of the long-term business aspects of administering this estate.
Suzana Popovic-Montag: In a situation where you’ve got a business that actually had been run by the deceased, in this instance, you’ve got to meet with the estate trustees and create, sort of, a plan going forward of how you’re going to either continue running that business or basically hiring individuals to do that for you as an estate trustee.
Ian Hull: Alright and that, of course, turns us at this point, we’ll wind up because it’s a good turning point in terms of how we will talk about the business side of things and let’s start focusing on some of the investment side that the – what people are going to expect you to be doing with the investments and what you’re expected to do on that front, depending on the estate itself. So I think that’s a good spot to wind up this podcast.
Suzana Popovic-Montag: Okay, and just another reminder to people who’d like to call in and provide us with their comments, to feel free to call us at 206-457-1985.
Ian Hull: And, of course, go to our webpage at hullandhull.com and work your way into it. Feel free to e-mail us at hullandhull@gmail.com and watch our blog. Thanks very much.
Suzana Popovic-Montag: Thanks to you, Ian.
You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.The podcast you have been listening to has been provided as an information service.It is a summary of current legal issues in estates and estate planning.It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.
Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.
Suzana Popovic-Montag:Hi, and welcome to Hull on Estate and Succession Planning.You’re listening to Episode #98 of our podcast on Tuesday, February 5th, 2008.
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by
Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.Here are Ian and Suzana.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian, how are you today?
Ian Hull: I’m just great.
Suzana Popovic-Montag: That’s good.
Ian Hull: So just as a reminder, we have set up easy to get access to our daily podcasts and blogs. Go to hullandhull.com for that, but we’ve also set up a call-in line.
Suzana Popovic-Montag: And what we’re hoping to do is to hear from you there at area code 206-457-1985.
Ian Hull: So we encourage it and hopefully we’ll get some people interacting in this over the weeks to come.
Now we’ve been working through and looking at questions of really, estate administration techniques that we can help assist our lawyers and assist ourselves in the process of trying to work through an estate administration. And of our checklist or things to do in getting things organized before we pass away, one of the things that I keep harping on is trying to keep a running total of your assets and so on. But let’s spend some time today talking about particulars of what we want to have on that list.
Suzana Popovic-Montag: One of the things that I certainly encourage people to keep a list of, Ian, is their insurance policies. Things like insurance on their vehicles, on their home, on their personal belongings, so that these things are put into one place or are easily accessible or at least, you know, you have an opportunity to know that you’ve found everything that you’re actually looking for.
Ian Hull: And that… can be very important. One of the things that people forget is that just because you paid the premium doesn’t mean that the insurance company is going to pay the claim. And you need the policy. This is particularly important with life insurance as well. It’s best to have the policies located in one single spot or easily found in some way, shape or form so that it takes a lot of the burden off your executor when the time comes that they have to move quickly. For example, if you’ve got a car and you don’t know whether or not it’s insured, that’s going to be an urgent issue that you have to deal with.
Suzana Popovic-Montag: And certainly when you’ve got real estate, there are situations where the death of the owner of the insurance policy is going to affect whether or not that insurance company will continue to insure that asset. And so you want to make sure that if there is the requirement for some vacancy permit or something like that, that the insurance company is notified of the change in circumstances so that the insurance does continue to be effective.
Ian Hull: One of the questions that people often ask is, “What do we do with the house now that it is unoccupied if the person has passed away?” And it’s a case-by-case answer and it depends on almost every situation. It depends on the insurance company itself but typically what an insurance company will say is, ‘we don’t want to continue to insure a house that is vacant except if you’ – and then this is where it is case-by-case – ‘except if it is properly being monitored.’ And they’ll often say, ‘we want to make sure there’s first of all there’s maybe a security system in place.’ Another idea that often they say is, is that you guarantee that you’ll check it every day. That way you can preserve the property in the interim while you’re going to get it ready for sale or distribution to the beneficiary but at the same time keep it well insured.
Suzana Popovic-Montag: And just in terms of being well insured, I think that just sort of tweaks me to the fact that if the personalty, or the things that are within the house, that are valuable had otherwise been included in the value of the home for the purposes of insurance and now those things are no longer there, then you want to make sure that what you do have in place is adequate insurance for the house.
Ian Hull: Okay. So let’s talk just more about this real estate and how…we’ve talked about the insurance aspect…but how we deal with real estate generally.
Suzana Popovic-Montag: And what I think of in these situations when we’re dealing with a piece of property is the real estate taxes that are either outstanding up until the date of death or will have to be paid on a go forward basis.
Ian Hull: And then, as you say, the contents of the house and the valuables and so on, you’ll want to make sure they’re well insured. But you also need to take control and custody over them in some way, shape or form. And so what I often tell my clients is that…go through the house and bring a video camera and video everything in the house - every room, every piece of furniture - so that at the other end of the day if someone says, “Geez, you know I used to have a beautiful chest of drawers in that room and it’s gone,” you have an answer to say, “No it isn’t, it never was there because here’s the video that I took the day after I got the job of being anexecutor.” It’s a trick that you can get trapped and you can get caught into and a nice answer to it is if you have the evidence in response to it.
Suzana Popovic-Montag: And that’s so much easier than the suggestion to go and make a handwritten list, for instance, and helps with the identification too, so I think that’s a fantastic suggestion.
Ian Hull: One of the things that you really struggle with, I think, in the whole management of the real estate is when they’re in a commercial or semi-commercial, and I call that semi-commercial as a residential landlord situation. Or commercial landlord situation. What early action steps need to be taken?
Suzana Popovic-Montag: Well, in those situations, Ian, I think it’s always recommendable to look for the lease, to review its terms and to see about contacting the tenants so that in terms of going forward and collecting rent and making any re-direction of payments that are necessary, that you can do that by having this documentation firstly in hand and secondly understand what it provides for.
Ian Hull: And as with any piece of real estate, you want to know what encumbrances are on the property. For example, a mortgage, sometimes the mortgage is mortgage insured. But if it’s not mortgage insured, you want to look at the terms because some financial institutions might be prepared to re-negotiate the mortgage because the person’s passed away. You might be able to get more favorable terms and so forth. Now that’s all good news, but it’s also probably expected of you as an executor to look into that level of business expertise.
Suzana Popovic-Montag: And when we started this series of podcasts, Ian, we talked about, you know, executors doing their homework. But this is another illustration of those kinds of things that we’re hoping that people will do during their lifetime in terms of, you know, getting insurance documentation together, getting information about real estate together and here now rental property or leases or mortgages, that kind of stuff. If it’s all together, it certainly will help your executor at the end of the day.
Ian Hull: So Suzana, what happens if the deceased was renting a property, say renting a condominium or an apartment building unit?
Suzana Popovic-Montag: Well, one of the first things that you’d want to do is to contact the landlord and advise them of the fact that the tenant has now passed away and see how you would go about either cancelling the lease and providing vacant premises or otherwise dealing with the interim period until decisions are made as to how to go on.
Ian Hull: And I guess in the right circumstance, you might even want to look at subletting if you can’t get out of the lease arrangements that they were in.
Suzana Popovic-Montag: That’s probably a really good suggestion.
Ian Hull: Okay. This is a bit of a loaded question and we’ll spend more time in future podcasts on this as well, but what do you do if you have an ongoing business?
Suzana Popovic-Montag: Well that really is, as you say, a loaded gun because that’s not something that you can just quickly cancel and put aside and deal with on a rainy day. You actually have to arrange for the continuity and I’d say competent management of the business in the meantime until either you distribute it pursuant to the terms of the Will or you continue to manage it in accordance with the terms of the Will
Ian Hull: And without getting into too much detail in this podcast, you’re right, I mean it’s such a loaded question. But, you know, in the course of the continuity and creating a competent management team, you probably want to meet with them and create some sort of short term plan of action as to how you’re going to operate the business.
Suzana Popovic-Montag: That’s for sure. And you may also want to review if there’s any buy/sell agreements that are in place, shareholder’s agreements or those kinds of corporate documentation that may provide for how to deal with the situation in the meantime.
Ian Hull: Okay. We are now inching toward that fateful moment of getting probate and we’re not quite there. But one of the first steps that we want to make sure we’ve got under control is opening an estate bank account. Coincidentally I’m on my way after this podcast to go close a bank account which is full circle on an estate administration. But in this case, we want to be mindful of what’s going to be necessary and:
Is opening a bank account necessary? and
What are some of the steps we’re going to have to take in that regard?
Now what I often will do is I will send a letter to the bank just advising them, because I don’t have probate. They’ll want probate before they’ll actually open the bank account typically, but I don’t have probate in hand. But I’ll write them and say, “Look, I’m the executor, here’s a notarial copy of the Will. I look forward to seeing you, my face is now on this file, not the deceased’s.” And it softens the bank up and it gets it ready to sort of deal with an account that is not normal anymore. or is not being dealt with by someone who’s alive. And I send that same to the financial institutions as well, sort of priming everybody to know that I’m coming down the pipe. I don’t have probate. I’m applying for probate, or if I’m not, in the right circumstances. But typically you’re going to be applying for probate if you’re going to need to get money out of financial institutions. So I’ll just make it clear that I’m applying for probate and you can expect to hear from me shortly. This letter actually does take the account out of the mainstream of the bank operations and flags it in some meaningful way so that they’re going to be ready for you when you get your probate application. It doesn’t take much time and it’s a helpful step
Suzana Popovic-Montag: I think it also helps, Ian, in the event that the account is somehow held jointly with another to put the bank on notice of the fact that one of the joint account owners is no longer alive and there may be consequences that arise from that, if it’s not clearly a, you know, right of survivorship kind of situation.
Ian Hull: Okay. So finally, just because again I’m coincidentally on my way to go do this as well, is the locating and cleaning out the safety deposit box. An important step and again one that you want to document very carefully. I will often just take notes of what I have taken out of the box or make an inventory as soon as I’ve emptied the box, back at the office, of everything that I’ve taken out. Sometimes I’ll even video that moment in time. That’s not always the case. But you want to make sure that you keep the custody of the documents and whatever is in the safety deposit box under tight reign and control.
Suzana Popovic-Montag: Well I think that brings us to the end of this week’s discussion. Thanks very much to all of our listeners for joining us and thank you for joining me today, Ian.
Ian Hull: Thanks very much Suzana. And again, don’t forget to come to our webpage at hullandhull.com and you can link into our daily blog.
Suzana Popovic-Montag: And we hope to have a little bit of interaction with the comments from the people who are listening and any comments, questions they might have we’d look forward to receiving them.
Ian Hull: So for that number again 206-457-1985. Thanks so much.
Suzana Popovic-Montag: Thank you.
You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.The podcast you have been listening to has been provided as an information service.It is a summary of current legal issues in estates and estate planning.It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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