Executors Need Answers to These Questions

Executors are eager to get off to a good start. They dive into estates. However, they need to test the water before jumping in head first. They can avoid grief with proper legal advice. I am an estate lawyer and start by asking executors these ten questions. My advice always depends on the answers I receive.

1. Is there a possible will contest?

Can the will be contested by a disgruntled beneficiary or relative? If the answer is yes, a court can stop you from acting as executor. You then have no legal authority to act if the will is contested.

Lawyers can advise executors if wills meet the formal legal requirements. If they do not satisfy these tests a will is not valid.

Even a will that’s missing a few words can create problems.

Recently a will ended up in court. Chuck, the will maker, gave away cash gifts of $5,000 to each grandchild. But Chuck forgot to state who would get the balance of the estate. Because the will failed to give away the estate residue a court case was started.

These problems can lead to a day in court before a judge. Possible will challenges affect how executors handle their estate work.

Read Bad Legal Advice Costs Executors Plenty

2. Was there a divorce or marriage?

A divorce or marriage can cancel or change certain will terms.

You must know if a marriage or divorce occurred after the will was signed. This can cause an executor to play detective searching for clues. Where is the divorce decree? Who was the divorce lawyer? Was there a court order for support?

3. Are there written agreements affecting the will?

These legal agreements can conflict or change the terms of the will. It is important to review any legal contract including:

• separation agreements,
• prenuptial, cohabitation or domestic contracts
• shareholder or business buy /sell agreements

Wills are often out of date. They may not reflect such agreements made after the will was signed. These agreements can change a person’s legal rights and obligations.

4. Are there other spouses?

Spouses or dependents receiving support have rights to trump a will. They can sue for more than what is in the will. Today, people can have several spouses.

Blended families are common. People cohabit and do not divorce. They can be separated from a legal spouse and also live with a common law partner.

If spouses are not provided for they can sue the estate. They can make claims to property and for support. These claims can override what is in the will.

5. Are all beneficiaries named in the will still alive?

Beneficiaries who were to receive a gift may have passed away. What happens then? Who gets the gift under the will?

Executors will need legal advice to answer these questions. This advice depends on local laws and the wording in the will.

6. Are there alterations on the original will?

Say someone scratched out the words “Janet Smith” on the will. They changed her name to “Janet Jones.” This change may affect the validity of the will and who receives the gift.

7. Did anyone already receive their gifts under the will?

What if Uncle Bob gave Ida a cheque for $20,000 in the hospital before he died? Was this the $20,000 Ida was supposed to get under Bob’s will?

Should you, as executor, give Ida another $20,000? How do you make sure you do not over pay Ida?

8. Were you given conflicting instructions?

Terry told you what he wanted you to do for his family. Terry’s will gave you different instructions. You were told to give all the jewellery to a favourite niece. However, the will does not specifically mention the jewellery or the niece. You can’t decide to do without legal advice.

9. Are any assets no longer in existence?

Uncle Bob also gave Ida his piano. However, the piano was sold with the uncle’s house. What happens when an item has been sold or no longer exists? The piano could have been given away before the will was read.

Does Ida have grounds to complain? Does the executor owe her a new piano?

10. Who owns any jointly owned assets?

What do you do with joint bank accounts or jointly owned property? Joint bank accounts are a nightmare. In many estate cases executors end up suing the other joint owner.

Things are not often as simple as they first appear. Executors may need to claim the property for the estate.

Summary

Executors need lawyers to answer these ten questions. Use an experienced estate lawyer before you make an expensive mistake.

Not all lawyers have estate experience. They may not understand why these questions matter

Executors may not realize what can go wrong. They need answers to such questions to avoid problems. Failing to get answers can derail an estate administration and put executors at risk.

Edward Olkovich (BA, LLB, TEP, and C.S.) is an Ontario lawyer, nationally recognized author and estate expert. He is a Toronto-based Certified Specialist in Estates and Trusts Law. Ed’s law firm website is MrWills.com © 2014

Read Bad Legal Advice Costs Executors Plenty

The Scariest RRSP Story

Will you put money into your RSP before the deadline? Are you going to rush over to the bank or your advisor to do that? Then I’ll ask you to remember Jack the pilot’s story as you contribute to your RSP. It will throw you a new curveball and your financial future may not be the same.

Jack was a pilot and had a sizable RSP account. He and his wife Helen were going through a separation. Jack wanted to keep his portfolio intact. He decided to let Helen have their home, and he would keep the investments. Jack signed a separation agreement, and a divorce proceeded uncontested.

Jack later remarried and had several children with his second wife. Jack’s second wife predeceased him and Jack revised his will. He wanted everything to go to his children. Unfortunately, Jack died without revising his designated beneficiary of his RSP.

Jack had invested over $300,000 in his RSP. The tricky part was that it was still designated to his first wife, Helen. Here is the trouble this caused his estate.

Jack left the RSP to his first wife

Helen received the full $300,000 from Jack’s RSP. Unfortunately, this generated a tax liability to his estate of approximately $150,000 for the RSP.

Well, I know you’re asking: isn’t there a tax-free rollover of a RSP to a qualifying spouse? Does this not give Jack a tax deferral if he leaves a RSP to a qualifying spouse?

Yes, but the problem was that Helen was no longer a qualifying spouse. She was Jack’s first wife. Therefore, there was no tax deferral or rollover possible for Jack’s estate.

The worse news is that Jack’s children paid the taxes of $150,000 from his estate. That tax bill left very little for Jack’s children whom he intended to benefit.

The scary part

All of this could have been avoided. All Jack had to do was check the designated beneficiary of his registered plans. Whenever there is a separation, death or divorce you need to revise your designated beneficiaries.

Could Jack have made a new designation in a will? Possibly. But to be a valid designation it is necessary for Jack to make reference to the institution and the RSP account number.

When banks merge or branches close, these designated particulars are changed or are lost. When a bank branch closes, oftentimes paper or electronic records will not always match Jack’s intended beneficiary.

Who is responsible for this RSP mistake?

Only Jack has the right to obtain this information. He must keep it up to date to reflect his estate plan. It is not enough for Jack to make a will. His will must reflect how he owns or has designated his property.

As a lawyer, I do not include any designations for registered plans in any wills. I do this so my clients can cheaply and easily change their designated beneficiary. They do not have to pay a lawyer to change their will. That is the cost benefit of controlling your designated beneficiaries.

The scary part is if you fail to keep the designated beneficiaries up to date.

Then your loved ones may end up with a horror story.

Estate Planning Steps to Take

1. Remember Jack the pilot as you contribute to your RSP.

2. Ensure your RSP holder confirms the name of your designated beneficiary in writing.

3. Make sure your designated assets match your beneficiaries under your will.

About Edward Olkovich

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of Executor Kung Fu. Visit his website, mrwills.com, for more free valuable information.

© Edward Olkovich 2013

 

 

How to Prepare a Proper Will Quickly: Key #3

Are you, like Simon, travelling without the protection of a will? Simon had no clue how to divide up his estate. He was going on a trip to Dallas. He wanted to make a will before he left. Here are some will tips to help you and Simon.

Simon said, “I want to leave $25,000 to Billy and $25,000 to Sally. Will I have enough money in my estate to make my promises?”

Let me share this secret with you about what Simon should do.

No one knows for sure exactly what their estate will be worth. You should think of dividing your estate in terms of percentages or, better still, shares. This is a lot easier than figuring out “how much will I have left for each person?”

Leave 5% or, even better, five shares for Billy and five shares for Sally.

When you die without a will, the government distributes your estate.

If you do not have a will, you have no say in who gets what and who is in charge of your affairs.

Want to know what you must do to make a will?

Things You Must Decide

• Who will be in charge of your estate (executor).

• Who gets what (beneficiaries).

• Who your executor and beneficiaries will be in case the ones you name are not around (backups).

 Technically, there is a fourth thing your will should do. If you have minor children, you need to name their custodians or guardians.

Lawyers Can Answer Questions

Your will is your most important estate planning tool. Don’t underestimate the legal skills required to prepare this document. It’s a job for professionals, not amateurs.

Wills protect assets from costly court cases and your loved ones from uncertainty and hardship.

Do-it-yourself will kits are not a good way to protect your family.

They may seem like a good idea at the time. But most homemade wills have flaws that people cannot see.

Even if mistakes do not make the will invalid, they usually cost the estate more in legal fees.

The Trick with Wills Is to Have One

People forget that wills are legal documents.

You may not fully understand the law when you make a will. You still must comply with all the formal legal requirements.

Families go to court to interpret, challenge and contest wills every day. Invest in a proper, lawyer-prepared will to avoid mistakes that could drive loved ones crazy with a court case.

You don’t have to be afraid of making a will. Learn more tips and tricks in About Wills: You Need to Review These Essential Tips.

Next let’s talk about how to find the right executor to handle your estate.

See my related blog posts:

Successful Estate Planning Key #1

Estate Planning Key #2 Major Tax Traps

Who Inherits Your Money?

About Ed

Edward Olkovich (BA, LLB, TEP, C.S.) is a nationally recognized author and estate expert. He is a Toronto estate lawyer and Certified Specialist in Estates and Trusts. Edward has practiced law since 1978 and is the author of seven books. Visit his website, mrwills.com, for more free valuable information.

© Edward Olkovich 2012