My nephew emailed the other day to tell me about an acquaintance who has not only learned that her sister has pilfered their mother's estate, but that the chances are she won't be able to afford the legal costs to get the probate court to do anything about it.
Think about that. Here's a mother who retained an attorney to help her give specific directions to her survivors as to how she wanted her estate handled. One of the beneficiaries chose not to honor those directions, and the legal fees to force her to do it are beyond the reach of the other beneficiary.
Want to know what's worse? I wasn't the least bit surprised, even though I was deeply sympathetic.
You see, this happens with great frequency. And it does because the one who wears the black hat usually has power of attorney for their parent and is also the executor of their estate or the trustee of their living trust. And to make matters worse, it isn't difficult to find a notary who will attest a forged signature.
Probate courts -- at least those in Texas -- just don't seem to be able to enforce the wills of those they are set up to serve. The district attorneys and the secretary of state do little, if anything, when they find out a notary is attesting in violation of his oath and the law.
So all of this gives that person a tremendous advantage. First, with the power of attorney, they can cause business decisions and transactions to be made without the knowledge or approval of the Trustor (also known as the "Grantor") while the Trustor is alive. And secondly, if anyone contests those decisions other than the Trustor, the person with the power of attorney or who is the trustee has the full value of the trust (estate) behind him to fight off a law suit. The trustee is not using his own money. What has he to lose?
The person contesting the trustee's decision has to use his own assets to pay his attorney; and further, in many wills and trusts a provision was added that says that if a beneficiary contests the decisions of the trustee or executor and the court rules against the contestor, the contestor forfeits his beneficial interest.
Parenthetically, what moron dreamed up the idea that this was a good provision? Why do others follow the moron?
I have come to some conclusions I would like to share with you:
- Notify in writing every beneficiary named in your will or trust that they are, in fact, beneficiaries and what they may expect to get when you pass away. Have your attorney write the letters.
- If you are using a trust rather than a will, file a Memorandum of Trust within the public records of your county; that way, the trustee can't hide the fact that you've named, say your church, as a beneficiary.
- Require that your accounts be paid and deposits made by a professional public accounting service, not one of your children or a friend. The service should also file your tax returns. All checks payable to you or your trust should be sent by the payor to the accountant, not your trustee or the person with your power of attorney.
- Have your estate administered by a bank trust department, regardless the size of your estate's corpus. They are bonded against losses because of their wrong doing. Ironically, in most cases, wills naming individuals as administrators specifically say they are not required to be bonded.
- Do not put anyone on your checking account, stock accounts, real estate deeds, as joint tenants with rights of survivorship for the purposes of avoiding probate. Your attorney and CPA or financial planner will explain the reasons why this is so very dangerous.
If you have more than one beneficiary, this is especially important.
And now the disclaimer. I am not an attorney. Check my opinions with your attorney or a trust officer at your bank. This is important stuff. You've only got one chance to get it right.
AMENDMENT TO THE ORIGINAL POST. Perhaps I should explain my understanding of how the Living Trust/Testamentary Trust normally works. It starts out being what's called a Living Trust because it is established and funded during the lifetime of the Grantor.
All of the Grantor's assets are transferred to that trust. Its side kick is a document called a Pour Over Will. The Pour Over Will's purpose is to let the "world" know that the Grantor has decided to set-up the Living Trust, and that upon the Grantor's death, any and all property that was inadvertently not previously transferred to the Living Trust, now is.
The Pour Over Will also often times serves to give certain items to beneficiaries without those items actually being transferred to the Living Trust. Perhaps, a car. Perhaps the Pour Over Will will say that the Grantor's 2007 Lincoln will go to her grandson at the time of her death.
Now as soon as the grantor passes away, the Living Trust will have a provision that changes it from a Living Trust to a Testamentary Trust. It's actually the same instrument. That's when the Trustee is noticed it's time to pay the final bills and distribute the estate in accordance with the instructions written in the Testamentary Trust.
BILL CHERRY, REALTORS
DALLAS
Our 44th Year Selling America!
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800 314-7110
Copyright 2008 - William S. Cherry
Permission is granted to quote or copy the contents as long as proper credit is given of its authorship.
Bill,
Verry good advice!
People nether know or understand the burdens put upon a trustee. Looting can destroy the remaining family.
Short of dieing shortly after your money runs out the best thing you can do is leave definite instructions that everyone knows and have them professionally executed.
The only thing that parents need to leave their family is found memories! Tell your Parents to enjoy their money, they earned it!
Bill
Hi Bill,
Excellent advice. When family members are on the honor system as executors, the only thing that binds them is their own honor.
Mr. Bill and Brian
You're both such smart dudes! Thanks for adding your thoughts.
Bill
My mom is in the middle of a big mess with my aunt's estate in Oregon.
Family, friends and neighbors have taken things from the estate. The 2 attorneys have taken so much money and not documented. They were taken to court last week by my mom and her siblings and the judge let those 2 attorneys know that there will be criminal charges brought against them.
It is a mess. What we have learned is that the legal system in Oregon does not want to get invloved with wills and estates.
Patty, thanks for adding your mom's experience. For the most part, probate courts are totally impotent, either by design or because the judges don't want to enforce the laws. I'm not sure which.
My friend, the financial adviser to the retired, W. Neil Gallagher, Ph.D., says that the word "trustee" means just that. You shouldn't appoint someone to do stuff as a trustee whom you can't be sure you can trust.
My observations have as much to do with the legal documents, how they are drawn and how they are positioned as anything.
First, the trustee or executor should be required to post a bond, and that bond paid for by the estate. If the trustee doesn't qualify for a bond, then the court should be required to appoint a professional trustee, i.e., commercial bank, etc.
Second, the moment the trustee steps in in any capacity, the documents should require that the trust/estate's business be audited by a CPA every year to assure that the transactions have followed the instructions of the will/trust.
Third, the will/trust should provide that if a beneficiary files suit against the trustee/executor for improper performance, both sides' legal fees will be advanced from the corpus of the trust, and the whole cost charged against the loser's portion of the estate.
Finally, absolutely no one should allow that their will or trust have any provision that takes away a beneficiary's interest if he sues the estate and loses. At the most, he should only be responsible for reimbursing the legal fees of the defendant.
Those things alone go a long way in preventing improper decisions and uses of the corpus.
When it comes to legal matters, most issues come down to the attorney you choose. Choose wisely. Interview them, check references, check them out with the State Bar of Texas for grievances.
Second, choose a Trust over a Will: Wills are documents that are published on your death--so, your private, family matter becomes public record and accessible to everyone with the know-how to access it. Unlike a person, a Trust is an entity that doesn't have an expiration date. No need to probate a trust. Just make sure you choose an objective, trustworthy (for lack of a better word) trustee to manage it.
It's so sad that money changes people, especially family, but with all the emotions tied up in losing a relative, the last thing anyone wants is a knock down, drag out court battle with a brother, sister, niece, nephew, cousin etc etc.
Thanks for your comments, C.R.
If I were preparing a will or a trust today for myself, I would
1) Retain an attorney who was board certified in estates...none of these Jack of all Trades who think they know as much as anyone about this very specialized part of law. In many cases, they screw up more than they help.
2) Require him or her to provide a contract with me that they first represent my interest over and above the interest of the trust or will; that they cannot represent both.
3) Require him or her and give them the authority to represent my interest anytime those appointed or employed by the trust were suspect of doing bad things.
I have messed with settling estates in Texas that were trusts as well as probated wills. I frankly find trusts are far more likely to be mishandled, and far harder to resolve those issues. In my case, I pitched my trust in the trash and had my wishes redefined in a Will.
What do I care who knows what assets I hadn and left behind and who I left them to?
I'd rather have that than chance that the secret of my trust would allow the trustee to do with the corpus what he wanted to rather than follow my instructions.
I know of one case where the trustee/beneficiary did their best to gyp the grantor's church out of its part of the estate -- a cool million bucks. That's still up in the air and unresolved. You see, the church is afraid to use its limited assets to file suit for fear they will run out of money to fight before the case is adjudicated.
By the way, the grantor had paid her shylock attorney a cool $30,000-plus to draft her trust...a trust that ended up doing nothing it was suppose to, and an attorney who saw no reason to defend his work.
But who would expect otherwise? He had charged his client 10 times the going rate for this representation, and what he provided in return was an absolute legal can of worms.
It is absolutely CRAZY what people will do for money even to their own family. I know of a case recently where the Father passed away leaving 5 adult Children. Three of them had an attorney do a illegal deed transfer from both the parents names to just one of the adult childrens names without the fathers signature prior to his death and without his knowledge! This man was the most kindest and generous man to ever live, he probably would have willingly given it to them had they asked, however they chose to steal from their own father! The attorney used a title from a prior transfer when it was just in the Mothers name even though it was transferred to both parents names a year later. (the parents had been separated for a few years and 3 of the adult Children thought it was the Mothers due to have full decision on how the house would be divided upon her death.) Fortunately the daughter he lived with found all the paperwork and after completing a title search has proof that this was done illegaly. The attorney has been reported to the State Bar Ethics committee, will hopefully loose his right to practice law and the Fathers portion of the estate will be divided as he had wished, not how it was decided for him! I have nothing but disgust for anyone capable of doing such a horrible thing!
Thanks for educating us on this, Bill. It is sickening how greedy a conniving sibling can be even if it causes a permanent family rift. It looks like I'm not the only one who has had the happen. Very sad.
Hi Bill, Excellent advice, as usual. With your permission I would like to
" Re- post " your words of wisdom. Please let me know.
Sound advice. This is an issue we are ill-prepared to deal with when the time comes. Thanks for the post.
Thanks to each of you for your comments -- Vickie, Bill, Shirley and those of you who didn't sign your comments.
Bill asked for permission to repost this piece. Permission is, of course, granted to him and anyone else who wishes to pass it on to others. I'll promise you will be doing many people a service by doing so.
Bill
Unfortunately one person in our family did this same thing to all the other family members. What often happens though is the person who is named the trustee is often very manipulative and controlling. He can guilt the elderly relative into trusting him. Then when the end happens, he thinks no one is the wiser has to how much money there was and where it is.
How surprising that the offending party now lives estranged from his family and friends! And probably doesn't realize why.
You have given great advise. If my grandmother were still alive I'd have made sure she had done ALL of the things you suggest. No one should take it for granted that their heirs will do the right thing when it comes to money or the estate.
It's amazing what people will do for "things' that they can't take with them when they're gone!
Bill, This is excellent advice on how to handle a complex subject. I have seen trusting parents sign their homes over to their children only to find themselves in a nursing home....It's a very scary thought that you can think you'll have your wishes carried out only to have problems which don't get resolved. Makes me want to re-visit my will yet again. Thank you for the information.
Bill - Great post; sadly, sometimes it is not your enemies that you have to worry about. Thanks for sharing.
I hope many read this post and follow the advice. I once heard of a truly awful situation where the person was not even removed from the home yet and people were climbing over the person to take stuff. How sad is that? In the end it is only stuff. Why would anyone act in that manor? There is so much more to life than stuff.
Why not give it to them before you die and do a life estate on the home. Of course that would be barring the fact that your Rockerfeller or someone with that kind of money.
Great information, this is good information to pass on to clients and family. I know that money changes people, it never ceases to amaze me what "monsters" we can turn into.
I'm dealing with something like this now. It amazes me how family members EXPECT to get "their part." It also amazes me the way people act when a loved one dies. Looting is real and you better be prepared.
So many relatives take advantage of a dead person to increase their wealth.
This is some great information and it's really sad that there are unsavory people out there that would go against their "loved ones" wishes; however, I feel that at some point I will be in this situation at least once...and I am not looking forward to it one bit! Thanks for an educational / informational post.
Excellent post...something different for a change. I hate the word trustee...not very confident with it. money and greed always take over and blind the people involved.
Bill, wonderful public service today. THANKS so much for taking the time to clarify this and bring it up in the first place. We all need to be mindful on behalf of our seniors.
Bill,
This brings new light to the bumpersticker "We're spending our children's inheritance." One thing I have witnessed repeatedly in my life...
If you mistreat others there is a God in heaven who sees all and He keeps good books!
Thanks for the excellent advice!
It's so sad that family members get greedy at a time when they need to unite!!
Sending letters to all the beneficiaries is a great idea. Then they know what is coming and can't be cheated so easily.
I am going through this very thing with my sister after my mother's death.
Very upsetting. Please keep me in your prayers.
Thanks for the info Bill. I guess the big lesson is to find a trustworthy person to fill the role.
Money is the root of all evil. That's as simple and as complicated as it gets.
Bill - How sad is it that there are so many in this world who just have no morals and no values that you should even have to write this post. I would rather die filthy poor and have known I did the right thing than die rich and know I screwed people to get it!
I have seen it quite often, the executor has so much power. Very sad, not sure how they live with themselves. Goes along with our cultures attitude, they deserve it..........for whatever reason they decide on. Very sad, folks should follow the deceased plan on the distribution of their assests.
Excellent advice---isn't it sad that families have to fight over money? Personally, I find it disgusting.
Well, I think I will just not pass away. It would break my heart for my family to act as some of the folks described here. If I have to pass away, I will do as charged above, and spend my money while I am alive. That is, if this crazy real estate market turns around and I make some...
Great great article Bill, very informative. Thanks for the post!
My parents set up a living trust that has worked well for us. When my father passed away the estate passed to mom, with the exception of a small insurance policy that went 50/50 to my brother and I. Now that mom is no longer to handle her affairs I am managing the trust. Everything that I do must be approved by my brother which hasn't been an issue. Whenever I need to get additional funds from the trust for her care the broker calls my brother who okays the funds and we are done. I'm in the process of setting up a trust for my family now to make it easy for them as well. It is the best way to make sure there are no questions about what you want done and by whom.
Wow so many good coments. I enjoyed reading your post. You are a good writer. I will have to read more from you
Thanks
Don
Bill- definately a sad story but all too common. My Aunt is doing the same exact thing to my dad at this time. Are people forgetting their loved one's wishes and/or what is morally right. I have a brother and even though there is not a lot of money, etc... at hand, when it is time for my parents to leave this world....I will not be fighting with my brother over anything. If it is important for him to take any and everything....I will have what is important...my memories.
Congratulations on the feature Bill....you've deserved one for a long time!
Were you listening in on my phone call to my younger brother today? This stuff has been going on in my dysfunctional family for years....and my Father is still alive! It's all so sad!
Miss Joanie, Tina, Don and Cindy --
Thanks for chiming in although I wish none of us would have to be even considering that some have and exhibit such bad behavior.
Bill
To Each of You:
Unlike most of you, I'm not used to many people reading my posts. And I'm especially not used to many commenting.
This one hit a nerve. An amazing number read it, and about 40 commented. I'd say that, in itself, is a sign that bad things are going on in probate across America...and going on with frequency.
Perhaps reposting this piece along with the comments would be a good and productive thing. Perhaps printing and sending the piece and comments to your local probate judges would be a good thing.
But whatever the approach, this stuff has got to stop. And those courts that are not willing to charge violaters with extreme consequences need new judges.
When a person dies he's not here to make sure that his possessions are distributed the way he wants. Consequently allowing any violations is especially acerbic.