The Super Will

Red S

When one dies, one leaves behind two kinds of property: Probate Property, and Non-Probate Property. The SuperWill Statute can blur this distinction and the only kryptonite which can weaken the will are contained in exceptions buried deep in the Code that spawned this hero to some, foe to others.

Probate property is that which is controlled by the will of our departed. The most common example is the house he lived in. Non-probate property is that which, by contract, avoids the probate process and goes directly to those who are designated as beneficiaries payable on death. The most common example is a bank account with a payable on death or joint tenancy with right of survivorship.

But lo- what if we make that contract, perhaps even in a trust with your spouse, then later make a will that says something different about the same property? What if you don’t even know the SuperWill statute exists? Worse, what if you decide to rely on it but are not aware of the limitations on its use?

Lying underneath the surface of many wills is a reference to re-directing property that was non-probate, and suddenly becomes probate, often without a lot of forethought. A recent Supreme Court decision  in our state strongly suggests one can undo the intent of a trust one may have made with a predeceased spouse just by writing a new will. After reading the decision I can say this is not going to happen every time.

Like the man of steel, the Superwill statute is not something to mess with unless you have your own member of the Justice League evaluate what you are doing. The estate planning forms you may get from a paid or unpaid source are not members of the Justice League. After reading the aforementioned case, I am not sure even the new licensed legal technicians Washington now allows have membership.

Like Superman the SuperWill can change everything, or not, and knowing what you are doing means everything.

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The Power of Attorney – A Banks Sum of All Fears

Banks live in fear. Things have not gone well for them in recent years, and so even the slightest amount of risk leads them to declare all sorts of reasons why they cannot provide service the way their customers need them to when they are unable to bank for themselves. No where is this more pronounced than in their response to a durable power of attorney executed by a depositor, a principal, in favor of the attorney in fact, or agent.

The idea behind a “durable” power of attorney is that your elect to hand to someone the authority to manage your affairs should you become incapacitated, but before you die, which is when your Last Will and Testament becomes effective. This can avoid an expensive guardianship.

Here is a sample of the gymnastic reasons given not to honor these documents:

1) This document is only a copy. My client was in a coma. I presented my copy to the bank one day to allow my clients brother to get to the money in the bank so that same bank could have its mortgage paid. The young man in the lobby looked at the notary crimp and saw it wasnt raised, so rejected it. I drew my notary crimp out of my briefcase, crimped my signature on the same copy, and handed it back to him. We were allowed access to the money. Apparently that made it an original.

2) The references are to bank accounts generally, not our bank. My remedy is to start incorporating the names of the depository institutions into each power of attorney I draft. Older forms do not take this step, which has now become part of the practice.

3) Our bank is referenced, but not the bank account number. So you can put the account numbers down, but this is risky. What if they fall into the wrong hands? Generally we have started putting at least the last 4 digits down, or all of them if the client approves.

4) If you take money out of the account to pay your principal’s bills, that is an estate planning transfer because all this money is designated to go to someone else when the account holder, your principal dies. You are not authorized by this document to make estate planning transfers. While I have begun drafting around this claim, this dodge underscores the duplicitous absurdity of banks claims in recent years. Does this mean that every time a depositor writes a check he is mindful of the impact on his estate?

5) We honor durable powers of attorney, but only the one we drafted, and your principal hasn’t signed this yet. Please have him sign our form then we will allow you access to his money. Right. The principal cannot sign checks competently now, that is why the agent is there, so he cannot possibly sign a new power of attorney the institution drafted. It’s madness, isn’t it?

In Washington we have a statue that allows us to threaten to sue the bank, and sue and recover attorney fees if they fail to honor these documents in good faith. I think they probably have a right to demand the original, or at least some proof the circumstances suggest the copy is a true and correct version of the original but the rest deserve a stern letter from the lawyer.

The best defense against this nonsense is to develop a relationship with the people in the bank lobby between yourself as principal and your agent well before that day you are not able to go to the bank yourself.  Develop trust in a non-threatening environment, put in time reducing the banks fear, and normally this should pave the way to avoid guardianship and a peaceful disposition of your affairs in later life.

Things Happen Along the Way

In 1519 Ferdinand Magellan departed Spain with 25o officers and crew in five ships. He didnt tell the crew, but the objective was to sail around the world. In 1522 only one of the original ships limped into the port of Seville with 18 of the original Europeans on board along with 3 Indonesians they picked up along the way.

What happened? Stuff. They ran into cannibals on the southern tip of South America, the Pacific was a lot wider than they had expected and they ran short of food, and Magellan himself was killed in the Philipines.

What has this got to do with estate planning? Would you leave on a perilous voyage without a will?  Before the author of the account of the First Voyage Around the World left, he executed a will. That seems prudent, but there is no record if the remaining 249 Spaniards, Portuguese and Italians on board did the same.

This is pretty much what I encounter each day in my practice; a patch work of estate planning executed in bank lobbies, stock brokerage offices and sometimes a lawyer’s office. Why is such a mess?

Conditions change. Emotions wax and wane. People have ideas about what the people they leave behind “need” without considering what really happens when application of Dead Man’s Statute prohibitions on hearsay are made, or the impact of an inheritance on a disabled person without a preexisting Special Needs Trust really means.

We are on a perilous voyage. All kinds of decisions made in the wake of your ship may come back to haunt you. Think about it.

Empty Grandmas Accounts Before She Dies to Avoid Probate?

I wrote this post because I saw this question as a top search on my dashboard.

The answer is no. There are several problems with this approach.

1) Crime. That is what this is, Crime. Go to Jail, Do not pass GO, do not collect any $200. You will be characterized as “financial exploiter” at least if you do this in the state named after the first President, and that means you fall under the “slayer statute” and as we all know, slayers do not inherit. Or at least I think we all know this.

2) Breach of Fiduciary duty. There I go again with all that legal stuff. The trouble is that “legal stuff” can get you in trouble, if not in jail, at least sued. Lets say grandma put you on the account “just in case”. It is still not your money. While the bank is authorized to allow you to remove it, the disposition of those funds really have to be for grandma’s benefit and not those who are left here on earth when she passes. She put you on the account because she trusted you, and when we start hearing the word “trust” all kinds of duties attach.

3) Joint Tennant with Right of Survivorship. Lets say grandma opened this account with you and personally, not the bank employee, checked the box that says this or shortened to JTWROS. That is a will substitute that means when she dies the money is yours without probate. Note the timing. It will not be a defense to say that you will inherit this money some day anyway through this non-probate transfer. What if she needs the money before then?

I suspect there are more reasons not to do this but the post is getting too long. You may have good reasons to avoid probate, but this approach is too dangerous. In layman’s terms, don’t take things that don’t belong to you. You don’t have to go to law school to know this. I think we all learned this in kindergarten.

State Sponsered Chaos at Death

Believe it and you know you can, we can count on the State to have the final say as to who gets your stuff when we die if we don’t timely make that decision ourselves.

“Timely” means after you are age 18 and before you die.

“Make that decision yourself” means making a will or having will substitutes in place.

In Washington State when you die without a will you are considered “intestate” and the statute is clear about what happens. If you are married it means much if not all of what you have goes to your spouse. Any property you brought to the marriage or inherited is split between your spouse and your kids. If you don’t have a spouse the kids get it, without much control. If you live somewhere else it might be different, but the results are the same- you have no say.

Think about it. Do you really want your 19-year-old son to gain control over enough cash to ruin his life? This happens more than we would like. Even so, a will substitute is not necessarily that great a means around the intestacy statute that if applied might slow him down a bit.

Making your 19-year-old son a payable on death beneficiary of a savings account means he gets the money sooner, and can lead to all kinds of tasteless events. I literally have a file in my office where the young man showed up for the funeral in the new car he bought after his father passed. “Look what Dad bought me!” he told the shocked mourners.

One thing you cannot pass at death is good manners, even with a will, but you might curb the excesses of sudden wealth.

Living and Dying in Casual Wear

We have become too casual in America. We no longer dress for dinner, church, or work. Open collar is the look. Someone decided we all wear jeans on Fridays at the office, (everyone except me that is). OK fine, call it freedom or liberty or whatever you like but there is some harsh legal environments we really can’t be causal about.

You may find yourself in a bank, opening a checking and savings account. You are wearing Dockers and a shirt from Lands End.  You may find yourself in the personnel office of your new employer filling out forms about all kinds of things, including your 401(k) dressed in the style of the corporation, which in Seattle means you shop at REI. You may find yourself in your living room, with a life insurance sales man, and a lot of paper, and a lot of distractions and might even be in your pajamas. You may say to yourself, well, what do these have in common?

Death. You are probably making dispositions of what happens to the money you are handling in each situation. Not so casual, is it?

And Death changes things. Conduct that one would never believe possible from friends and neighbors, people you have trusted for years suddenly become crazed with greed when a windfall appears available. Naming your best friend as the beneficiary of any of these instruments tests him “to do the right thing”. He might fail the test. He might decide perhaps you really intended to disinherit your kids. There is little your lawyer can do about it.

Many of us in this practice draft in “superwill” or “blockbuster” terms into the will to fix all these issues with the will, clearly designating where property is to go if you have casually checked some wrong box in scenarios as listed above, but they can’t fix all of them, depending on the State’s statute on the topic. Generally these  super terms in the will won’t fix your causal approach to death if you open that account, are hired at a place that tolerates the REI look or have a visit from the life insurance salesman after the date you have executed your will.

Life and Death. It is time to get serious when you think about both. Dress for the event.

How Do I Avoid Probate?

I hear this question daily in my practice. Here are some answers.

1) Avoid Death. This is more of a medical than legal answer, but as far as I know no one has been able to do this yet.

2) Die Penniless. Some really famous and well regarded people have died penniless, thereby avoiding probate as there is nothing to distribute. Consider this short list: Jesus Christ, Mahatma Gandhi and Pope John Paul II to name a few. Spend everything and gain fame. Not a bad choice. Or you can give it all away, but then what do you live on while you are waiting to die? Just to avoid probate? Maybe not such a great choice.

3) Will Substitutes. This is actual legal solution. These will substitutes take several forms. Here is a non-exhaustive list:

A) Joint tenancy With Right of Survivorship. This is a favorite box that is checked on bank records not by the depositor but by the bank clerk because, they testify in the estate litigation later, “We always do it that way”. It is indeed remarkable how much law is practiced by the unlicensed in bank lobbies across America.

What this designation on the bank record does is make the money in the account instantly the property of anyone else on the account when one of them dies. What this means is the niece who was trusted to pay grandma’s bills suddenly has a windfall when grandma dies and creates a family fight that will last a generation. Moral of the Story: If you are going to open a bank account with anyone you are making an estate planning decision.  Ask to see the card before you sign where they indicate. It is possible to name people as joint tenants without right of survivorship, or just give them signatory authority if you do not want them taking at death. But then you haven’t avoided probate, because the probate is how we move the money to the people you want to receive the money at death.

B) Revocable Living Trust. The idea behind this approach is the person contemplating death transfers everything he or she owns to a trust that is controlled by the person transferring to it. The house is titled under the trust as is the car, and anything else that needs a name attached to it. The trust then transfers assets to the residual beneficiaries when the person making the trust dies, and no messy probate need be commenced. At least that is the idea.

Revocable Living Trust is something Susie Orman has told America via television to do to avoid probate. Susie doesn’t have a law degree or a license to practice law, but she is on television so apparently we are to believe her. She is in California as well, and based on my ancillary contact with the probates of California I this is probably a good choice.

The trouble is I have yet to see a fully funded trust after the persons have died that formed it. It seems there is always something left out, not transferred to the trust during life, and the only option is filing the probate. Additionally not everyone in Washington State caught Susie Orman’s legal advice on television. As such, showing up at the bank and declaring yourself the Trustee of your parents Revocable Living Trust draws a blank stare, and a standard response: Go file a probate and bring us authority from the Court that you really get your parents money.

C) Contracts. This is related to the first two, but can include a life insurance policy. It could also reference a transfer of land at death due to the tenancy in land being only a life estate, with remaindermen named in the recorded deed. Wow, that sounds hard. It doesn’t really dispose of all the property either, only the land.

So, to sum up an answer to the question “How do I avoid probate?” the answer for most of humanity is to buy into a lot of gimmicks that are usually filed under “Mistakes a lawyer will fix later by filing a probate”.