The Sands of Iwo Jima Timeshare

Sands of Iwo JimaClients come in with timeshare presented as two different legal problems:
1) Contract, as in how do I get out of this and
2) Estate planning, what happens to this when I die.

The first is usually answered by you sell it for a lot less than you paid for it.

The second depends on whether you only have a license to spend your vacation in some remote location the United States took by force, or you actually own some of that sand in fee simple absolute. More common is the license variety represented by “points”.

Shortly after I began composing this piece an estate planning client came in with the points variety. She actually uses the points. Much like any other amphibious invasion she spends considerable time planning and plotting more than a year in advance in order to maximize her usage, and not get stuck with the leftovers of places our country has seized but no one really wants, like a vacation on Iwo Jima.

Night of the Living Trust

What seemed like a good idea at one point often becomes an unwanted “person” that lives on and makes everyone miserable.  Like Zombies, trusts that have outlived their usefulness need to die, but because the residual beneficiaries may not like the idea of a trust being killed off in favor of the person who wrote it to begin with, the Trustor, the resolution of its life moves slowly and infects people with despair. It also infects them with a dislike of lawyers and the entire complex business of dying. Why cant it just be simple? Because it isn’t.

Often the lawyer wrote this thing but they had good reason to; the client came in certain this is what they wanted. Just as often and perhaps more likely they never consulted a lawyer who might have persuaded them that the effort of a living trust is too much. For example usually people forget to put everything they buy into the trust defeating a purpose of avoiding probate.

Most tragically the do it yourself Trustor may forget to make this a revocable trust, meaning the family members obtain a real interest in the property they are residual beneficiaries of when he funds the trust, even before the Trustor dies. This means they all own a piece of the living trust. The remedy is to get everyone to agree to give the property back to the man who made the mistake in the first place.

But lo, there may be a beneficiary out there not willing to let go and hence, we experience the horror of the Zombie Trust.

Be afraid, be very afraid.

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.

Dead Stick Control

In 2001 the legislature of the Evergreen State elected to extend the Rule against Perpetuities to 150 years. It had been 21. What that meant that anyone you wanted to have inherit your property had to be born within 21 years of your death. Now you can extend your dead hand well into the future. But should you?

Real Property, as we have come to understand, does not always go up in value. Neither do stocks, although the people who sell and trade them would argue with me. Do you really want to lock the trustee into holding stock for 150 years?

Will what you write out today make any sense when it is time for the trust to pay out? 150 years is a long time. Lots can change.  Stock in buggy whip company for example in 1861 would be worthless today. With 150 years to stretch out property, this means a soldier in the American Civil War dying at the First Battle of Bull Run, in July 21st 1861 could literally leave his property to a baby born on or before July 21st 2011.

What is really volatile however are social values. Consider the “Parentage” statute was until a few years ago called the “Paternity” statute, because until then maternity was a matter of fact whereas paternity was a matter of opinion. It is no longer so.  And for generations the statute came under the title of “Bastardy”.  We don’t use that term any longer, and instead society has apparently agreed to accept and pay for the results of all this free love. Can you imagine if our Civil War soldier tried to control the behavior of his descendants 150 years later?

What if that trust placed prohibitions on consumption of alcohol or tobacco as a condition of that child receiving his money? Perhaps the soldier could have prohibited the baby from owning slaves. Perhaps he could have conditioned the trust payments on choice of mate for his heir being a certain religion. Or maybe he just wanted to make a point about values that seem to be important to just about anyone living a life in America.

It is said it is still the case in the State of Louisiana when a young man declares he has chosen a bride there are three questions; Whose her Daddy? Is she Catholic? and Can she make a rue? From the perspective of a father these are good questions. They are also good questions from the perspective of a great-great-great grandfather.

You Are Born With An Estate Plan You May Not Want

Born free? Not entirely. Should you acquire any property while here on earth the State has a plan for your stuff when you cross that Great Divide if you do not timely exercise a right to control that disposition yourself by a will, trust or other designations made in writing.

Here are some quotes from Washington’s statute, RCW 11.04.015. For those of you who lack quick access to Black’s Law Dictionary, be advised the word “Intestate” ( not to be confused with ‘Interstate’ ) means dying with out a will. “Issue” means children. I have left out references to “domestic partner” because it makes the whole thing too complex and you get the idea, a substitute for “spouse”.

Also you need to know the basic rule that any property acquired during marriage is presumed to be community property, unless by gift to a spouse solely or anything he or she receives during marriage from inheritance, which is separate property. Property you bring to a marriage is separate as well.

Here we go:

The net estate of a person dying intestate, or  that portion thereof with respect to which the person shall have died intestate, shall descend subject to the provisions of RCW 11.04.250 and 11.02.070, ( each of these mean you cannot escape this earth without paying bills timely submitted )  and shall be distributed as follows:

(1) Share of surviving spouse. The surviving spouse shall receive  the following share:

(a) All of the decedent’s share of the net community estate; ( ‘net estate’ is that nasty reference to the bills ) and

(b) One-half of the net separate estate if the intestate is survived by issue; or

(c) Three-quarters of the net separate  estate if there is no surviving issue, but the intestate is survived by one or
more of his parents, or by one or more of the issue of one or more of his  parents; ( What? ) or

(d) All of the net separate estate, if  there is no surviving issue nor parent nor issue of parent.

At this point your eyes should be glossed over and you may want to read the rest later. If not, we resume with the statute:

(2) Shares of others than surviving spouse. ( That is the other half the separate property or all of it if there is no spouse, or that funny one-quarter leftover in 1(c) above ). The share of the net estate not distributable to the surviving spouse, or the entire net estate if  there is no surviving spouse, shall descend and be distributed as follows:

(a) To the issue of the intestate; if they are all in the same degree of kinship to the intestate, they shall take equally, or if of  unequal degree, then those of more remote degree ( as in one of your children predeceased you leaving you  grandchildren ) shall take  by representation.

(b) If the intestate not be survived by issue, then to the parent or parents who survive the intestate. This happens more than you would anticipate; think of young male Microsoft software engineers with a lot of stock and a really fast car.

(c) If the intestate not be survived by issue or by either parent, then to those issue of the parent or parents who survive the intestate; if they are all in the same  degree of kinship to the intestate, ( your brothers and sisters ) they shall take  equally, or, if of unequal degree, ( predeceased brothers and sisters who left children behind ) then those of more remote degree shall take  by representation.

(d) If the intestate not be survived by issue or by either parent, or by any issue of the parent or parents who survive the intestate, then to the grandparent or  grandparents who survive the intestate; if both  maternal and paternal grandparents survive the intestate,  the maternal grandparent or grandparents shall take one-half and the paternal  grandparent or grandparents shall take one-half.

(e) If the intestate not be survived  by issue or by either parent, or by any issue of the parent or parents or by any grandparent or grandparents, then to those issue of any grandparent or  grandparents who survive the intestate; taken as a group, the issue of the maternal  grandparent or grandparents shall share equally with the issue of the paternal  grandparent or grandparents, also taken as a group; within each such group, all  members share equally if they are all in the same degree of kinship to the  intestate, or, if some be of unequal degree, then those of more remote degree shall  take by representation.

Sort of Talmudic isn’t it? And there are even more mind bending statutes that everyone can avoid by executing a will. All in all dying testate is better, and cheaper. Don’t die with the estate plan the State has for you, it is an awful thing to do to the people you leave behind, except the lawyers who can easily spend a significant portion of your estate figuring out what all this means after you are gone.

Will Contests

My Daddy ( a lawyer ) used to say Judges are like a box of chocolates. You never know what you’re going to get.

But there is one thing I know you will get when you contest a will most of the time: Defeated.

Most of these cases are brought on three basis; 1 )Testamentary Capacity: for example the Dad’s mind was gone when he signed this will or 2) Undue Influence: someone taking an unusually large or unnatural gift had a position of trust with Dad or 3) Fraudulent Misrepresentation in the execution of the document: Dad signed a will when he was told it was a contract to buy a new Ford.

This is a complex area of shifting presumptions of law which start out favoring the will as written, and is peppered with problems of proof to over come that presumption ranging from excluded testimony due to the Dead Man’s Statute to just how good your medical expert is who saw Dad before he signed this will.

This trouble is compounded by the standard of proof. The contestant has to prove these things that would invalidate the will by clear cogent and convincing evidence. That is the civil equivalent of putting a man in jail, well beyond a preponderance.

Often the question is would Dad have any reason to do what the will says. If so, it is doubtful the there is much of a contest. Better off spending the attorney fees on a real box of chocolates.

Cat Seizure in Bankruptcy

One reason we revolted from Britain: Debtors prison. When you couldn’t pay your debts they put you in jail until you could. Seems really strange, doesn’t it? So, well, foreign.

So the concept that one could not be jailed for his debts and has a right to discharge debts in bankruptcy has been with us from the beginning.

And how have Americans reacted to this freedom? They exercise it regularly. Even after the “get tough” Reform Act of 2005 there is a lot a debtor gets to keep in terms of assets notwithstanding declaring bankruptcy. Check out Title 11 section 522 of the United States Code. You get to keep your retirement, 401(k) and IRA. All of it. Such a deal.

Of course various Federal Court Districts around the country have interpreted things differently here and there, sometimes as close as from the Eastern District of Washington ( a closet Red State ) to the Western District of Washington ( which makes this a Blue State in every  Presidential election ). Sometimes within the District decisions vary from Trustee to Trustee.

Once in a recent 341 meeting of creditors the Trustee was examining my client as to her statement of debts and monthly budget. He noted she was discharging veterinary bills and had pet food in her budget. “But”, he triumphantly noted, “you have not listed any pets in your list of assets! Where are your pets!?!”

“I have three cats”, my client confessed, then added “Do you want my cats?”

The Trustee relented, but I had visions of him selling pelts to pay her debts. I am not making this up.

Personal Property At Death- A Crime in Progress

The worst thing that can happen to a lawyer is to be in a fight over personal property, particularly after the owner of the property has died. The people this unfortunate testator intended to have the asset post mortem may never see their wishes followed because the lawyer with any experience at all refuses to get involved with the fight.

Personal property is best described as objects people can pick up and walk off with at any time, but right after a death the owner is not in a position to object. This is opposed to real property which is of course dirt and the structures on it, or intellectual property like stocks and bonds that are generally not laying around the house at any given moment of one’s last breath.

For some reason it doesn’t enter the mind of the purloining party that this object doesnt belong to them, and that first lesson of kindergarten still applies post mortem. Instead it seems a new rule applies that begins with the phrase “He doesnt need this any more…..”.

So lets say the disgruntled heirs who have perhaps only the residual clause of the will to support the claim (which is a perfectly valid means to pass property ), as they are the takers under that final clause. The lawyer has to first prove the deceedant actually owned the property the dispossessed heir claims to have existed. Guns, tools, lamps, a wagon wheel from the 19th century, photos, silver, 1963 Seattle Worlds Fair memorabilia, all are among the claimed “disappeared” that have crossed this lawyers desk and have gone on to require a disproportionate amount of time to the value of the assets in question. We literally have gone to the local hardware stores trying to show the deceedant actually bought the Kobalt tools he always said he was going to buy, without any success.

We have in our state a great little statute that is supposed to help with this, and many other wills from other jurisdictions have something similar. The statute allows the person who has made the will to leave a list of who is to get what personal property at death, signed and dated, no witnesses required, so long as the will refers to the list and the will is properly executed with the two witnesses initially. The list can be changed at any time by the testator prior to death.

This avoids many problems post mortem. First it proves the testator had at least at one point ownership of the personal property. Secondly we know who he or she intended it to go to. Third, if suddenly someone who had access to the house at the time of death suddenly has the wagon wheel or a nice set of silver at Thanksgiving, we have a pretty good idea what to do next.

The oddity is that any value of object can be transferred by the statute. Our testator may have owned 5 acres of radioactive dirt next door to the Hanford Nuclear Reservation whose value is dubious but also a $100,000 yacht in the Everett Marina. It takes Wills Act formalities with the two witnesses to pass the worthless dirt, but only this list attached to the will to pass the yacht, no witnesses required. This invites fraud and forgery if you ask me, but then I worry for a living because I possess the secret knowledge of lawyers.

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.