A Will, Your Recipe Not The State’s

Your Recipe or the State’s

People are told to go to the internet to find resources so that they can draft their own Wills. I have written many times about the dangers of doing so without appropriate and professional guidance.

A True Story

Recently, I had occasion to socialize with a physician friend of mine.  During our encounter, he asked me if there was some way to transfer money from a friend’s bank account without anyone else knowing about it. He went on to explain that he had siblings who would not have felt supportive of this transfer. Knowing this man, I can tell you that the underlying reasons for his inquiry was not to do anything illegal. The money which was involved in this transaction was simply a gift from a relative which she wanted to make to him. But he didn’t want to stir the ire of his siblings by revealing it, as he felt jealousy and greed might come into play.

He wanted to know how it could be done without any of the siblings discovering that transfer. In addition, he didn’t want the gift to be completed until the death of his female friend.

I explained that he could simply have her designate him as the beneficiary on that account so that it was payable on death. This can be accomplished at most financial institutions by filling out a beneficiary designation. This is also known as a “Totten” trust which are valid in most states including Michigan.  With that mechanism, I explained, there would be no need for probate as ownership at death is pre-determined. Otherwise, they would need to exercise a transfer of ownership through a court order or by designating someone to sign documents transferring ownership as the representative of the estate of the decedent or those funds could be placed in trust and a beneficiary named to take those funds at some time in the future.

Once a person dies, they are unable to sign documents transferring ownership represented by deeds, titles, assignments, and so forth. For the “dead hand” cannot sign documents to transfer ownership. If title is held solely by the person who died, the new owner cannot take title by simply waiving the Will (if there is one) at a bank teller and demanding the funds from the decedent’s account.

Another True Story

Several years ago the son of a former client, who we will call Adam, came to my office to find out how to probate his mother’s estate. He was identified in the Will as the alternate Personal Representative (PR) or Executor, as it is identified in many states. His brother, we will call Steve, was identified as the primary PR in the Will. The mother’s only asset was about $20,000 in a bank account, which had been titled in her name alone. Adam said that Steve had withdrawn all the money from that account by simply showing the teller a copy of the Will listing him as PR. With that, the teller gave Steve all the money, $20,000, that remained in the mother’s account.

Some time passed and Adam attempted to find out what was happening with his mother’s estate. He knew that there was money in her bank account. Steve and Adam were estranged. Steve would not answer any of Adam’s inquiries, nor would he start the probate process. So Adam came to my office to see what he could do.

I explained that it was Steve’s obligation to commence probate so that someone could be appointed to act as the mother’s agent for purposes of signing documents transferring ownership where transfer of ownership of assets was required. Since he failed to do that, we would file a petition to commence probate and start the process on behalf of the estate.

In the case of the bank account, which was in the mother’s name alone, the funds would need to be transferred to the individual(s) entitled under the Will to take it. First, the agent (PR) would need to submit the Will and prove that it was a valid Will. If it were proved to be a valid Will, and not contested, then property would be distributed in accordance with the instructions in it.

The Will left everything to Adam. And the transfer of those funds by the bank, was a transfer out of trust as no one of authority had been properly appointed through the probate process.  I sought return of those funds at the bank. At first, when I called the bank, I was informed that we would have to sue Steve to return the funds. They told me that it was our problem, not theirs.

However, after I sent a demand letter to their legal counsel for return of those funds to the decedent’s account, or that we would sue the bank and ask for costs, we got a different response.  Their senior counsel backed up our position and told them to return the funds to that account immediately.

The Will alone did not give the teller legal authority to release the funds from the account. As a result, it was the bank’s responsibility to seek reimbursement from Adam’s brother. I am sure they instituted additional procedures so that that type of incident would not recur in the future. And, someone may have even lost their job as a result. But it points out how ignorant the general population is of the probate or non-probate transfer procedures. This is just one example why seeking the advice of competent legal counsel is so important.

What these two stories bring to mind is the level of misunderstanding many lay-people have concerning transfer of the incidents of ownership of property at death.  In the case of my doctor friend, here was a highly educated and intelligent person who really had no clue how property is transferred at death. But, that is to be expected. To complete a Will on-line without understanding how property is transferred at death is like making a pie but not knowing how to bake it.

How can you plan for transfers at the time of your death without knowing how those transfers will be accomplished? How can you make provisions for equal distributions without knowing what is controlled by the the Will and what isn’t. How can you draft a Will with the expectation that that Will will control the distribution of your property without understanding that the Will is only a document directing who should get property controlled by the Will? A Will is nothing more than your recipe for distribution of property at your death which has not already been designated by other means at death. If you do not execute a Will, there is a recipe in the state statutes which will be the formula for the transfers. We call that “intestate” distribution. The way I explain it to students is that if you want a recipe that results in “bread” then do a Will because the state’s recipe could result in “cookies”. There may be nothing controlled by your recipe or the state’s recipe if everything passes in accordance with provisions in the law allowing beneficiaries to be designated through joint or concurrent legal title or other means under the law or “by law”.

I highly recommend using drawings or other symbols or diagrams to help the client to fully appreciate this process. If you do a good job of educating them, they will have a fuller appreciation for the value of your services. You don’t need to drown them in legalese or over-complicate matters. Think of it as educating one of your grandchildren. Pictures and diagrams help. Develop a systematic process and be prepared to use it. Then give the client some pictures that they can take home with them to demonstrate how this works. If you do a good job, they will tell their friends and actually try to educate their friends or send them to you for a primer as well. We call that a referral!