Asset Particulars – Hull on Estate and Succession Planning #98
Listen to Asset Particulars
This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the importance of keeping track of asset details.
Asset Particulars – Hull on Estate and Succession Planning Podcast #98
Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #98 of our podcast on Tuesday, February 5th, 2008.
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by
Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada. Here are Ian and Suzana.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: Hi there Ian, how are you today?
Ian Hull: I’m just great.
Suzana Popovic-Montag: That’s good.
Ian Hull: So just as a reminder, we have set up easy to get access to our daily podcasts and blogs. Go to hullandhull.com for that, but we’ve also set up a call-in line.
Suzana Popovic-Montag: And what we’re hoping to do is to hear from you there at area code 206-457-1985.
Ian Hull: So we encourage it and hopefully we’ll get some people interacting in this over the weeks to come.
Now we’ve been working through and looking at questions of really, estate administration techniques that we can help assist our lawyers and assist ourselves in the process of trying to work through an estate administration. And of our checklist or things to do in getting things organized before we pass away, one of the things that I keep harping on is trying to keep a running total of your assets and so on. But let’s spend some time today talking about particulars of what we want to have on that list.
Suzana Popovic-Montag: One of the things that I certainly encourage people to keep a list of, Ian, is their insurance policies. Things like insurance on their vehicles, on their home, on their personal belongings, so that these things are put into one place or are easily accessible or at least, you know, you have an opportunity to know that you’ve found everything that you’re actually looking for.
Ian Hull: And that… can be very important. One of the things that people forget is that just because you paid the premium doesn’t mean that the insurance company is going to pay the claim. And you need the policy. This is particularly important with life insurance as well. It’s best to have the policies located in one single spot or easily found in some way, shape or form so that it takes a lot of the burden off your executor when the time comes that they have to move quickly. For example, if you’ve got a car and you don’t know whether or not it’s insured, that’s going to be an urgent issue that you have to deal with.
Suzana Popovic-Montag: And certainly when you’ve got real estate, there are situations where the death of the owner of the insurance policy is going to affect whether or not that insurance company will continue to insure that asset. And so you want to make sure that if there is the requirement for some vacancy permit or something like that, that the insurance company is notified of the change in circumstances so that the insurance does continue to be effective.
Ian Hull: One of the questions that people often ask is, “What do we do with the house now that it is unoccupied if the person has passed away?” And it’s a case-by-case answer and it depends on almost every situation. It depends on the insurance company itself but typically what an insurance company will say is, ‘we don’t want to continue to insure a house that is vacant except if you’ – and then this is where it is case-by-case – ‘except if it is properly being monitored.’ And they’ll often say, ‘we want to make sure there’s first of all there’s maybe a security system in place.’ Another idea that often they say is, is that you guarantee that you’ll check it every day. That way you can preserve the property in the interim while you’re going to get it ready for sale or distribution to the beneficiary but at the same time keep it well insured.
Suzana Popovic-Montag: And just in terms of being well insured, I think that just sort of tweaks me to the fact that if the personalty, or the things that are within the house, that are valuable had otherwise been included in the value of the home for the purposes of insurance and now those things are no longer there, then you want to make sure that what you do have in place is adequate insurance for the house.
Ian Hull: Okay. So let’s talk just more about this real estate and how…we’ve talked about the insurance aspect…but how we deal with real estate generally.
Suzana Popovic-Montag: And what I think of in these situations when we’re dealing with a piece of property is the real estate taxes that are either outstanding up until the date of death or will have to be paid on a go forward basis.
Ian Hull: And then, as you say, the contents of the house and the valuables and so on, you’ll want to make sure they’re well insured. But you also need to take control and custody over them in some way, shape or form. And so what I often tell my clients is that…go through the house and bring a video camera and video everything in the house – every room, every piece of furniture – so that at the other end of the day if someone says, “Geez, you know I used to have a beautiful chest of drawers in that room and it’s gone,” you have an answer to say, “No it isn’t, it never was there because here’s the video that I took the day after I got the job of being an executor.” It’s a trick that you can get trapped and you can get caught into and a nice answer to it is if you have the evidence in response to it.
Suzana Popovic-Montag: And that’s so much easier than the suggestion to go and make a handwritten list, for instance, and helps with the identification too, so I think that’s a fantastic suggestion.
Ian Hull: One of the things that you really struggle with, I think, in the whole management of the real estate is when they’re in a commercial or semi-commercial, and I call that semi-commercial as a residential landlord situation. Or commercial landlord situation. What early action steps need to be taken?
Suzana Popovic-Montag: Well, in those situations, Ian, I think it’s always recommendable to look for the lease, to review its terms and to see about contacting the tenants so that in terms of going forward and collecting rent and making any re-direction of payments that are necessary, that you can do that by having this documentation firstly in hand and secondly understand what it provides for.
Ian Hull: And as with any piece of real estate, you want to know what encumbrances are on the property. For example, a mortgage, sometimes the mortgage is mortgage insured. But if it’s not mortgage insured, you want to look at the terms because some financial institutions might be prepared to re-negotiate the mortgage because the person’s passed away. You might be able to get more favorable terms and so forth. Now that’s all good news, but it’s also probably expected of you as an executor to look into that level of business expertise.
Suzana Popovic-Montag: And when we started this series of podcasts, Ian, we talked about, you know, executors doing their homework. But this is another illustration of those kinds of things that we’re hoping that people will do during their lifetime in terms of, you know, getting insurance documentation together, getting information about real estate together and here now rental property or leases or mortgages, that kind of stuff. If it’s all together, it certainly will help your executor at the end of the day.
Ian Hull: So Suzana, what happens if the deceased was renting a property, say renting a condominium or an apartment building unit?
Suzana Popovic-Montag: Well, one of the first things that you’d want to do is to contact the landlord and advise them of the fact that the tenant has now passed away and see how you would go about either cancelling the lease and providing vacant premises or otherwise dealing with the interim period until decisions are made as to how to go on.
Ian Hull: And I guess in the right circumstance, you might even want to look at subletting if you can’t get out of the lease arrangements that they were in.
Suzana Popovic-Montag: That’s probably a really good suggestion.
Ian Hull: Okay. This is a bit of a loaded question and we’ll spend more time in future podcasts on this as well, but what do you do if you have an ongoing business?
Suzana Popovic-Montag: Well that really is, as you say, a loaded gun because that’s not something that you can just quickly cancel and put aside and deal with on a rainy day. You actually have to arrange for the continuity and I’d say competent management of the business in the meantime until either you distribute it pursuant to the terms of the Will or you continue to manage it in accordance with the terms of the Will
Ian Hull: And without getting into too much detail in this podcast, you’re right, I mean it’s such a loaded question. But, you know, in the course of the continuity and creating a competent management team, you probably want to meet with them and create some sort of short term plan of action as to how you’re going to operate the business.
Suzana Popovic-Montag: That’s for sure. And you may also want to review if there’s any buy/sell agreements that are in place, shareholder’s agreements or those kinds of corporate documentation that may provide for how to deal with the situation in the meantime.
Ian Hull: Okay. We are now inching toward that fateful moment of getting probate and we’re not quite there. But one of the first steps that we want to make sure we’ve got under control is opening an estate bank account. Coincidentally I’m on my way after this podcast to go close a bank account which is full circle on an estate administration. But in this case, we want to be mindful of what’s going to be necessary and:
- Is opening a bank account necessary? and
- What are some of the steps we’re going to have to take in that regard?
Now what I often will do is I will send a letter to the bank just advising them, because I don’t have probate. They’ll want probate before they’ll actually open the bank account typically, but I don’t have probate in hand. But I’ll write them and say, “Look, I’m the executor, here’s a notarial copy of the Will. I look forward to seeing you, my face is now on this file, not the deceased’s.” And it softens the bank up and it gets it ready to sort of deal with an account that is not normal anymore. or is not being dealt with by someone who’s alive. And I send that same to the financial institutions as well, sort of priming everybody to know that I’m coming down the pipe. I don’t have probate. I’m applying for probate, or if I’m not, in the right circumstances. But typically you’re going to be applying for probate if you’re going to need to get money out of financial institutions. So I’ll just make it clear that I’m applying for probate and you can expect to hear from me shortly. This letter actually does take the account out of the mainstream of the bank operations and flags it in some meaningful way so that they’re going to be ready for you when you get your probate application. It doesn’t take much time and it’s a helpful step
Suzana Popovic-Montag: I think it also helps, Ian, in the event that the account is somehow held jointly with another to put the bank on notice of the fact that one of the joint account owners is no longer alive and there may be consequences that arise from that, if it’s not clearly a, you know, right of survivorship kind of situation.
Ian Hull: Okay. So finally, just because again I’m coincidentally on my way to go do this as well, is the locating and cleaning out the safety deposit box. An important step and again one that you want to document very carefully. I will often just take notes of what I have taken out of the box or make an inventory as soon as I’ve emptied the box, back at the office, of everything that I’ve taken out. Sometimes I’ll even video that moment in time. That’s not always the case. But you want to make sure that you keep the custody of the documents and whatever is in the safety deposit box under tight reign and control.
Suzana Popovic-Montag: Well I think that brings us to the end of this week’s discussion. Thanks very much to all of our listeners for joining us and thank you for joining me today, Ian.
Ian Hull: Thanks very much Suzana. And again, don’t forget to come to our webpage at hullandhull.com and you can link into our daily blog.
Suzana Popovic-Montag: And we hope to have a little bit of interaction with the comments from the people who are listening and any comments, questions they might have we’d look forward to receiving them.
Ian Hull: So for that number again 206-457-1985. Thanks so much.
Suzana Popovic-Montag: Thank you.
You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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