Is your will drawn up? Do you have a power of attorney?
Aside from ensuring your investments are right for you, your financial advisor should have a healthy interest in ensuring a few other things in your life are addressed. A key step will be ensuring you’re prepared and taking the appropriate steps to tie up loose ends if you can’t make decisions, or aren’t around to make decisions.
What is the common reminder you’ll hear when addressing these issues? The choice of executor, or power of attorney, is incredibly important. Choose them carefully. We need to find someone who is judicious and able to set aside any personal issues to carry out our wishes as we had intended.
Seems incredibly simple. We all believe we possess the appropriate sense and judgement to bypass the good-for-nothing choices. We will appoint a solid and respectable person. One with a good job, stable family life and responsibilities that highlight they grasp the importance of the task. That person will carry out our wishes as we had intended.
Next issue. Well, not so fast…
What’s the problem, you ask?
People change. The upstanding stable individual we entrust with our affairs today, might not be the upstanding stable individual who should be entrusted with our affairs in five- or ten-years’ time. Dynamics can alter very quickly due to various reasons. Mental health issues, relationship changes or life milestones can suddenly trigger thinking or behaviour not previously associated with the trusted person.
Financial advisors get a look under the hood of life planning matters on a regular basis and these changes unfortunately do happen. Someone involved in a current case we’re privy to has given us permission to highlight the perils of unexpected behaviour. It can rear its head and leave parties bogged down in a legal quagmire for years. Not only is time wasted, but estates can be frittered away. If the deceased knew what was occurring with their assets, well the phrase, ‘turning in their grave’ was coined for a reason.
Cynthia and James (not their real names) were made executors of their Aunt’s estate. Both everything you’d want as executors. Reliable and trustworthy, both in professional jobs and without any personal differences. You’d expect them to finalise everything in short order.
Their Aunt passed away nearly a decade ago, and they’re still battling it out over her estate. And ‘battling’ gives the impression this is two parties at war. Nothing could be further from the truth. Cynthia would like to move on; no one really knows what James wants. Since their Aunt passed, James developed an intense hatred for Cynthia.
The estate comprised a modest house and a small amount of money. Combined, it wasn’t a large sum and it’s been getting smaller by the year (it’s not in a location where real estate prices have readily appreciated). Every action by Cynthia has prompted an opposite reaction from James. This has drawn the lawyers into the fray.
Initially, Cynthia wanted to buy the property herself. That wasn’t going to work because James decided he wanted to buy the property. Stalemate. Eventually, Cynthia decided she wanted to sell the property and be done with the issue. James then decided while he was happy to keep his share, he no longer wanted to buy the property. This further frustrated Cynthia.
This has kept the estate from being settled, and there doesn’t seem any prospect of it being settled soon. The pair communicate through lawyers and while Cynthia could take the matter to court and likely win an outcome, she’d rather be fair and equitable, so both parties walk away with an even share.
The small sum of money left within the estate has been drained. The pair are now covering the associated property holding costs and legal fees out of their own pockets.
Usually the moral of the story is how we need to be careful in who we choose to carry out our wishes, being especially careful with the personalities of those chosen. There are countless tales involving poor choices of executors and the associated headaches they bring. Cynthia’s story shows you might well be making the most judicious choice at the time but, through no fault of your own, an executor does a 180 and kicks off with unexpected behaviour.
What to do if you’re concerned about this?
It may mean continually looking for warning signs, or paying for a truly independent executor and stipulating that the assets be liquidated and the proceeds be divided up from there.
Read on for Part Two of this saga:
https://www.spencerprivatewealth.com.au/blog/2024/3/6/where-theres-a-will-but-not-a-way-part-2
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
With thanks to FYG Planners for this article.