To protect and serve. That is the pledge of those that make up our country’s military. We are comforted, knowing that those men and women regularly protect our country and her assets. In so doing, a portion of those most precious men and women ultimately fall with grace and honor. Like those persons, we expect our carefully hand chosen executor or personal representative to protect the value of our hard earned estate assets and honorably serve those we’ve ultimately left behind by properly administering our estate. Unfortunately, however, this does not always happen. In fact, there are times when the one we’ve chosen, whom we believed to be the most dependable, falls in the most disgraceful and dishonorable way, by losing estate assets and leaving the remaining heirs/legatees with little to no portion of their intended inheritance. Sometimes it’s a matter of unfortunate asset mismanagement and other times it’s the result of some deliberate action. In either case, the loss of assets can be avoided and the good news is that you don’t need the armed forces to protect what you’ve worked so hard to leave behind for your family or loved ones. In fact, it’s a very simple matter of insurance – a bond to be exact. To ensure the protection of your most valued assets, here’s what you need to know to ensure that at the very least, the value of what you’ve left for your loved ones will actually get to them.
Preserving your assets begins with the writing of your Will. When so doing, don’t roll the dice by not requiring your assigned personal representative, otherwise known as the “PR”, to obtain a bond. While you believe that whom you’ve chosen to handle your affairs will do so, exactly as you wish, there are no guarantees that this will be the result. Over the years I have been appointed by the Court, over the Estates of persons that I have never known, in an effort to move along a stagnant Estate, to better manage the assets of an Estate and/or in the worst cases, to recover assets that have been lost due to mismanagement, liens, attachments, tax sales and yes, outright theft.
How does this happen? Easily. Once appointed, the personal representative is in total control of the assets of the Estate. They have immediate, sole and direct possession and control over the decedents’ house(s) and car(s). In addition, they will have sole and direct access to all of the bank, investment, retirement, pension and annuity accounts along with all other valuables. While there will be oversight (by way of regular accountings) to the Court and those who ultimately stand to receive the assets, the accountings are required at intervals of nine (9) and six (6) months. Worse yet, the accountings are prepared by the very person who may be mismanaging and/or stealing the assets and once discovered, it will take several additional months to request and have that person successfully removed from that position. Of course, by the time the person is removed, the value of the assets may have already been severely depleted. Not to mention the legal fees that will be necessary to obtain that end protective result.
In the worst of cases (once I am appointed), I discover not only that a good portion of the assets have been lost, but following a review of the Will, I find the phrase I dread the most: “I request that my personal representative serve without the need for a bond”. Well there goes it. Blind trust has prevented the protection of Estate assets. More specifically, in my professional past I have handled cases wherein a mother spent all but $65.00 of the money left to her 10 year old son, by her dad (in less than 11 months). I have handled cases wherein homes, that were valued at $350,000.00 and with no existing mortgage, were sold to a tax sale purchaser, for a mere $5,000.00 – all because the PR failed to pay the outstanding real property taxes. Additionally, I’ve seen tens of thousand’s of dollars left by one sibling for the care of her Alzheimer’s stricken father, literally eaten and shopped away by the other sibling in less than 6 months time. Unfortunately, by the time the sweet but less than sophisticated mother figured out what was going on, the money was gone. Finally, I’ve seen a sibling completely squander away more than $100,000.00 and almost lose the family home, because he felt he should not share it with his illegitimate brother. What did all of these people have in common? They were trusted family members, chosen by the decedent to properly disburse their assets among the remaining relatives. The cases go on and on with one additional fatal flaw – no bond was required. In some cases, a bond was required by the decedent or the court, but the remaining heirs/legatees blindly consented to allowing the appointed personal representative to serve without the need for a bond.
Why insist that a bond be required? Because while bonds are put in place to sometimes ensure the payment of debts owed by the Estate, their most important function is to ensure that there is no damage or harm to any person who has an interest in that Estate, due to the actions or inactions of the appointed PR. In other words, in the event that the PR inadequately handles the Estate, intentionally or not, there will be a side insurance policy that will (at the very least) provide the expectant heir/legatee with the dollar value of what was to be left to them in the event that assets are lost.
Of course, a bond is not the only way to recover what is lost due to a mismanaged Estate. I’ve been successful in suing the relative who breached their fiduciary duty by obtaining a judgment on behalf of the Estate and either negotiating a repayment plan or garnishing their wages to recover the money. Unfortunately, I’ve even had to institute foreclosure type proceedings against their home in order to recover the lost funds. These are drastic measures that in the end can further tear apart an already broken family. Of course, if there’s a bond in place, I am able to what is termed “condemn the bond” and have the insurance company cover the loss. While this action still requires that fault be placed on the PR who may have breached their duty, at least it will alleviate the need for such adversarial collection proceedings and ensure that any vulnerable adult, minor child or other deserving heir/legatee will recover what was rightfully left to them.
Not all cases are the same. In some cases there will be only one person who will take from a Will, and thus there will be no need for a bond. Otherwise, I would seriously consider the requirement of a bond in your Will. Don’t make your decision based upon your emotional ties with the person whom you may choose and don’t feel pressures or guilt from other family members or friends in making this decision. Most importantly, keep in mind that while you may have discussed your wishes with your family and believe that your family will follow those wishes, the reality is that there is no guarantee that those wishes will be followed following your death. Unfortunately, we’ve all seen families that fall completely apart in the minutes, days, weeks and months following the death of a loved one and in reality, sometimes things start to unravel as early as the final stages of death. In either case, a bond, by providing a safety net when need be, and sometimes by preventing someone who may not be creditworthy to serve at all, will ensure the protection of your assets and the service of whom you’ve chosen to administer your Estate. In other cases, if there is no bond, all may be lost.
If you have yet to prepare your Will, add the protective language that a bond will be required. If you have already prepared a Will that requires no bond, rethink that decision. If you are an heir/legatee and not appointed as PR don’t consent to a layperson serving without a bond in place. If you are unsure about exactly how to handle this matter or any other facet of estate planning, call me for assistance. Why? Because You Deserve Good Counsel.
Thanks for reading. Please note that I am licensed to practice law in Maryland and the District of Columbia. Please feel free to learn more about my practice at www.kelseylaw.net and to seek legal advice when you feel it necessary.
In addition, please be sure and “like” and “share” this and any other article to promote the sharing of these important topics. Of course, I welcome you as a regular follower to my blog and you may choose to do so by clicking “follow” at the top of this page. You may also follow my practice by liking “The Kelsey Law Firm” Facebook page and following me on twitter at “@Kelsey Law Firm”, feeling free to retweet at any time. For the lighter side of the firm’s activities, follow me on instagram at “TheKelseyLawFirm”. Hope to see you in one or all of those places.