Jenny Rozelle, Host of Legal Tea
Cautionary Tales - Listing a Bank as Executor/Trustee - Episode 69
Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about real-life cases with real-life clients with real facts – they’re things me or my office have worked on. For today’s episode, we’re going to be talking about a case, where from the beginning, it was just one thing after the next So, to keep things straight, let’s just start all the way at the beginning … when the client reached out to my office. Let’s call the client, Nancy – So Nancy called and shared that her sister, Peggy, lives in a nursing home and that Peggy had significant cognitive impairment – specifically, she suffered from Alzheimer’s. Prior to her impairment, she had created a solid estate plan – she had a Power of Attorney, Last Will and Testament, Revocable Living Trust, Health Care Representative Appointment, etc. My office did not do her plan – she was originally from another state and another attorney in that state did. Anyway, good for her! It’s something I’m constantly blabbing about on here … to #DoYourEstatePlan.
In those documents, Peggy had designated a friend as her Primary Power of Attorney, Executor, Trustee, etc. and if her friend could not serve, she listed a national bank; that, if I shared the name, you would definitely know who it was. Though, I’m going to refrain from sharing the name of the bank – mainly because I’ve seen MANY banks do what this bank did. So, honestly, calling them out individually does not seem fair because many banks would have done exactly what this bank did. Which, I’m sure you’re thinking, what did they do, Jenny?! Tell me! We’ll get there, I promise…
Where did I leave off? Okay, so Peggy had created this estate plan – a solid one – and subsequent to its creation, she was diagnosed with Alzheimers. Ultimately, that gradually took over and she ended up in the nursing home – she just couldn’t stay at home anymore. Staying at home was MOST definitely not in her best interest. Nancy, Peggy’s sister, in the first meeting she has with our office, explained that the friend that Peggy appointed in all these documents had tragically and unexpectedly passed away somewhat recently. So, that meant the bank was “next in line” to take over, right? Well, Nancy hops on the phone and finally gets connected with “who” get needs to talk to at this bank – it was someone headquarters in some-other-city; a complete stranger to Nancy and Peggy. Nancy explains to this bank representative the situation – that we’ve got Peggy, Peggy’s estate plan appointed so-and-so as the Power of Attorney, Executor, and Trustee, so-and-so passed away, and guess what? You’re up!
The bank representative begins asking questions – they are asking who the customer is, the assets involved, the values of the assets, etc. – and ultimately, the representative said that they would get back to Nancy soon as to “next steps.” Nancy though, “Okay – great! I’m getting somewhere.” A few days pass … which turns into a few weeks … and after arguably too much time has passed, Nancy thought, “You know, I never heard back from the bank. I should give them a call.” Nancy tries calling again … of course, as we know this awful song-and-dance, Nancy gets a completely different representative on the line. This representative said, “Oh, did they not tell you what the bank’s position is on this case?” Nancy said, “Noooo…I haven’t received any phone calls, letters, emails, nothing.” The representative said, “It wouldn’t be economically efficient for us to serve because the Estate does not have enough assets for us to be in charge.” Essentially, what the representative was saying was that it was not worth their time.
You want to guess how much Peggy’s Estate was currently worth? Over $2 Million Dollars. And that’s not worth their time? Wow! Okay…
So … now what? Well, Peggy’s documents were out of people. The only way to get someone, anyone in charge of anything at this point … was a guardianship proceeding. That is, involving the Court to get someone appointed to take care of her financial affairs. So not only did we have to lay this bad news on her, but she had also shared with us that bills were going unpaid … because no one had access to the accounts as POA or Trustee. So, like her nursing home bill, they hadn’t gotten paid and they were starting to get really grumpy – I guess, rightfully so. Heck, any business would get grumpy about unpaid bills.
Like I said, the next step was getting a guardianship over Peggy – and Nancy said she was willing to serve as Peggy’s Guardian. We walked her through “what” the guardianship process looks like; what a Guardian even is, does, is supposed to do, etc.; and then, once we got her appointed as guardian, our plan was to submit her Trust to the Court to request that the Court appoint her also as the Trustee. WHAT a process, right? All of this because the bank was resigning from the Trustee position and this poor client … was left picking up the pieces.
Fast forward a few weeks, we filed our guardianship documents with the Court; the Court set a hearing; and we showed up and got Nancy successfully appointed as Peggy’s Guardian. We all go home that day feeling good, feeling like “step 1” is done – now it was time to request the Court to get involved with the Trust and have the Court appoint Nancy also as the Trustee of Peggy’s Trust. We filed our Petition and the Court set another hearing … so we go marching back to the Court to present this second, this “part 2” request to get Nancy also appointed as the Trustee. At the hearing, the Judge ultimately agreed with our position and approved our request to have Nancy serve as Trustee of the Trust. Yahoo!
Well, yeah – that’s worth a celebration, I suppose, because we did get what we wanted; though, I’d be remiss if I didn’t think about WHAT caused all this extra work for the family – and it was SOLELY because the bank did not want to serve as the Trustee. They came out and told us it was not “financially efficient” for them to serve … and we were left with a Trust document that held assets (which were supposed to being used to pay her bills – like her nursing home!), but no one was in charge of said Trust until we got Nancy appointed. So just think about it … not only did all these bills go unpaid and accrue interest sort of unnecessarily, but also Nancy, as now-appointed Guardian and Trustee, had to utilize Peggy’s assets to pay US to get them out of this pickle. To be honest, it wasn’t cheap. We had several pleadings we prepared … we had Court appearances … the county in which this case was in was kind of far … we had a lot of communication with the bank to get them officially “off” … so yeah, there was a lot of work involved, which yielded a hefty fee.
You may be thinking, “Now why would Peggy put the bank in this position anyway?” Well, I have two thoughts on this question; they don’t relate to each other, but they’re important to talk about…
1. First … believe it or not, you don’t have to “ask” someone to put them in documents like this. Technically, you don’t have to get their permission to list them in a document like this. Some documents in some states require the person you are appointing “sign off” on knowing they’re in your document, but Indiana is not like that. You can list Dr. Seuss in your Power of Attorney document, in your Last Will and Testament, in your Trust … and not have Dr. Seuss know. I mention this because it’s very likely that Peggy did not ask the bank to put them in her documents. She may have just “thrown” them in there thinking, “Oh, it’ll probably never end up in their hands anyway!” Wrong – it did. Her friend, who was in the primary position, had passed away and the bank was “next in line.” So yeah, interesting you don’t have to ask someone to list them in these documents, right? Or heck, maybe she DID ask the bank – but at the time, her estate/assets were higher and they thought it would be “worth their time.” Anyway, on to the second point I want to chat about on “why would Peggy even put the bank in this position anyway?”
2. Second … I see documents all the time that list a bank, so this is NOT an infrequent thing. I think if I had to narrow it down, I see people list banks in this capacity in primarily two instances. The first instance is when clients, that are say in their 50s/60s, who did their “basic estate plan” when they first had kids … for whatever reason, it was super common for attorneys to designate maybe a family member or friend 1st, then they’d “plug in” a bank as a back-up. I see far less young families NOW list banks in these types of roles, but for you, Legal Tea Listeners, that are 50+, you’re who I’m talking about. It was really common when you were younger and did your first estate plan to designate a bank. Another instance I see designating a bank is when a client has … no one to appoint. I see this somewhat often nowadays, actually. So, think about people that may not have children, or may not have people they trust to put in this type of capacity (it’s a hefty job and you better trust these people!), or may just want to take the burden off their loved ones …
I bring this topic up, especially this latter explanation, to bring AWARENESS to this issue.
Am I saying designating a bank is “bad” – absolutely not! It’s worked just fine for a lot of people, I’m sure. I think what I want you to take away from this episode is 1) if you have existing documents that names a bank, have you checked to make sure they still exist (which is a big problem too!) or have you checked to make sure they’d actually “take” your case; and 2) if you’re considering naming a bank in a document, have you had conversations with the bank to understand what their policies are – especially their thresholds? That way, they don’t do what the bank in this “cautionary tale” episode did to my client! Better yet, even if you do designate a bank, maybe make a provision in your document to say, “Hey if everything falls apart and I don’t have anyone to serve in XYZ role, then ABC happens!” Any solid estate attorney can guide you on coming up with “what to do” as a back-up to a back-up plan!
Alrighty … shifting to next week. We are back to the current events/current trends topic – where we talk about something I’ve seen or run across, maybe on the news or social media, that I think would be interesting on here. During next week’s episode, we are going to be talking about someone out of Chicago, Illinois who passed away … well, he had a sizable estate … $11M approximately … the kicker? He didn’t have an estate plan, so that whopping estate is going to distant family. Just wait until you hear the number of distant family members involved!