'What you got away with was in fact illegal'

Dear Jonathan: My mother, who is a widow, passed away several months ago. Thankfully she prepared a trust and transferred her assets to that trust so that there would be no probate to deal with at her death. While in the process of cleaning out her house, I came across a folder with several stock certificates of publicly created companies, which are titled in both of my parents’ names as husband and wife. I was quite surprised to come across these since I wasn’t aware they owned stock in any of these companies. I have already checked, and all of the companies are still in business and the stock has a combined value of just under $100,000. Since I was the agent under her durable power of attorney, can I use that document to transfer the stock to her trust now, or is there a different or better way to transfer the stock so there are no probate issues?

Jonathan says: The good news is that the size of your mother’s estate just grew by $100,000. The bad news is that you will need to open up a probate estate for that stock. When your father passed away, all that stock automatically become your mother’s without the necessity of probate because that stock was titled in both of their names. However, now that your mother has passed away, in order to get that stock out of her name and to her heirs or her named beneficiaries, that stock will need to be probated. The durable power of attorney of which you were the named agent is of no help to you because it automatically terminated when your mother passed away and cannot be used to transfer the stock after her death.

I suggest that you meet with a probate attorney who can walk you through the process of what needs to be done to probate this stock. Good luck.

Dear Jonathan: I read somewhere that a durable power of attorney automatically terminates when the principal named in that power of attorney passes away. Is that true? The reason I ask is that a couple years back after my father died, I used his durable power of attorney to transfer several bank accounts that were in his name alone into a joint account in both of our names. The bank never challenged me on that so I assumed that it was okay to do. Was this wrong?

Jonathan says: Whatever article you read was correct. A durable power of attorney can only be used during the principal’s (person who created the power of attorney) lifetime. Once the principal passes away, the power of attorney automatically terminates and is considered null and void. Consequently, when you transferred those bank accounts of your father’s to the joint bank account, you had no authority to do so because that durable power of attorney was rendered null and void upon your father’s death. I can only guess, but I assume that the bank never challenged your use of that document because they were already familiar with you from prior dealings and they were unaware that your father had passed away.

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, P.C., in Grand Rapids, Mich.

Rendered 06/18/2024 21:44