How Joint Liability Creates Estate Problems
I am talking about Joint and Several liability in an estate context today. Let’s look at the joint liability of executors, or estate trustees, in estates. Next, I‘ll give you dangers you can avoid when making powers of attorney.
Let’s say you and your cousin Franco are handling your aunt’s estate as executors. You tell Franco to meet the accountant to sign the tax returns. You need to make a payment of $40,000 for income taxes.
Franco is watching the World Cup match. He won his bet on the game and goes out to celebrate. He forgets to see the accountant or pay the tax bill. The estate is charged a penalty.
As executors, you are jointly responsible for the tax liability.
You are personally and jointly liable to pay income taxes before distributing the estate.
Powers of Attorney
These are documents that can allow attorneys to act often “jointly or severally.” What that means is that your attorney may act separately and together.
This language can be simplified or replaced in your power of attorney. The document can simply specify that attorneys may act together or separately.
What if you give a power of attorney for property to your three children? You need to specify when they may act individually. Otherwise, all three of them must sign every check to pay your bills.
Is this necessary? You may need only one child to sign checks. The other two attorneys may need merely to monitor payments. They could monitor such payments every two months, for example, as you specify.
My next post considers jointly owned property.