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Case Of The Evil Uncle

It's sad but true: a death in the family sometimes brings out the worst in someone. Here's a little fictional tale to ponder, the "Tale of the Evil Uncle."

Sue, who lived in Toledo, was dealing with the death of Sue's mother, Ellen Wilson. Sue's father, Larry, passed away five years ago. After Larry's death, Ellen continued to live in the family home in Auburn, where Sue and her brother Tom were raised. Tom was a Major in the Army, assigned to a unit in Korea.

Ellen's will provided that her estate be divided equally among Sue, Tom, and Ellen's brother Jack Schmit, who lived in Kent. Ellen's will named Sue as the Executrix, with tom and Jack as alternates. Both Tom and Sue had families and careers, and neither of them was in a position to administer Ellen's estate. They were relieved to learn that good old Uncle Jack would do it.

Jack and Ellen had not been especially close in their adult lives, though they lived only a couple of miles from each other. Family rumor had it that Larry and Jack had been involved in a business venture years ago, and had a falling out over money. After that, Ellen had infrequent contact with her brother Jack. Ellen did not ever explain the details, but Tom and Sue got the impression that there was a lot more to affair than Ellen was willing to discuss.

Actually, Tom and Sue were both surprised that Jack was still named in the will, and that he was also an alternate executor of the estate. But the will had been written before Jack's falling out with Larry, and Ellen apparently had never gotten around to changing her will.

Tom and Sue concluded that Ellen and Jack had made up after Larry's death. When Ellen Learned eight months before her death that she had terminal cancer, Larry was the only close relative Ellen could turn to. Larry seemed to be a great help in Ellen's last months. He moved Ellen into a nursing home only a block away from his house, and saw her every day. She even gave him a power of attorney over all her affairs two months before she died.

Tom and Sue had some mild reservations about whether Uncle Jack should be the Executor. The business venture with Larry had failed, and Jack had also lost a couple of jobs over the years. He did own a home, but did no seem to enjoy a very high standard of life. On the other hand, Jack seemed very attentive to the property in the estate, and gave frequent reports to Tom and Sue.

According to Jack, the probate of the estate was doing very well. Jack said his lawyer was very skilled and efficient, and that all the taxes were paid up. He had placed the family home for sale, and had several offers. The highest offer was for $210,000. Jack said that he would beat that offer, and pay Sue and Tom $75,000 each for their shares.

That seemed reasonable to Sue and Tom. The house they were raised in was large, and sat on 4 acres, but it was also 60 years old. It needed a roof and a major remodel to sell well, and Jack said there was not enough money in the estate to pay for it. Sue and Tom had moved away from Washington State in the late 1970's, and had not been tot he family home for several years before Ellen's death. They decided to accept Jack's offer.

Jack was super-efficient. He immediately had his lawyer draw up real estate papers for him to buy the shares of Sue and Tom. He said he got the financing by arranging a loan secured by a mortgage on the property. They would all save the broker's fee. Jack would move into the house and remodel it.

The papers were sent to Tom in Korea. He took them to a JAG lawyer for review, and found them to be in proper form. He sent them to Sue for signature.

Sue was happy to get the real estate documents. She had her own busy life,a nd was grateful that good old Uncle Jack was going to buy out her share. She sat down at her desk at home on a beautiful fall day to sign.

As her pen was poised above the signature line, the phone rang. "Hello," said a cheerful voice, "I'm calling from Executive Securities in Chicago. There's a Jack Schmidt out in our lobby with a Power of Attorney for Ellen Wilson. He wants to close out Mrs. Wilson's account here. You are named as someone with right of survivorship. Is it ok to close the account?" Sue thought to herself: "Mom never mentioned this account. "Let's see," said the cheerful voice. "Mrs. Wilson ended up with the entire account after Mr. Wilson's death. The stock was originally purchased as an IPO in 1985. Nothing's been done with it since then. After all the splits, there are now 20,000 shares of Microsoft. At current values, it's worth about "[a brief silence with the faint clicking of a keyboard]" $1,8,32,000."

Sue got another call later the same day. A real estate agent with a client interested in the family home said that the property was needed as part of a new mall; did she think it could be sold for $950,000?

Lawyers are frequently criticized for being nothing but hired guns. But when a burglar breaks into your house, a hired gun can come in handy. And when someone from your own family tries to burglarize a probate estate, you may want some firepower.

A case in point is "The Tale of the Evil Uncle." Here is a brief synopsis of Part 1, which was published last week:

Ellen Wilson passed away, leaving a will, which divided her estate into three equal shares among her adult children, Sue and Tom, and her brother, Jack Schmidt. Sue lived in Toledo and Tom was overseas in the Army, so Jack became the executor of the estate because he lived in Kent. Jack offered to buy Sue and Tom's share of the family home (on four acres near Auburn) for $75,000 each. Just before agreeing to the sale, Sue accidentally discovered two very disturbing facts: (1) a new mall had offered to buy her mother's land for $950,000; and (2) her mother had left some Microsoft stock with a current value of $1,832,000. Good old Uncle Jack had concealed all of this from Sue and Tom. Our story continues.

After Sue recovered from her shock, she called her lawyer, Payne Hammerlock, from the prestigious Toledo Law Firm of Nee & Erthall. Payne said he would do some discrete checking on the status of Ellen's estate, and told Sue to meet him the next day.

At the appointed hour, Sue was ushered into Mr. Hammerlock's office. "There is good news and bad news," said Mr. Hammerlock. "First the good news: Your mother's Microsoft stock has not been sold, and is still an asset of your mother's estate. The family home is still on the market, and there really is a new mall that wants to buy it a premium. I would guess that your mother's estate is worth around three million dollars."

Sue was stunned. She and her brother Tom had been raised in an entirely middle class environment, with none of the privileges that you might expect millionaires to have. Sue's late father had been an administrator for the local school district, and her mom had been a secretary at an insurance agency. Family activities had centered around camping and little league sports. The highlight of Sue's childhood was a family trip to Yellowstone National Park.

"So what about the bad news," said Sue.

"Well," said Payne, "for starters, good old Uncle Harry never did file a probate for your mother's estate. He has been dealing with your mom's assets by using a power of attorney she apparently gave him shortly before her death

"But how can that be," asked Sue. "Didn't the power of attorney become void when mom passed away?"

"True," said Payne. "But people who handle your mother's property are not automatically informed about her death. As far as they know, the Power of Attorney is valid. I have paralegals and investigators looking for other possible assets which Jack may have already sold. You'll want to discover the proceeds of any sale that Jack has not disclosed to you and Tom."

Payne paused. "However, there is another fly in the ointment. It involves your other uncle - Uncle Sam. It seems that good old Uncle Jack didn't ever bother to notify the IRS about your mom's estate. The bottom line is that the estate may now liable for penalties and interest because of Jack's failure to file the appropriate tax returns."

Sue began to be a slow burn. "So what can Tom and I do now?" she asked.

"First," said the good Mr. Hammerlock, "I will refer you to an experienced attorney in King County Washington. Second, you will need to file a petition with the King County Superior Court to probate your mother's will. Third, you need to get a Court Order naming you as the executrix of the estate. Fourth, you need a Restraining Order that prohibits Uncle Jack from dealing in any way with the property of the estate. Fifth, you have to notify all asset holders (like the stockbroker) and potential purchasers (like the mall) that you are the executor of the estate, and that Jack has no right to sell any of the assets. Sixth, you have to notify the IRS about the estate."

Sue was still troubled. "But won't Tom and I have part of our inheritance eaten up by IRS penalties and interest because of Jack's failure to file tax returns?"

"That brings us to point number seven," said Payne. "Once the taxes have been paid, and the estate is ready is to be distributed to the three heirs, your Washington State attorney can ask the Probate Court to deduct any unnecessary costs caused by Jack's wrongful behavior from his share of the inheritance."

Sue pondered the justice of such an outcome. "Being an executrix sounds like a lot of work. I don't know if I can do it. There will be forms to fill out, bills to pay, records to be subpoenaed."

"But Sue," said the good Mr. Hammerlock, "you're going to have a Washington State lawyer and CPA to help you. That's what they're there for." Mr. Hammerlock picked up the phone and called a highly rated attorney in King County, who agreed to take the case. The new attorney also answered questions from Sue, recommended a local CPA, and outlined his plan for aggressive court action. He was tough. Sue liked what she heard.

On the way home, Sue reflected on recent events. She thought, "I hope Uncle Jack gets what he deserves." Sue smiled as she reviewed the plan of action proposed by her new Washington State lawyer. Sid Stikum, Attorney at Law. She liked the name. It had a nice ring to it.

Bruce Clement's Firm, Clement Law Center, is located in Federal Way (253-661-3111)