Probate, Decision, Finances, Petition and Action?
Date: Monday, February 16, 2004 to Sunday, March 7, 2004 11:59 PM
-- Trust fees
-- Investment results
-- Why Mary-Jane owns part of the house
-- Where the money went
Mary-Jane and Ann opted to take the lawyer´s view that the team of protesters waiting in the wing and organizing were the "bulge in his pocket" while he nicely engaged in negotiations, instead of the protesters´ view that lawyers were the bulge in Mary-Jane´s pocket for her in a steely confrontation with the bank. Confrontations are not her strength.
Once we had access, one afternoon at a meeting, to the many pages of probate court filings for the trust, there were a number of issues to be addressed in sorting the data. The bank´s fees and expenses were listed as well as the amounts authorized for the beneficiaries to spend. The major amounts in the latter category were fairly explicit but the identity of much of the rest was less specific. Interest and dividends were listed and the gains/losses on transactions summarized. The reports were filed every two years except for the transition years of 1995-96 when the original trust manager retired to be replaced by the current holder of the responsibility.
One of Mary-Jane´s difficulties is that there was no record of her usually paying half the property taxes and half the heat and electric, so we simulated those allocations, identified the major personal expenses and accumulated the remainder in ´personal miscellaneous´. The resulting pattern is given below with a couple notable issues to be pointed out.
First, Mary-Jane opted to pay off an education-loan and take care of dental work as soon as the trust was operational. She also purchased a jeep station wagon on the premise that she and her sister would need a 4wheel drive vehicle for winter transportation when the access road was icy. Ann´s 1978 Chevette did not seem adequate but the jeep turned out to be a lemon and ran up major bills.
1,525|| 783|| 600||5,800||2,200 ||2,836
5,980||1,570|| 600||7,100||4,000 ||5,938
Secondly, in the 3rd year of the trust, the house required major work on the roof which her sister could not begin to afford. Mary-Jane paid the entire $10,000 -- part in 1995, the remainder in 1996. In the process the bank penalized her $3,000 for "invasion of principle" and listed that as her expense, not a trust expense nor a reduction in investment income. But back to the roof funding. Although no landlord would be able to foist the entire up-front cost of such magnitude on a tenant, the bank -- and apparently the lawyers -- refuse to acknowledge Mary-Jane´s rightful claim to part equity in the house. If the bank had advanced Ann those funds you can guarantee that the bank would not be waiving them as the bank -- and Mary-Jane and Ann´s lawyers -- expect Mary-Jane to do. Exactly whom is her lawyer defending? Consequently, in the tally below, the roof is in the Heat/Electric and the penalty is in Personal: Major.
With all of this in mind, the emerging picture tends to confirm the claim of normally paying a share of the heat and taxes since the remaining miscellaneous amounts consistently range between $4,000-6,000 per year -- excluding the initial period where arrangements were being settled and the final period where the funds were about to run dry.
Note also in the totals row at the top, that the bank had paid itself, or its selected delegates to handle paperwork, about $10,000 which would have bought an ample amount of home repairs had this nightmare trust never been set up. Also, if you deduct the cost of the bank --and its administrative expenses-- from the income earned on the principle, the net income from the trust funds is reduced to roughly a little over 5% APY which is barely more than the going rate of simple CDs over the majority of the term of the trust management. Hence the bank´s supposed skilled investing contribution to the picture is basically nil, as most any semi-diligent interest rate shopper could have done as well with common CDs. Any bank bragging about their management is voided as basically just wheel-spinning, smoke and mirrors.
Next is the issue of the roof expense. If Ann is permitted to view Mary-Jane´s sharing of expenses as rent, then Mary-Jane is equally entitled to claim her payment of the roof repairs is a loan to a rental enterprise and that gives her the right to charge Ann interest. Given the time period and Ann´s circumstances, the interest rate should be at least 5% at the very least. Rates on home improvement loans and mortgages didn´t drop to those levels in the marketplace til post 2000 so 5% would have been a generous offer. Further, treating Ann´s role as landlord appropriately but non-greedily, she would charge her tenant half the depreciation on the roof, the other half being her own "rent". For a 20year asset initially costing $10,000 that depreciation expense would add $250 a year to the rent. Anyone who would suggest that Ann could seek to raise rents to add more profit to her enterprise, would also have to admit that Mary-Jane could have similarly raised the interest rate, making that game moot. The resulting picture where depreciation is charged against the interest demonstrates that Ann owes Mary-Jane $12,757 by now. Ann´s assets to repay this amount come only by granting Mary-Jane part ownership in the house.
Which still leaves the $3,000 charge for invasion of principle which should have been charged against the bank´s handling of the trust investments, which of course would reduce their purported investment results for the year and hence their claim for fees. I wonder if the investment manager got a raise for performance for that maneuver. Any claim by the bank -- or their lawyer -- that the expenditure was the beneficiary´s choice should be countered by pointing out that they -- the bank-- wish to charge the other beneficiary $10,000 for managing that "rental property" and should have taken account of the property´s management needs in planning the investment strategy. They were, after all, in charge of both trusts. Maybe they are so greedy that they figured they should be entitled to gouge Ann for the loan at much higher interest rates of their own? What was the definition of fiduciary duty anyway?
|1996||10,250|| 512||1,000|| 250||10,512|
|1997||10,512|| 526||1,500|| 250||10,788|
|1998||10,788|| 539||2,000|| 250||11,078|
|1999||11,078|| 554||2,500|| 250||11,381|
|2000||11,381|| 569||3,000|| 250||11,700|
|2001||11,700|| 585||3,500|| 250||12,036|
Protest vs Litigation
-- Who Mary-Jane and Ann are
-- Decision, Legalities and Intangibles
-- Financial Alternatives and Realities
-- The Rightful Stand
-- Lawyers and Shackles
-- Making it right