The Legal Play Podcast

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When an individual passes away, it falls to those left behind to determine what happens with any property and assets that individual possessed during their lifetime. The process of finding all the property and assets can be extremely complex, depending on what the property is and where it is kept. It’s relatively simple to find things like a house and a car, as those are large, tangible items. But in many cases, a person’s wealth that may be passed to beneficiaries and heirs can be difficult to locate, especially if the assets are intangible items such as investment accounts and partnership interest. Often, the breadth and nature of an individual’s property and assets hasn’t been communicated to any loved ones. This makes it far more difficult to locate some of the following assets:

• Bank accounts
• Brokerage accounts
• Property titles
• Insurance policies
• Interest holdings in partnerships or corporations

Records of these assets, and the ability to access them, are necessary to complete probate and ensure all heirs and beneficiaries receive their share.

Who is Authorized to Access a Decedent’s Assets?

Although family members may perform a basic database search following the estate owner’s death, they will find it difficult to get information about, let alone access to certain things like retirement or bank accounts. If the decedent planned ahead, they may have named a third-party to be able to ask questions or access the account in the event of an emergency or their death. But if no other party has been given the authority to access that information, most financial institutions will require letters testamentary or court orders to release information. Often it falls to the estate’s executor to access those assets. Also termed an administrator, executors are empowered either by the decedent or by the courts to manage the decedent’s affairs following death.

A probate case concerning the estate will need to be opened before an administrator – independent or dependent – can start accessing assets.

An independent administrator is named in the decedent’s will and has broad powers in discovering and managing a decedent’s assets. A dependent administrator is designated by the court if no one is specified in the will. Dependent administrators are limited in comparison to independent executors and must receive court authorization before they can access or make any decisions regarding the estate’s assets.

 Leaving Assets Behind? Create and Leave a Will 

If you know you’ll be leaving behind considerable wealth, invest a small amount of time into creating a will. Though it is fairly simple to create one, it is recommended to have an estate planning attorney help with this. (We are currently working with a client where the decedent used a software program to create her will, and there are lots of problems with it that have caused the client to hire our firm to resolve.) Once you have created your will, put it in a place where loved ones can easily find it. Make sure an executor has been named. Your will should also include a general summary of the estate’s assets and where they can be found. This information will be valuable when it’s time for your executor to gather property for probate.

Where Can an Executor Search for a Decedent’s Assets?

If no estate planning documents are available to provide an inventory and location of assets, the only option is to begin a thorough search that may include the following:

• Searching the decedent’s home for documentation – The first step in every asset search is surveying the decedent’s home for any helpful documentation. This could be a will, but it could also be property titles, account passwords, contact information for an attorney or CPA, or anything else that could be helpful in guiding the executor. If important paperwork is at the decedent’s home, it may be located in a filing cabinet, a safe, a lockbox, or another secured container. If you are lucky, the decedent will have everything specified in the documents they leave behind. If not, you’ll need to dig deeper.
• Searching the decedent’s phone or computer for information records – If a home search doesn’t turn up any critical paperwork, an independent administrator (or authorized dependent administrator) can search the decedent’s phone and computer for information. Chances are, these devices will be secured, but administrators may hire a computer forensics expert to crack through the device’s security and search for passwords, account information and the like. Authorized administrators are allowed to hire anyone they deem necessary to access the decedent’s assets.
• Contacting financial institutions and working with them to access accounts – Regarding bank, brokerage and retirement accounts, the first step is locating them. This can be a major challenge itself, and it may only be the beginning. Once the decedent’s accounts have been identified, the administrator will need to open up communication with the relevant banks or financial institutions. The mission here is to convince the institution to provide account information, but this rarely comes easy. The manager in charge of the decedent’s account likely won’t have the authority to provide this information. Further, banks almost always deny account information requests unless compelled to do so.
• Seeking court orders to authorize access or compel a third party to cooperate – When access-related roadblocks do emerge, and they will, administrators will need to get the courts involved. In most cases, financial institutions will provide the desired information if they receive a court order, but it must include the right provisions. If financial institutions are particularly stubborn, they can be compelled to respond to a court summons and explain their reasoning. In the majority of instances, it won’t come to this.
• Locating the decedent’s accountant, attorney or insurance agent – The decedent’s accountant, attorney and insurance agent can provide extremely valuable insight into the decedent’s assets, where they may be located, and whether the estate is involved in any judgments. You can track down essential financial documentation such as tax returns as well.

Searching for a Decedent’s Assets? Consult with an Experienced Estate Planning Attorney

If you’ve stepped into an administrator role and are responsible for tracking down a decedent’s assets, it can be overwhelming. Our firm has assisted many administrators in this process, and it typically requires detailed, creative thinking to complete. If you’re an estate’s administrator or a potential heir, and you’re not sure what the next steps are, our expert team of CPAs and attorneys can offer solutions and expedite the process of finding a decedent’s assets.

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Talk of condemnation and eminent domain are standard for most attorneys, but they are not as well understood by the general public. This is due in part to the multiple definitions of condemnation. The most widely accepted explanation of this term is generally the declaration of something as reprehensible or wrong, or the declaration of something as unfit for use.

However, when it comes to condemnation and eminent domain and their relation to each other in the legal sphere, the definition rings a little different.

The Basics of Condemnation and Eminent Domain

The power of eminent domain is the government’s right to take private property that is intended for public use. In this scenario, condemnation describes the process by where a government agency can utilize the power of eminent domain.

Condemnation and eminent domain have long been an issue in American history as the country has grown and required modifications of land for the people who live on and around it. For example, as a form of condemnation, the government may need a particular piece of property to:

• build or expand a public road
• enact measures for flood control
• perform infrastructure work such as building a school

Under the lens of eminent domain, the government does have the power to take property used for public use, but both the federal constitution and state laws require fair compensation be paid to the landowner. Specifically, the United States Constitution features the Takings Clause, which stipulates that the government cannot take property without providing just compensation to the owner.

As you might imagine, there is not always an agreement as to what constitutes as fair. For this reason, it is not uncommon to have hearings and disputes with the government over the property’s land value and the amount being paid for it. Contrary to what you may think, there does not have to be a final determination of just compensation before the government may take possession of the property.

Many times, the property is already in the process of public use while the parties are still debating the land value. As explained below, the parties can agree to government use of the property while the fair value is later determined in hearings and appeals.

The Main Steps in Condemnation and Eminent Domain

There are two main steps that must happen in a condemnation and eminent domain case:

1. Determining if the land in question is required for public use
2. Determining how much the property is really worth

When it comes to confirming land is indeed intended for public use, the government must indicate what they plan to use it for. Often in Texas, the government is serious about the process because it is needed to promote community safety via widening a road, expanding a landfill, or managing flood control.

However, there are instances in which someone could question the legitimacy of that public use. For example, if certain members of the government have become corrupt and abuse the process by taking land they do not need in the name of some political issue, it can be challenged. Proving corruption and an abuse of power can be an uphill battle. Another example might be if the government says they need six inches of a person’s land to widen a road. Six inches is not much; therefore, it may be questioned if there really is a proper “public use” argument. Yet, the landowner can be at a disadvantage in winning these cases if a safety issue is involved.

Once it has been established that the piece of property is indeed for public use, the next step is determining how much the land or property is effectively worth. This also includes consideration of how much the taking of that land might reduce the value of any remaining land on the property.

For instance, taking six inches out of a person’s front yard can be relatively minor in comparison to the size of the yard left behind.  However, if it is proposed that 20 feet be taken out of a front yard, it could mean that the property will no longer have much of a yard at all, which in turn can significantly affect the value of the house. In situations like this one, the government may be forced to take an entire lot even though they only need 20 feet of it solely because of the damage it will do to the remaining lot.

The Sometimes-Unusual Timeline for Condemnation and Eminent Domain

Although some might think the process of condemnation and eminent domain would be linear, there are times when it is not.

Once both parties have agreed that they are not going to challenge the public necessity of the property, a special commissioner’s group may convene and determine the initial price they will offer for the property.

At this point, the government can go ahead and begin clearing and using the land for the intended public use even though there may still be quibbling over the price.

For example, the original value determination may be $5 per square foot. It is possible that the landowner could find an appraiser to testify that the property is actually worth $8 per square foot. Should this be proven in a court of law within the county of the property, the landowner might end up making more money than previously thought. That said, if during the litigation it comes out that the property is actually only worth $4 per square foot instead of $5, the landowner will likely lose that extra dollar per square foot.

However, in most cases there tends to be a settlement that ends up being somewhere between the initial offer and the new appraised price, which negates the need for litigation. Still, there are some cases that will go to court to determine the rightful value of the property.

If you have questions about condemnation and eminent domain, protect your rights by consulting with a reputable and experienced attorney.

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A receivership is a legal process through which a “receiver” (or trustee) is given limited control over an individual’s or entity’s assets in order to protect those assets and ensure they can be used in transactions with creditors.

Receiverships are typically requested by creditors and ordered by the court, though they may be established by a regulatory body, such as the FDIC, or requested by a private party. The court may also appoint a person as the receiver when ordering the receivership, but not always. In some instances, the court may request the parties involved to agree on a receiver, who then steps into the role.

When Is a Receivership Needed?

Receiverships are usually requested by a creditor seeking payment from a borrower in default. Once requested, they are authorized through a court order or an order through a regulatory body. Creditors ask for a receivership in order to protect the assets owed to them.

Other instances when a receivership may be required include:

• During a bankruptcy case – During bankruptcy proceedings, the court may appoint a receiver to manage the bankrupt entity’s assets and oversee their liquidation. By entrusting the assets to a receiver, creditors know their interests are protected by an independent third party.
• When an entity’s principals cannot negotiate a decision – If partners or shareholders dispute the ownership of assets within the entity or cannot otherwise come to an important business-related decision, they may request a receivership. In this instance, the receiver acts as an impartial manager for the entity’s assets while its principals work through their disagreement. This is common for businesses heading toward bankruptcy and in the process of liquidating assets.

• When mismanagement of a trust or estate is suspected – Receiverships may necessary in the case of family disputes over the management of trusts or the assets in a decedent’s estate. Parties who suspect trust or estate assets are being misused or not allocated according to the grantor’s or decedent’s wishes may motion the court to appoint a receiver to manage the assets according to estate documents or private agreements.

• When a company has acted fraudulently – If a company is suspected of fraud, a government regulator may order a receivership to prevent assets from being lost or hidden from creditors. When a receiver is appointed during a fraud case, they may be given expanded powers to discover litigation and attain financial documentation.

What Can a Receiver Do with the Assets They Are Trusted With?

The court (or regulator) dictates the terms of the receivership upon its creation. Among these terms are the powers granted to the receiver, which may include:

• Making any decisions allowed under an entity’s charter, articles or bylaws or allowed by any previous agreements or estate documents
• Taking any actions deemed necessary to manage the company’s business affairs
• Purchasing or leasing vehicles, equipment or other materials necessary to run the business
• Making payments to creditors
• Making any payments necessary to preserve the receivership’s assets
• Borrowing funds to maintain the company’s operations
• Engaging in legal action, or responding to legal action against the business
• Paying out – or cease paying out – dividends to shareholders
• Redistributing disbursements to beneficiaries per agreement and court order

In the case of a receivership of business assets, the company’s original owners remain the material owners of the entity, but their powers are greatly limited once a receivership is instituted. In the case of a trust or an estate, the powers of the trustee or executor may be greatly limited or temporarily removed during receivership.

What Are the Receiver’s Responsibilities?

Receivers are expected to act as good stewards for the assets they are trusted with. This includes:

• Making decisions that protect the assets and property
• Observing concepts like fair market value (FMV) when liquidating assets
• Ensuring a company operates within the bounds of all government regulations
• Collecting funds from asset liquidation and pay out creditors
• Help steer the entity toward a period of recovery
• Observing all provisions in the court order authorizing the receivership

Receivers are empowered by the courts to essentially act as the entity’s primary decision maker, but this comes with major responsibilities.

Qualities to Look for in a Receiver

Receiverships consolidate a great deal of decision-making power into a single individual. Given their role, receivers should bring the following qualities to the case:

• Prior experience as a receiver – Receiverships demand a breadth of skills (accounting, business management, communication, legal) that are difficult to find in a single person. If an individual has proven themselves in prior receivership roles in the past, they will be better prepared to manage future receiverships. Our staff includes accounting and legal professionals who have performed in receivership roles for decades – including receiverships where judges sought us out in particular.
• Legal experience – Receivers must be certified accountants before they can take on a receivership position. However, some receiverships involve complex legal matters like executing or responding to litigation. Receivers are also expected to observe all applicable regulations when making their decisions, and these regulations may have legal consequences. A receiver who can provide specialized legal knowledge can consider the financial and legal consequences of every decision.
• Trustworthiness – Receivers may have considerable latitude in how they manage a company’s affairs. They must also serve as an impartial third party. Trust is an important quality in a receiver as they must put aside their personal biases when acting in the role. The courts will look for an established accountant or attorney – preferably one with past receivership experience – to ensure the receiver is trustworthy.
• A steady demeanor – Receivers are frequently thrust into the middle of situations where emotions are running high. Shareholders may hotly contest which assets to liquidate if they are facing bankruptcy. There may be legal action between the entity’s principals, so their legal teams may not even get along. Receivers are expected to manage these emotions as they make the best decisions for the business.

Receiverships Are a Powerful Solution for Protecting Assets and Creditors 

Receiverships are a valuable asset-protection tool and can resolve deadlocks that may hold up bankruptcy proceedings, fraud cases, or internal disputes within a company. Though typically court-ordered, receiverships are also appropriate for private parties looking for an impartial, expert asset manager while important decisions are negotiated.

If your case requires a knowledgeable receiver that offers accounting and legal expertise, the May Firm can provide receivership services grounded in decades of experience.