Posts Tagged ‘intestate’

Intestate Succession Rules Can Be Tricky to Apply

APRIL 4, 2016 VOLUME 23 NUMBER 13

March was “Write-a-Will” month (sometimes referred to as “Why a Will” month). Though we’ve never understood the difference, August will be “Make a Will” month again this and every year.  In the United Kingdom, every March and October are “Free Wills” months. Or is it April?Or is that only in Canada?

With all the emphasis on the importance of getting estate planning done, you’d think people would actually get around to writing a will. It turns out that any month is a good one for illustrations about why making a will is important.

Consider Kent Konrad (not his real name), who died in Michigan in February, 2012 — just weeks before his 60th birthday. He never wrote a will. His estate became embroiled in a fight about who was entitled to receive his property.

Kent never married, never had children. Both of his parents had died before him. The Michigan rules for “intestate succession” (the default distribution for people who have not made a will) directed that his estate should be distributed half to the descendants of his maternal grandparents, and half to the descendants of his paternal grandparents.

That seems fairly straightforward, but there was a wrinkle. Kent’s father was a posthumous child. In other words, Kent’s grandfather (Karl) died before Kent’s father was born. In fact, Karl died as a result of a fight over the affections of Kent’s grandmother; the couple had quarreled, and Karl had threatened anyone who might try to date his girlfriend. When another man attempted to kiss her, Karl knocked him down with a single blow — the suitor got up and stabbed Karl to death. Karl died in 1931; Kent’s father was born three months later.

Kent’s grandmother never had any other children, so under Michigan law his paternal relatives’ share would go to Karl’s other descendants — a son Ernest. Except for the wrinkle.

Kent’s maternal relatives argued that Ernest should not receive any share of Kent’s estate. Why not? Because Karl never acknowledged Kent’s father, and never agreed to support him. Under Michigan law (Arizona has a similar statute), that permitted an argument that Karl could not inherit from his son or his son’s children — and that arguably would cut Ernest out from receiving any share of Kent’s estate.

Nonsense, ruled the Michigan probate judge. Not only was Ernest the closest relative in Kent’s paternal lineage, he should receive half of Kent’s estate. The other half would be divided among Kent’s cousins on his mother’s side of the family.

The Michigan Court of Appeals agreed. The fact that Karl died before ever even meeting his son did not amount to a refusal to acknowledge or support him, according to the appellate court. Although one of the three appellate judges deciding the case disagreed, the court upheld the probate judge’s ruling by a 2-1 vote. Estate of Koehler, March 24, 2016.

It is important to keep in mind that the legal dispute over Kent’s estate could easily have been addressed. All Kent needed to do was to sign a will. The precise relationship of his uncle and cousins would then have been unimportant. He could have left his estate in shares, or all to his uncle, or all to his favorite cousin, or all to his girlfriend, or to charity. He could have left some or all of his estate in trust to take care of his two dogs — or any variation or combination of those choices.

If Kent had signed a will, could his uncle, or his cousin, have challenged the will? Well, yes — but will challenges are very rare, and even more rarely successful. It would not be enough to show that there was confusion over his family relationships — anyone contesting the will that Kent should have signed would have to show that he was incompetent, or mistaken, or unduly influenced.

Why do people not get around to signing wills? Reasons vary, of course — some people don’t think it’s important, some just can’t get focused on their own mortality, some mean to make that appointment but just don’t get around to it.

Don’t wait for a pre-set month to get your will written. Don’t wait for inspiration, or discounts, or free clinics. If you don’t have a will, this would be a really good month to get the task done.

Do-It-Yourself Will May Not Save Costs After All

APRIL 7, 2014 VOLUME 21 NUMBER 13

From time to time we devote our weekly newsletter to a story about estate planning gone wrong — often (but not always) because of an individual’s decision to forego the help of a lawyer in drafting a will or trust. Lawyers also make mistakes, of course, but they are trained and paid to anticipate most of the kinds of issues that might arise. Untrained individuals may not have the skill or luck to foresee problems.

Consider Diane, who decided to write her own will. She bought a pre-printed will form at a bookstore, and opened up the package. In the middle of the form was a big open space with the language:

“I direct that after payment of all my just debts, my property be bequeathed in the manner following:”

Below that awkward introductory sentence, on the lines in the form, Diane wrote in:

“To my sister Mary Ann, my BigBank Checking and Savings Account, my house at 123 Poplar Street and its contents, my 2010 Dodge Truck and my Friendly Investments IRA. If Mary Anne dies before me, I leave all listed to my brother John.”

Diane completed the form properly, signed it, had it witnessed by two people and had the entire document notarized. She felt pleased that she had accomplished this task efficiently and inexpensively.

Do you already see what was wrong with Diane’s will? If you are a lawyer, you probably do — but you might not if you are not a lawyer.

Three years later Mary Ann died — before her sister, and before Diane’s will could leave anything to her. In fact, Mary Ann left her own home and bank account to Diane. Diane took the $120,000 she inherited from her sister and opened a new brokerage account at Friendly Investments (the same brokerage house where her IRA was located). Then, two years after Mary Ann’s death, Diane died.

Diane’s brother John did survive her. So did the two daughters of her other, deceased brother Jim. So who inherits what?

Those are essentially the facts of a recent Florida Supreme Court case, Aldrich v. Basile, (March 27, 2014), except that we have changed the names and a few of the details. In that case, the probate judge decided that Diane intended to leave everything to her brother John, and ordered that her nieces would receive nothing. The Court of Appeals ruled that Diane had died without a complete will, and that her nieces would receive a share of the undesignated part of her estate — the home and account she had inherited from her sister. The Florida Supreme Court had to decide between those two views, and ultimately sided with the Court of Appeals. Diane died “partially intestate” and the unspecified part of her estate would pass to her living brother and her late brother’s children. Her nieces received a share — a small share, to be sure — of her estate.

Now you can more easily see what was wrong with Diane’s will. She did not include a “residuary clause” providing for assets not listed in her will. If she had added a few short words to the end of the dispositive language she could have provided for distribution of “all the remaining assets I might own” or something similar.

Perhaps Diane actually did want to leave her inheritance to all of her relatives, and the failure to provide for it was not oversight but intentional. Well, there are more facts in the Florida case that we haven’t shared with you yet. After Mary Ann’s death, Diane grabbed a note pad (ironically, with the pre-printed heading “Just a Note”) and wrote out her additional instructions: “I reiterate that all my worldly possessions pass to my brother” John. She signed it, dated it, had it witnessed by one person (John’s daughter) and put it in the envelope with her will. Her wishes were pretty clear: she wanted to leave everything to John. That wasn’t what happened, however.

Diane’s will would actually have worked in Arizona. Unlike Florida, Arizona recognizes “holographic” (handwritten) wills even when they are not properly witnessed. Her “Just a Note” note would probably have been treated as an amendment or codicil to her will, and would probably have been admitted in Arizona probate court.

What is the lesson to be learned from Diane’s story (and case)? Even if you think your estate is small, and you want a “simple” will, you should see a lawyer. As we said at the beginning of Diane’s story, we’re trained and paid to think of how things might go wrong, or at least change, if circumstances change, and we’re familiar with the rules for wills, trusts and probate proceedings. Ultimately, Diane’s estate would have saved a lot of legal fees for the very modest cost of a lawyer at the outset — and what she wanted could actually have happened.

Definitions For Common Estate Planning Terms

FEBRUARY 3, 2014 VOLUME 21 NUMBER 5

Judging from the questions we field online and from clients, there is a lot of confusion about some of the basic terms commonly used in estate planning. We thought maybe we could do a service (and make our own explanations a little easier) by collecting some of the more-common ones — and defining them. Feel free to suggest additional terms or quibble with our definitions:

Will — this is the starting point for estate planning. It is the document by which you declare who will receive your property, and who will be in charge of handling your estate. Note, though, that if you have a “living trust” (see below), your will may actually be the least important document in your estate planning bundle.

Personal representative — this is the person you put in charge of probating your estate. It is an umbrella of a name, encompassing what we used to call executors, executrixes, administrators, administratrixes and other, less-common, terms. If you use one of the old-fashioned terms in your will, that probably won’t be a problem — we’ll just call them your “personal representative” when the time comes. Note that your personal representative has absolutely no authority until you have died and your will has been admitted to probate.

Devisee — that’s what we call each of the people (or organizations) your will names as receiving something.

Heir — if you didn’t have a will, your relatives would take your property in a specified order (see “intestate succession” below). The people who would get something if you hadn’t signed a will are your “heirs.” Note that some people can be both heirs and devisees.

Intestate succession — every state has a rule of intestate succession, and they are mostly pretty similar. The list of relatives is your legislature’s best guess of who most people would want to leave their estates to. Think of it as a sort of a default will — in Arizona, for instance, the principles of intestate succession are set out in Arizona Revised Statutes Title 14, Chapter 2, Article 1, beginning with section 14-2101 (keep clicking on “next document” to scroll through the relevant statutes).

Escheat — that’s the term lawyers use to describe the situation where you leave no close relatives, or all the people named in your will have died before you. Escheat is very, very rare, incidentally. Note that the Arizona statute eschews “escheat” in favor of “unclaimed estate.” There is a different, but related, concept in the statutes, too: if an heir or devisee exists but can’t be found, the property they would receive can be distributed to the state to be held until someone steps forward to claim their share. That is not an unclaimed estate, but an unclaimed asset.

Pourover will — when you create a living trust (see below), you usually mean to avoid having your estate go through probate at all. If everything works just right your will won’t ever be filed, and no probate proceeding will be necessary. Just in case, though, we will probably have you sign a will that leaves everything to your trust — we hope not to use it, but if we have to then the will directs that all of your assets be poured into the trust.

Trust — a trust is a separate entity, governed by its own rules and providing (usually) for who will receive assets or income upon the happening of specified events. Think of a trust as a sort of corporation (though of course it is not, and it is not subject to all of the rules governing corporations). It owns property and has an operating agreement — the trust document itself. There are a lot of different types of trusts, and usually the names are just shorthand ways of describing some of the trust’s characteristics.

Testamentary trust — the first kind of trust, and the oldest, is a trust created in a will. Of course, a testamentary trust will not exist until your estate has been probated, so it is of no use in any attempt to avoid probate. But  you can put a trust provision in your will so that any property going to particular beneficiaries will be managed according to rules you spell out. Testamentary trusts are relatively rare these days, but they still have a place in some estate plans.

Living trust — pretty much any trust that is not a testamentary trust can be called a living trust. The term really just means that the trust exists during the life of the person establishing the trust. If you sign a trust declaration or agreement, and you transfer no assets (or nominal assets) to it but provide that it will receive an insurance payout, or a share of your probate estate, it is still a living trust — it is just an unfunded living trust until assets arrive.

Trustee — this is the person who is in charge of a trust. Usually we say “trustee” for the person who is in charge now, and “successor trustee” for the person who will take over when some event (typically the death, resignation or incapacity of the current trustee) occurs. There can, of course, be co-trustees — multiple trustees with shared authority. Sometimes co-trustee are permitted to act independently, and sometimes they must all act together (or a majority of them must agree). The trust document should spell out which approach will apply, and how everyone will know that the successor trustee or trustees have taken over.

Grantor trust — this is a term mostly used in connection with the federal income tax code, but sometimes used more widely. In tax law, it means that the trust will be ignored for income tax purposes, and the grantor (or grantors) will be treated as owning the assets directly. Most living trusts funded during the life of the person signing the trust will be grantor trusts — but not all of them. Outside of tax settings the term “grantor trust” is often used more loosely, and it can sometimes mean any living trust whose grantor is still alive.

Revocable trust — means exactly what it sounds like. Someone (usually, but not always, the person who established the trust) has the power to revoke the trust. Sometimes that includes the power to designate where trust assets will go, but usually the trust just provides that upon revocation the assets go back to the person who contributed them to the trust.

Irrevocable trust — a trust that is not a revocable trust. Oddly, though, a trust can have “revocable” in its name and be irrevocable — if, for example, Dave and Sally Jones create the “Jones Family Revocable Trust,” it probably becomes irrevocable after Dave and Sally die. Its name doesn’t change, however.

Special needs trust — any trust with provisions for dealing with the actual or potential disability of a beneficiary can be said to be a special needs trust. Usually, but not always, a special needs trust is designed to provide benefits for someone who is on Supplemental Security Income (SSI), Social Security Disability (SSD) or other government programs. Sometimes the money comes from the beneficiary, and sometimes from family members or others wanting to provide for the beneficiary.

There’s more. A lot more, actually. Has this been helpful? Let us know and we’ll add to it in coming weeks. In the meantime, a reminder: ask your estate planning lawyer for help with these concepts. Don’t be embarrassed that they seem complicated — they are complicated.

Posthumously Conceived Twins Denied Survivors Benefits

MAY 28, 2012 VOLUME 19 NUMBER 21
The United States Supreme Court doesn’t very often weigh in on Social Security rules, so when it does those of us in the elder and disability law community pay attention. Last week’s decision by the Court, interpreting Social Security regulations as applied to posthumously conceived children, addressed interesting questions of law, science and public policy.

Here are the bare facts: Robert and Karen Capato lived in Florida. Robert was being treated for esophageal cancer, and before chemotherapy and radiation treatment began the couple preserved a sample of Robert’s sperm. That way, Karen would be able to conceive another child (the couple had one child together already) by Robert even if his treatment left him infertile — or even if he died.

Robert Capato did die of cancer. Nine months after his death Karen became pregnant using his banked sperm. Eighteen months after Robert’s death she delivered twins.

Karen applied for Social Security survivors benefits for the twins. Citing Florida law on inheritance rights, the Social Security Administration denied the benefits (presumably the couple’s child conceived and born before Robert’s death qualified for benefits). The federal District Court agreed with Social Security, but the federal Court of Appeals reversed that decision and ruled in favor of Karen and the twins. The U.S. Supreme Court sided with Social Security, reversed the Court of Appeals and sent the entire case back for a final determination. Astrue v. Capato, May 21, 2012.

But what’s most interesting about the Supreme Court’s decision may be what it doesn’t decide. It does not rule that no child conceived and born after the death of the child’s father can ever receive Social Security benefits on that father’s work record. It does not bar careful planners from preserving future benefits for children born as a result of in vitro fertilization. Instead, it holds that the basic test is whether state law — usually the state law where the father dies — controls whether the posthumously conceived child is entitled to Social Security survivors benefits.

The Court unanimously ruled that Social Security is only available to survivors who are determined to be heirs of the deceased worker. In Florida, said the Justices, that would not include children conceived after the death of their father. Florida’s probate code expressly excludes after-conceived children, and Robert Capato’s will did not make reference to children who might be conceived after his death.

But does Florida law apply in this case? Probably — but the Justices left open the possibility that the trial judge could find otherwise after a new hearing. Interestingly, Karen Capato moved to New Jersey while pregnant with the twins, and she argued (unsuccessfully, so far) that New Jersey law should apply to the determination of paternity.

Can we infer the answers to some of the obvious questions you might ask? Perhaps — but not conclusively, of course.

If Florida changed its law to make posthumously conceived children entitled to intestate inheritance, would that change the result for the Capato twins? Probably not — but it should change the result for future Florida residents in similar circumstances.

If Robert Capato’s will had specifically mentioned the children he might have in the future, would that have changed the outcome? Hard to say, but tantalizingly interesting. Apparently, Robert and Karen specifically mentioned their intention to preserve sperm for future in vitro fertilization to the lawyer who prepared Robert’s will. Should he of she have included the unknown future children as beneficiary’s of Robert’s estate? Perhaps that would have changed the result.

What if Robert Capato had lived — and died — in Arizona? It’s not clear. Arizona’s probate code does not expressly define posthumously conceived children as either included or not included in the list of intestate heirs. No Arizona appellate case has decided the question, either (though there is at least one reported Arizona case involving the status of sperm intended to be preserved for possible future in vitro fertilization).

What about the laws of intestate succession in other states? Well, we’re not qualified or inclined to render legal opinions about other state laws. But we will note that the Supreme Court specifically pointed to the intestacy laws of several states as dealing with posthumously conceived children. Among the states with some treatment of the question (in addition to Florida) the Court included California, Colorado, Georgia, Idaho, Iowa, Louisiana, Minnesota, New York, North Dakota, South Carolina and South Dakota. There is no mention of New Jersey law — the law Karen Capato would like to apply to the twins’ claim.

Want to read the entire opinion — or even listen to the oral argument before the Supreme Court? Look to the excellent Oyez multimedia website maintained by the IIT Chicago-Kent College of Law.

Only Preponderance Of Evidence Required To Disinherit Killer

SEPTEMBER 25, 2000 VOLUME 8, NUMBER 13

David Pickett died in Portsmouth, New Hampshire, in February, 1993. The cause of his death, as the New Hampshire Supreme Court later described it, was “the infliction of an incision wound to his neck by one or more unknown persons.” No one has been prosecuted for his murder, but the police did have a suspect—his brother Robert.

During his life David Pickett never got around to signing a will. In the language of the law, he died “intestate.” Under New Hampshire law (as under the law of most states), that means his estate would pass first to his spouse, then to his children and grandchildren, then to his parents and their issue. David Pickett was not married and he had no children; his parents were both already dead. That meant that his estate would be distributed half to his sister Mary P. Hopwood and half to his brother Robert Pickett.

Mary Hopwood filed an action in the New Hampshire courts asking that Robert Pickett be precluded from receiving his share of the inheritance. She claimed that he had killed his brother, and she pointed to a long-standing provision of the law that prevents a killer from profiting from his wrongful act. He should be treated as having died before the brother he killed, she argued, and that would mean that she would receive the entire estate.

If Robert Pickett had been charged with murder, of course, the prosecutor would have to prove beyond a reasonable doubt that he had killed his brother. Mary Hopwood would not have that heavy of a burden of proof, but the lawyers in the case disagreed about what standard did apply to her claim. Would she only have to show that it was more likely than not that brother Robert killed David, or would she have to prove that assertion by the more rigorous standard of “clear and convincing evidence?”

The trial judge held her to the higher standard, and ruled that she had not met her burden of proof. She appealed to the Supreme Court, which determined that she should have only been required to show that Robert Pickett was more likely the killer than not; the case was remanded to give her another chance.

At the first trial, Ms. Hopwood tried to introduce evidence from the pending criminal investigation, including a recording of conversations between her daughter and Robert Pickett. The trial judge had precluded all evidence from the criminal investigation to protect ongoing police efforts. The appellate justices directed that the transcript be admitted. The key question addressed in those transcripts: did Robert Pickett mail a letter to “the Estate of David Pickett” on the morning before (or, as he insisted, immediately after) he was informed by police of his brother’s death? Hopwood v. Pickett, August 23, 2000.

Like New Hampshire, Arizona provides for the automatic disinheritance of a killer. Conviction in a murder trial is one way to accomplish that result, but even if the alleged killer is not convicted (or not even charged) other heirs can file a request for the disinheritance. Arizona’s statute makes it crystal clear that only the lower standard of proof–preponderance of the evidence–is required, just as the New Hampshire Supreme Court ultimately ruled.

An interesting sidelight to the Hopwood v. Pickett case: while the appeal was pending, the New Hampshire Supreme Court was rocked by (unrelated) allegations of misbehavior and malfeasance. After briefs had been submitted and oral argument concluded, one Justice resigned under a cloud, another decided to accept retirement and a third (the Chief Justice) removed himself from consideration of the Pickett case, apparently to focus his attention on an impeachment trial in the State Senate. Since that left only two Justices to decide the issue, the Court asked two newly appointed Justices to fill the gap, even though they had not heard the oral argument of lawyers. With the consent of lawyers from both sides, those four jurists unanimously decided the Pickett case. Apparently the New Hampshire judicial system works reasonably efficiently even in times of crisis.

©2017 Fleming & Curti, PLC