Posts Tagged ‘Oklahoma Supreme Court’

Estate Tax Portability — What If the Executor Refuses to File?

JANUARY 30, 2017 VOLUME 24 NUMBER 5
We knew it would happen, and now it has. A surviving spouse has sued to force the administrator of the deceased spouse’s estate to file a federal estate tax return to perfect the “portability” election. Before we can tell you how it turned out, we’ll need to explain the controversy.

April Villarreal died last year. Her estate was not large enough to require a federal estate tax return (that is, she did not have more than $5.45 million, the 2016 estate tax exemption amount). She and her husband Charlie had a prenuptial agreement, which provided that her assets would all go to her children — Charlie would have no interest in her estate at all.

April did not leave a will, but based on the prenuptial agreement her son Richard filed for and secured appointment as administrator of her estate in the Oklahoma courts. Actually, there were various legal moves and counter-moves leading up to that appointment, but within a few months of April’s death Richard was clearly in charge of administering her probate estate, and it had become clear that Charlie had waived any interest in her estate.

Seven months after April’s death, and after Richard had indicated he had no intention to file a federal estate tax return, Charlie filed a petition asking the court to order Richard to file a return. Clearly there was no tax liability — so why was he insistent?

That’s easy. Most people know that a surviving spouse “inherits” the deceased spouse’s federal estate tax exemption amount — or at least to the extent that it has not been used. In other words, if April left (just to pick a number) one million dollars to her children, then Charlie could receive an additional $4.45 million exemption to reduce — and possibly eliminate — the estate tax liability on his own, later, death. But that transfer only works if the deceased spouse’s estate administrator files a federal estate tax return.

Why would Richard refuse to file a return? There would not be any tax due or paid, though there would be some costs — and significant work — involved in preparing the return itself. Filing the return would not benefit April’s own estate in any way.

Richard argued that the prenuptial agreement Charlie had signed before the couple’s 2006 marriage expressly waived any interest in April’s estate. That’s true, responded Charlie — but that doesn’t mean that a benefit that costs her estate nothing and would help him should simply be allowed to evaporate. Besides, the agreement was signed before the portability benefit even existed under federal law.

The estate tax benefit, by the way, is properly referred to as the “Deceased Spousal Unused Exclusion Amount” (or DSUEA). The federal law creating a DSUEA system does not permit the injured spouse to file their own version of an estate tax return — it must be filed by the estate’s administrator (or the person who would have been the administrator, in cases where no administration is required).

The Oklahoma probate court ordered Richard to file the return. Because much of the information on the return would actually come from Charlie, the court ordered him to cooperate and provide the necessary documentation within a short period. Because the return was technically due in only about two months, the judge also ordered Richard to seek an extension for filing the return. Charlie was ordered to pay for the return’s preparation.

Richard appealed. The Oklahoma Supreme Court considered the case very quickly, and rendered its opinion upholding the trial judge. The order directing Richard to file the estate tax return, and to make the election to preserve the DSUEA for Charlie, was approved. Given the time-sensitive nature of the issues, the entire process (from Charlie’s original motion to the Supreme Court ruling) was accomplished in just five months.

The Oklahoma Supreme Court ruling makes clear that the probate court has jurisdiction to decide questions about estate administration. The mere fact that the issue was really about federal filings, not state issues, did not mean that the state court had no authority. The existence of the prenuptial agreement — especially since the right to carry over unused tax exemptions didn’t even exist at the time of the agreement — did not prevent Charlie from making his request. Estate of Vose v. Lee, January 17, 2017.

There has been much discussion in the professional probate and estate planning community about just this question. Can a personal representative (what used to be called an executor) refuse to file a return just because they don’t want to, or out of spite, or because they don’t want to be bothered? The opinion in April’s case notes that the personal representative has a fiduciary duty to the beneficiaries of the estate — and that a spouse is a beneficiary even if all they receive from the estate is the DSUEA election.

April’s case presents the argument very concisely. It’s hard to see what possible objection there might be to filing the estate tax return, where Charlie is ordered to provide all the documentation and pay the costs. The only reason to refuse the election would be the intransigence of the deceased spouse’s children. Given the blended families so common today, it seems like similar circumstances will arise with some frequency.

Common-Law Marriage, Divorce and Probate, All In One Case

DECEMBER 19, 2016 VOLUME 23 NUMBER 47
Here’s a question we hear frequently: how long does a couple have to live together in order to be considered married? The answer in Arizona: until the wedding ceremony.

In other words, Arizona does not recognize “common-law” marriages. That strong, direct statement, however, masks a more complicated answer. Arizona, like every other state, will recognize a marriage that was validly established in another state — so if a couple living in, say, Oklahoma (which does recognize common-law marriages) meets that state’s requirement to be treated as validly married, and they then move to Arizona, they will be married under Arizona law, as well.

No state, however, has a concept of concept of common-law divorce. That is, a divorce must be granted by a court, and can not be established by the couple simply acting as if they were divorced. And no state recognizes bigamous marriages — so if a couple is already married (by common-law or by a formal state-recognized marriage), neither spouse can enter into another marriage, whether by common-law or regular ceremony.

Try telling all that to Rhonda Brown, an Oklahoma woman who seems to have a fairly fluid concept of marriage. She and Bobby Joe Brown were married in 1995, and they had three children together. After a few years of marriage, though, she told her husband that she could not continue to live with him if he did not stop sleeping with other women, and when he did not change, she moved out on her own.

Rhonda moved around Oklahoma and Kansas for several years. She had children by another man (they were removed from her care by the Kansas authorities). According to her testimony, she and Bobby Joe still saw one another occasionally.

At one point Rhonda even “married” another man — though she said she always thought of the second marriage as a “sham.” How did that happen? According to her, she and Jimmy had been long-time friends and had always agreed they would marry one another if it was necessary for one to help the other out. After Jimmy’s release from prison, his grandparents let him live with them and supported him, but told him he needed to get married. When Rhonda agreed to visit his grandparents and tell them that she and Jimmy were going to get married, his grandparents immediately called a minister and had the ceremony that same day. She never saw Jimmy again, she said.

Meanwhile, Bobby Joe had moved in with another woman, Ami. Although they never had a marriage ceremony, Ami said that they always acted as if they were married, and held themselves out as husband and wife. That’s the very definition of common-law marriage in most states where it is permitted — including Oklahoma. They even had two children together and, according to Ami, they were a married couple in almost every respect. One problem: Bobby Joe was still married to Rhonda.

Then, in 2013, Bobby Joe died in a motorcycle accident. Ami filed a petition with the local probate court, alleging that she was the surviving spouse and asking for appointment as personal representative of his estate. The probate judge approved her appointment as personal representative; Ami did not mention Rhonda or give her notice of the proceedings.

Rhonda ultimately learned about the probate of Bobby Joe’s estate, and sought to remove Ami as personal representative. She pointed out that she had priority for appointment as Bobby Joe’s legal spouse, and that she was one of the heirs of his estate. The probate court heard testimony about the complicated relationship — and then denied Rhonda’s claim to priority for appointment.

The Oklahoma Court of Appeals affirmed the probate court decision, and Rhonda asked the state Supreme Court to review the ruling. The Oklahoma Supreme Court also agreed that Rhonda should not be appointed to administer her husband’s estate.

It is important to note that the state courts did not find that Rhonda and Bobby Joe were divorced, or that Bobby Joe and Ami were validly married. The ruling was ultimately based on concepts of “estoppel” — Rhonda could not make the legal argument that she was married to Bobby Joe because she had participated in another marriage, even though she claimed that her second marriage was a sham. To be more precise, the ban against her asserting her status as surviving spouse might be said to be partly because she admitted to a sham marriage — the courts decided that she should not be permitted to argue two inconsistent things in two different state proceedings. Estate of Brown, November 1, 2016.

The decision in Bobby Joe’s probate appeal was not unanimous, by the way. Six of the nine Justices of the Oklahoma Supreme Court agreed that Rhonda should not be allowed to seek appointment as personal representative, while three argued that there had been no divorce and Rhonda was still entitled to handle Bobby Joe’s estate.

It is also worth noting that the Oklahoma courts did not decide that Rhonda was not Bobby Joe’s surviving spouse. Though she could not insist on her priority for appointment as personal representative, the state Supreme Court decision does not say that she is not entitled to a share of Bobby Joe’s estate. That argument might be made later, back in probate court. We’ll let you know if we hear about it.

Why do we care about common-law (and other fluid concepts of) marriage in Arizona, where only properly recorded marriages are valid? For two reasons: (1) people who move to Arizona from Oklahoma, Kansas, Montana — or one of the handful of other states which recognize common-law marriages — might bring their confused marital statuses with them, and (2) we are constantly both surprised and intrigued by the complicated ways people live their lives.

It has been more than a decade since we last reported on common-law marriages, incidentally. In our 2013 newsletter article on the subject, we reported that fifteen states then recognized some form of common-law marriage. Today that number is down to eleven, with some dispute as to the status in one or two of those.

Paternity Testing Allows Unacknowledged Son to Share in Estate

NOVEMBER 21, 2011 VOLUME 18 NUMBER 40
Paternity testing has come a long way in the last few decades. You might reasonably think that it is now so easy to establish parentage that probate court disputes about the subject would be largely a thing of the past. If you thought that, you’d be wrong. Just ask Thomas Powell.

Mr. Powell’s experience in probate court began with the death of Oklahoma resident Valatus Merral Dicksion. Mr. Dicksion had been married, but his wife had died before him. He and his wife had two adult daughters. Mr. Dicksion left a four-page handwritten will, which originally had named one of his daughters as administrator of his estate. Someone had crossed out that portion of the will.

Mr. Dicksion’s brother filed the handwritten will with the probate court. He listed the two daughters as heirs, and described the will as being in his brother’s handwriting and signed by him. The court appointed him as personal representative.

A few months after the probate proceeding was initiated, Mr. Powell filed a petition seeking recognition of his status as a son of the decedent. He argued that the decedent had a relationship with Mr. Powell’s mother, and that his mother put him up for adoption shortly after his 1952 birth.

Mr. Powell and the decedent’s brother both agreed to DNA testing to see if paternity could be confirmed. The paternity testing results were conclusive: Mr. Powell was in fact the decedent’s biological son. The probate court then entered an order determining that he was an “unintentionally omitted” heir, and awarded him the same share of the decedent’s estate that he would have received if Mr. Dicksion had died without signing a will at all.

As the probate estate was wrapping up, Mr. Powell joined his half-sister in objecting to the validity of the handwritten will and sought removal of the decedent’s brother as personal representative. The probate court denied his objections and approved the final accounting of the estate. The probate judge also denied the personal representative’s request that Mr. Powell be ordered to pay the estate’s additional attorney’s fees incurred in responding to his requests.

Mr. Powell appealed to the Oklahoma Court of Appeals, which ruled (among other things) that the DNA testing should not have been used to determine paternity after Mr. Dicksion’s death — that paternity must be established before an alleged father’s death. Mr. Powell then appealed that result to the Oklahoma Supreme Court.

The state high court rewrote the outcome substantially in Mr. Powell’s favor. First, the justices decided that post-death paternity testing CAN be used to determine heirship, at least in Oklahoma. Then they ruled that an Oklahoma law preventing a decedent’s business partner from being appointed to administer an estate should have been applied to Mr. Dicksion’s brother. Finally, they ruled that the contest of Mr. Dicksion’s alleged will should have been formally resolved before the estate could be closed. In Matter of the Estate of Dicksion, November 15, 2011.

The decision was not unanimous. Of the nine members of the Oklahoma Supreme Court, five voted to uphold Mr. Powell’s paternity determination and four argued that prior Oklahoma court decisions should have been followed (which would have prevented the DNA tests from being used). The four dissenting justices did not address questions about the appointment of Mr. Dicksion’s brother as personal representative, or the status of the unresolved will contest.

Mr. Dicksion’s family situation and probate proceeding make for an interesting story. They also cast a little light on how probate contests can sometimes arise, and how resolution of disputes can be difficult and unclear (witness the 5-4 decision of the Oklahoma Supreme Court). It would be a mistake, however, to generalize too much from the result in this case.

All three parts of the Oklahoma Supreme Court holding are dependent on the peculiarities of Oklahoma law. The statute for determining paternity (and its effect on a will not mentioning a previously unknown child) is unusual in Oklahoma, and unlike that in Arizona. The prohibition on business partners being appointed as personal representative (unless mentioned in a will) is also unique to Oklahoma, and does not have an Arizona counterpart. Finally, Oklahoma is one of the minority of states which permits a “holographic” will to be valid (Wikipedia reports that 19 of the 50 U.S. states permit holographic wills — we haven’t checked that assertion, but it sounds about right to us). Arizona, like Oklahoma, does recognize holographic wills; in Arizona, a valid holographic will must have the signature and “material provisions” in the testator’s handwriting.

So what useful information is in the appellate decision in Mr. Dicksion’s probate case? Well, we might generalize a handful of principles:

  1. Know the local law, and update your estate planning if you move. While we might not be too concerned about the possibility of unknown descendants in Arizona, Oklahoma law appears to be significantly different. Whenever a client moves to another state, we urge them to meet with a lawyer in their new state to see if there are differences in state law that they should be aware of. This is the sort of difference we sometimes see and always caution about.
  2. Deal with contingencies in the planning documents, even if it seems unnecessary. If Mr. Dicksion’s will had included a provision that said “I intentionally omit any person not specifically named herein” (or similar language) would the result have been different? Perhaps not — but it might have strengthened the argument that an unknown child should not share in the estate. Of course, this is exactly why lawyers’ documents tend to be much longer and more complicated than non-lawyers think is absolutely necessary.

Court: “Massive Curtailment of Liberty” in Guardianship Cases

APRIL 21, 2008  VOLUME 15, NUMBER 43

We apologize. We like to think that we bring you the most interesting, useful and thought-provoking elder law cases, news stories and trends each week. Somehow we completely missed a great case last year. With thanks to our friend Prof. Rebecca Morgan for calling it to our attention, we will now attempt to remedy the oversight.

The actual holding of the Oklahoma Supreme Court in Matter of the Guardianship of Holly (June 26, 2007) may not be that powerful, but the language is. The issue was fairly simple: Danny Holly, a 58-year-old head-injured man whose daughter had been appointed as his limited guardian, wanted to hire his own attorney. He already had a firm representing him, and in fact he had chosen them four years earlier. But now he wanted to change lawyers.

The problem was that Mr. Holly’s guardianship (of his estate — what in Arizona would be called a conservatorship) was worth several million dollars, and everyone seems to have been concerned that he not be allowed to interrupt its administration by changing attorneys. They also expressed concern that he might be subject to undue influence by his new lawyers or others. His daughter and her lawyers agreed.

Mr. Holly’s judge scheduled a hearing on his request for new counsel. At that hearing the lawyers all argued about what should happen, but neither Mr. Holly nor anyone else gave sworn testimony. At one point the Judge said “I see no reason to swear in all of the attorneys. You are all officers of the Court.” Then he ruled that Mr. Holly could not change lawyers.

The Oklahoma Supreme Court eloquently and forcefully disagreed. The statements of counsel did not amount to evidence, ruled the Justices. “Unsworn, in-court statements by attorneys acting as advocates are not evidence,” the Justices noted.

Oklahoma law gives a ward the power to select his or her own attorney. Failure to allow Mr. Holly that right was reversible error, according to the state’s high court. Could that lead, as the guardian and the existing attorneys claimed, to a messy court proceeding? Perhaps, but “messiness has never been a valid reason for dispensing with one’s fundamental rights,” wrote the Justices. “Indeed, it is often a hallmark of the assertion of those rights.”

The Oklahoma court places its judicial finger squarely on the issue. Citing what it called the “massive curtailment of liberty” inherent in guardianship proceedings, the court opined that even after the appointment of a guardian “the proceedings must continue to be conducted with the utmost care to ensure that the ward subject to that curtailment receives due process.”

We feel better now, having shared this powerful appellate decision with you, our readers. We hope you forgive us the delay in getting it to you, and that you appreciate it as much as we do. We even hope many of our readers will have an opportunity to cite its language one day in a guardianship or conservatorship proceeding.

Would the same result (perhaps even the same strong language) obtain in Arizona proceedings? Likely. Arizona law is not quite as explicit about the right to select counsel, but in practice guardianship judges — and especially appellate judges — should be expected to fiercely protect the ward’s right to select counsel. If, on the other hand, there is actual evidence of undue influence, improper self-dealing or conflicts of interest, or other strong reasons to overcome the presumption in favor of the ward’s ability to select his or her own attorney, the result in individual cases might be different. Participants should start, however, with the assumption that the ward’s selection of his or her own attorney will be given effect.

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