When it comes time to complete estate planning, our clients usually have clear ideas about who should receive their property, what health care decisions they would want made — even how they feel about cremation, burial, organ donation and most of the other issues that must be addressed. What stumps more clients than any other issue? Who to name as trustee, personal representative (what we used to call an “executor”), and agent under health care and financial powers of attorney.
Some of the common questions we hear from clients about whom to select:
Is it acceptable to name a child who lives out of state? Yes, at least in Arizona, which does not require in-state residency for any of the various fiduciary roles. With e-mail, fax machines, overnight delivery and other modern communications options, there is usually little difficulty for your son on the east coast (or even your daughter in Japan) to communicate. In fact, we frequently observe that we may have an easier time communicating with your the Iowa sister you named as agent than your nephew who lives on the east side of Tucson.
There is one small exception to that rule, and it is more practical than legal. We generally counsel that the ideal health care agent should live near you. Reviewing medical records, talking to doctors and caretakers, and developing a clear picture of your condition is much easier for someone nearby.
Can I name several, or all, of my children as co-agents, co-trustees, etc.? Yes, though we may try to discourage you from naming multiple fiduciaries. To the extent that you are trying to avoid family disputes, it is our experience that giving everyone equal authority tends to encourage disagreements. We will probably suggest that you might want to name your daughter (the banker) as financial agent, and your son (the nurse practitioner) as health care agent — and each as back-up to the other. If you really want to give them joint authority, though, there is no legal reason not to do so.
Speaking of which, is it better to name different people to health and financial roles, or give the same person authority over everything? There is no clearly correct answer. You know your family (and their strengths and weaknesses) much better than we do. If there is one person who is capable in all areas, by all means give that person authority as health care agent, financial agent, personal representative and trustee. You can segregate the roles as a means of providing checks and balances, or to give everyone reassurance that you value their input.
Do I have to tell everyone involved who will have which authority? No. But as a practical matter, we encourage you to do so. We want your daughter to realize, for instance, that she is the one who needs to make arrangements if something should happen to you. We hate to see someone show up, ready to act — and then find out they have no role. That creates confusion, and obviously can engender hard feelings.
We hope that you will share your estate planning documents with all your family (and any non-family members named as trustee, agent, or personal representative). There is no legal requirement that you do so, but it does increase the likelihood that any problems can be worked out while you are still alive, competent and in charge of your own decisions.
James Marier was married to his wife Kathleen for twelve years, until the couple divorced. As often happens, Mr. Marier continued to maintain a good relationship with his step-daughter, Tracy Marks. Her children called Mr. Marier “Grandpa Jim,” and he continued to spend holidays with his ex-wife, his step-daughter and the grandchildren.
Mr. Marier had a 401(k) retirement plan through his work, and after his divorce named his mother as its primary beneficiary. Later, after a visit from his sisters, he decided to break from his family altogether, and he wrote a will naming his step-daughter as personal representative and primary beneficiary. He also decided to change the beneficiary to leave his 401(k) plan to Ms. Marks.
Mr. Marier filled out the change of beneficiary form, listing Ms. Marks as his primary beneficiary. In the space marked “relationship” he apparently wrote in something, but then covered the entry with white-out. The form as sent to the plan administrator left the space blank. The administrator, in turn, mailed the form back to Mr. Marier with a note that he needed to complete empty space, and noting that “white-out is not accepted.”
Unfortunately, Mr. Marier’s health was declining rapidly by that time. When the form arrived he had just undergone surgery for a brain tumor, and the form was never returned to the 401(k) administrator. Mr. Marier did call the administrator’s office at one point, and asked who was named as his beneficiary; the individual who spoke with him looked at a scanned copy of the form and assured him that his step-daughter was his primary beneficiary.
When Mr. Marier died, the 401(k) administrator initially determined that the last beneficiary designation was improper and began the process to pay the plan balance to Mr. Marier’s mother’s conservator. Ms. Marks objected, arguing that she had been properly named as beneficiary. The administrator then decided that the failure to fill in the relationship line was “not a material omission,” especially since previous beneficiary designation forms on file adequately identified her, but turned to the courts to determine who should receive the account balance.
The trial court found that the 401(k) plan required that the form be properly completed, and ordered the money paid to Mr. Marier’s mother. The Eighth Circuit of the U.S. Court of Appeals disagreed, however, ruling that the plan’s decision to accept the form as being in substantial compliance, even though the administrator then turned the matter over to the courts, was sufficient to leave the account to Ms. Marks. Marks v. Irwin Bank & Trust, October 19, 2006.
Kathryn Gordon’s will named her sister, Nancy Molet, to handle her estate. Based on that will Ms. Molet was appointed as personal representative. Like most individuals in such circumstances, Ms. Molet hired an attorney to help her get through the probate process.
Eventually Phoenix attorney Harvey Finks billed the estate $25,710 for his representation of Ms. Molet. She, in turn, billed the estate $10,885.50 for her work as personal representative.
The ultimate beneficiaries of Ms. Gordon’s estate were her daughter June Pierce and Ms. Pierce’s five children. The beneficiaries objected to the size of the legal fees and the Ms. Molet’s fee, and they filed a formal objection with the court.
Attorney Finks pointed out to Ms. Molet that he would likely be called as a witness during the trial on his fees, and so she retained another attorney—Phoenix lawyer Paul Blunt—to represent her for the fee dispute.
Eventually Ms. Molet, Mr. Finks and the estate beneficiaries agreed that it made sense to submit the dispute to binding arbitration. In that type of proceeding, both sides would make abbreviated arguments and put on their cases more informally. They both agreed to be bound by the arbitrator’s decision.
The arbitrator approved most—but not all—of the requested fees. He reduced Mr. Finks’ fee by $2,510 to $23,200, and he lowered Ms. Molet’s fee by almost $5,000, to $6150. Then Ms. Molet submitted Mr. Blunt’s fees for payment by the estate, arguing that she had hired him in her capacity as personal representative.
The Phoenix probate judge decided that Ms. Molet would have to pay her own attorney’s fees. Judge Jane Bayham-Lesselyong decided that “it would be inappropriate” for the estate to pay the cost of defending the fees themselves.
The Arizona Court of Appeals disagreed. In the appellate court’s view, the question was really only whether Ms. Molet acted in good faith when she hired counsel to defend her fees. The heirs argued that Mr. Blunt’s representation benefited only Ms. Molet and not the estate. The appellate court agreed that it is relevant to consider whether the estate or the heirs received any benefit from the representation, but decided that the inquiry should be made as a part of the determination of whether Ms. Molet acted in good faith. Estate of Gordon, March 30, 2004.
The reported decision does not indicate how much the estate paid in legal fees and costs to defend Ms. Molet and Mr. Finks. It seems likely, however, that it was more than the reduction in the original fees ordered by the arbitrator.
In 1978, shortly after his mother’s death, Donald Gilbert wrote this note on a three-by-five note card:
“Dear Lillian, 11-27-78. I’ve been very depressed—I can’t stop crying for Mom—in my death I’ve left everything to you and the children. Don’t be angry with me. Love, Don.
Mr. Gilbert died seventeen years later. His cousin Lillian Miller claimed that the note was a will, and that she and her children should inherit his estate.
California, like Arizona, recognizes “holographic” wills. A holographic will is one substantially (or, as in the case here, entirely) in the individual’s handwriting and signed by the individual. While wills usually must be witnessed by at least two persons, holographic wills do not require any witnesses. If Mr. Gilbert’s note card was a will at all, it would be valid under California law.
As is usually the case, of course, the facts were more complicated than that. After Mr. Gilbert’s death Ms. Miller had secured appointment as administrator (what in Arizona and many other states would be called “personal representative”) and had handled the estate for two years. During that time she had misused Mr. Gilbert’s funds; the probate court ultimately ordered her to repay $837,525. If she and her children were the sole devisees, however, her misuse of funds probably would not cause her any problems.
The probate court determined that the note was in Mr. Gilbert’s handwriting. One friend testified that Mr. Gilbert had said he had prepared a will; another friend swore that Mr. Gilbert had said the exact opposite. Considering all the evidence, the probate court decided that the note card was Mr. Gilbert’s last will and that Ms. Miller and her children should inherit the entire estate.
The California Court of Appeals disagreed. For the appellate court, the key question was whether Mr. Gilbert intended the note card to be a will. It would not be enough, said the court, just to determine that the note reflected what Mr. Gilbert intended to do. The note referred to a past act when it said “I’ve left everything to you….” In that case, the note was not itself a will, even though it was in Mr. Gilbert’s handwriting and signed by him.
Since no other will could be found, and there were no children or spouse surviving, Mr. Gilbert’s estate went to his cousins—including Ms. Miller, but also including several others. It is unclear how much money remains in the estate, or how much Ms. Miller will have to repay. Estate of Gilbert, October 16, 2003.
Jose C. Martinez lived and died in Belen, New Mexico. Mr. Martinez was the father of ten children, and in 1984 he had signed a will leaving his real estate to two of the children.
In 1995, Mr. Martinez signed a document called “Revokation of Last Will and Testament of Jose Martinez.” This document indicated Mr. Martinez’ intention to revoke the “previous WILL which was exeucted approximately Twelves years ago.” The “Revokation” was also signed by one of his daughters, was notarized and apparently was filed with the Valencia, New Mexico, County Clerk.
Mr. Martinez died two years later. He had executed no new will since 1984, and so the question for the courts was whether the 1984 was still valid, or had been effectively revoked.
After the trial court found that the will had been revoked and that Mr. Martinez’ estate would be divided equally among his ten children, one of his daughters filed an appeal. Interestingly, the daughter who appealed would actually receive less under the will if it was admitted to probate; although she had been named as Personal Representative under the will, she was not one of the two children who would share Mr. Martinez’ real property, which apparently was the bulk of his estate.
New Mexico (like Arizona and 14 other states) has adopted the Uniform Probate Code. One provision of the Code sets out how a will may be revoked. As adopted in both New Mexico and Arizona, two methods of revocation are permitted. A will can be revoked either by a new will which expressly revokes the previous will (or which is so inconsistent with the previous will as to effectively revoke it), or by “performing a revocatory act on the will….” A “revocatory act” is defined to include “burning, tearing, canceling, obliterating or destroying the will or any part of it.”
Did Mr. Martinez revoke his will when he signed the “Revokation?” Assuming he was competent to do so, it may be assumed that his intention was to revoke the will. But, according to the New Mexico Court of Appeals, his failure to comply with the statute defeated his attempted revocation. The will was admitted to probate despite Mr. Martinez’ signature, and apparent intention, to the contrary. Estate of Martinez, June 8, 1999.
Arizona, since it shares the exact same language on revocation of wills from the Uniform Probate Code, should be expected to reach the same result. But the New Mexico opinion notes that the same result would probably have been reached even before the Uniform Probate Code’s adoption in that state, based on common-law principles regarding will revocation.
Some states, noted the New Mexico court, permit revocation of wills by a writing other than a new will. Usually, however, the revocation must comply with the same execution requirements as a will; in other words, a written revocation still would have to be witnessed by two people. Since Mr. Martinez’ “Revokation” did not meet that standard, it would not have been an effective document under New Mexico’s law even before the adoption of the Uniform Probate Code.
If Mr. Martinez was unable to locate the original of his old will, what could he have done to revoke it? Under the Uniform Probate Code and the law of many states, his only choice would have been to sign a new will which included revocation of the old document.
John Montañez and Ouida Ray apparently had a stormy relationship. They were married in Florida in 1955 and their daughter Prudence was born later that year. Montañez and Ray divorced in 1956. In 1960 they remarried, and a second daughter, Rhoda, was born the next year. By February, 1961, Montañez and Ray were separated, never to have any significant contact again.
Although Montañez and Ray never divorced, Ray married another man in 1971. That marriage also ended in divorce.
Montañez was in the merchant marine, and so had little contact with his wife or two daughters. In fact, though he spent the last year of his life in a nursing home in Florida, none of his family even knew he was in the same state, much less visited him. He died in May, 1994, from septicemia, pneumonia and deeply infected bedsores.
During the year he spent in the Snapper Creek Nursing Home, Montañez had a court-appointed guardian and conservator, a private fiduciary organization known as Comprehensive Personal Care Services, Inc. After his death, Comprehensive was appointed Personal Representative of his estate. Snapper Creek Nursing Home promptly filed a claim for $20,696.23 against the estate, seeking payment for the care provided in his last months of life. Most of that claim arose from the costs of treating Montañez’ advanced bedsores.
Comprehensive objected to Snapper Creek’s bill, but quickly negotiated a settlement under which the estate would pay $15,000 and neither party would pursue any other claims against the other. Meanwhile, an heir-locator service found Ouida Ray, Prudence and Rhoda, and they became involved in the negotiations.
While Ray and her daughter Rhoda agreed to the proposed settlement, Prudence was not. She pointed out that the settlement would preclude her from bringing any further action against either Snapper Creek or Comprehensive, even if she could show negligence in the care of Montañez or the supervision of his guardian and conservator. The Florida court overruled her objections, and approved the settlement. It also authorized payment of $43,750 in attorney’s fees to Comprehensive.
At the same time, Ray alleged that she was entitled to a share of the estate as Montañez’ surviving spouse. Over the objections of Prudence, the trial court awarded her the widow’s share of the estate.
On appeal, the Florida Court of Appeals reversed. Noting that Comprehensive was not even qualified to serve as Personal Representative under Florida law, the Court of Appeals also saw an inherent conflict of interest in the settlement. Noting that “the Decedent’s death from septicemia and grossly infected bedsores raises the possibility that viable negligence and malpractice actions may exist by the estate against both Comprehensive and Snapper Creek,” the Court voided the settlement and ordered the appointment of a new Personal Representative.
The appellate court also observed that the Personal Representative of an estate has a duty to heirs and creditors not to settle litigation to the disadvantage of the estate. More fundamentally, the Personal Representative in this case (as a potential defendant) had a conflict of interest which made it impossible to settle the litigation fairly. In addition to voiding the settlement, the Court reversed the award of attorney’s fees.
On the subject of Ray’s right to a widow’s share, the Court of Appeals found that her subsequent remarriage (and divorce) barred her from making any claim. The opinion noted that when she remarried in 1971, she claimed on her marriage application that she had divorced Montañez in 1965, and she could not now claim otherwise. Estate of Montañez, Fla. Ct. of Appeals, February 12, 1997.
