Posts Tagged ‘probate court’

DIY Wills — Another Example Showing Why You Should Hire a Lawyer

OCTOBER 6, 2014 VOLUME 21 NUMBER 36

We occasionally relate stories about people who have prepared their own wills without the help of competent professional advisers (like, for a primary example, a qualified attorney). When we do, we intend to make several points:

  1. The cost of getting a lawyer to prepare your will (and trust, and powers of attorney) is probably quite a bit less than the contest after your death might cost. Of course, disgruntled heirs can file contests of lawyer-prepared wills, too — but the odds are lower, the likelihood of success much lower, and the family friction lessened when a lawyer is involved in preparing the will.
  2. Do-it-yourself wills might accomplish exactly what the signer intended, but it’s often hard to tell — the likelihood of ambiguity or miscommunication is much higher when no professional is involved.
  3. Even though a self-prepared will might ultimately be successful, it can take years, costs tens of thousands of dollars (occasionally more) and destroy family relationships — all bad results that you can mitigate by getting your estate plan prepared by someone who knows what she or he is doing.

All of this should be considered against a reality: will contests are rare. They are much rarer, in fact, than people usually suspect. Despite popular literature, even wills that are arguably defective are more likely to be honored than challenged.

That is all by way of background to this week’s story. We are going to ask you to play Probate Judge, so pay attention. Let’s start, as the Judge often does, with the document itself. Here is the entire text of Bruce Morrison’s will (we’ve changed only the names):

On this date 7-18-2011 – I am here with my neighbor of over 30 years – [Bruce Morrison] – I am here to write down his last “will” – He is in good spirits, alert and sound of mind. On this date Bruce has asked me to write down the desires he has in regards to his earthly possessions. “I Bruce Morrison do will all my earthly possessions to my daughter Betty Harrison that lives in California, she can do with them what she likes.”

[signed] Toni Robertson 7/18/2011

[signed] Richard Robertson 7/18/2011

[signed] Bruce Morrison 7/18/2011

Bruce died two months later. He left two daughters — Betty (the daughter mentioned in the will) and Randi (who is not mentioned at all). Randi filed a probate petition for a determination of intestacy — arguing that Bruce died without a valid will. Betty countered that his will was valid, that she had been left his entire estate, and that Randi should receive nothing.

As the will contest developed, a number of additional facts were laid out:

  1. The night the will was signed, Bruce had just been released from the hospital after a series of tests. At the time he signed he may not have known it yet, but he was terminally ill with (as yet) undiagnosed cancer. He had been prescribed — and was taking — the painkiller hydrocodone, which can also affect competence, attention and understanding.
  2. Bruce’s hand was shaking too much to write out the will himself. He asked his friend Toni to write out the will for him, and she later testified that he dictated the part that begins “I Bruce Morrison do will…”. The entire document, however, is in her handwriting, not his.
  3. The sequence of signatures was that Bruce signed first, then Toni. Then Toni suggested that her husband should also witness the will — he had been in another room during the writing and signing. Richard came into the room with Bruce and Toni, and asked “So, Toni wrote your will; did she sign it too?” Bruce responded “no, that’s my shaky handwriting.” Richard then signed above Bruce’s signature, next to his wife’s.
  4. Although both Randi and Betty agreed that Betty was indeed Bruce’s daughter, he was not listed as her father on Betty’s birth certificate.

Both Randi and Betty asked the Montana probate judge hearing the case to grant summary judgment on the basis of the evidence they had collected. In such a ruling, no actual trial is conducted — the parties simply argue that there is no interpretation of the available evidence under which the other side could prevail.

Betty argued that the will was properly executed and reflected Bruce’s wishes. She pointed out that she was not involved in its execution, and that there was no real dispute about Bruce being her father.

Randi, on the other hand, pointed out that Bruce was taking heavy medications that would make him susceptible to undue influence. The fact that he had not been listed on Betty’s birth certificate made it unclear who would be “the natural objects of his bounty,” according to Randi. She also argued that the fact that Bruce signed when one of his witnesses was out of the room made the will invalid — and that his statement (“no, that’s my shaky handwriting”) should not be admitted to prove the validity of the will because it would be hearsay.

OK, acting Probate Judge — it’s time for your ruling. Is the purported will of Bruce Morrison valid? Does his daughter Randi receive any share of his estate?

The Montana probate judge’s ruling: the will was valid and effective. The possibility of undue influence is not the same thing as evidence that there really was such influence, and Randi had produced no affirmative evidence in that regard. And the statement of Bruce confirming his signature was not hearsay, but acknowledgment that he was adopting the will as his own.

Randi appealed, and the Montana Supreme Court affirmed the probate judge’s ruling. The state’s high court agreed that Bruce’s declaration that he had signed the will was not hearsay, since it was not being introduced to prove the truth of what he said but instead to show that he had declared the will to be his. Randi’s arguments about undue influence would not suffice to create a dispute in the absence of real evidence. In Re Mead, September 30, 2014.

In this case Bruce’s real wishes seem to have been carried out, but that doesn’t change our main point: there was unnecessary cost, delay and friction occasioned by having a friend write out a one-sentence will and signing under challenging circumstances. Maybe Bruce simply didn’t have time to get his will prepared by a professional, but his estate — and his favored daughter Betty — would have been better served if he had found the time. Maybe he felt like it was an emergency and he needed to get something done that July evening, but the next day he could have — and should have — called a lawyer’s office to make an appointment on the first available date to get the job done right.

Avoiding Probate — A Good Idea, But Not Always Effective

AUGUST 25, 2014 VOLUME 21 NUMBER 30

Some people really don’t like city traffic, and will go out of their way to get on the freeway whenever possible. Of course, that approach can backfire — freeway traffic is sometimes snarled, and sometimes in unpredictable ways (and at unpredictable times). Avoidance of surface traffic can be a good practice, but of course isn’t itself the end goal; the real point is to get where you’re going quickly and efficiently, with a minimum of frustration along the way.

We’ve been looking for a good metaphor to explain our view of “probate”, that vilified court process that often (though much less often than you probably think) has to be undertaken upon a family member’s death. Maybe the freeway/city street metaphor isn’t perfect, but we think it might be suggestive of the real goal. You probably want to make administration of your estate as simple as possible, while minimizing cost and aggravation for your family. You also want your wishes carried out, and you might add “no squabbling” to your list of goals. Those are your goals; “avoid probate” is no more the goal than “get on the freeway” is a goal in driving.

Why the extended traffic metaphor? Because of a case we read this month from the Missouri Court of Appeals. We thought it was a good case study in how probate avoidance sometimes is ineffective (and, in the reported case, probably even drove up the cost and complication).

Susan McCauley (not her real name) had a modest estate. In fact, her debts apparently exceeded the value of her assets. She had three children, a home, a commercial rental property, a brokerage account and three bank accounts. She and her late husband had borrowed money against the commercial property and also had a signature loan with the bank; the amount of those two loans exceeded the value of the property itself.

Whether avoidance of probate was Susan’s primary goal or not, she took several steps to accomplish that result. She made her bank accounts “payable on death” to her three children. She put a “transfer on death” titling on her brokerage account, again naming her three children. She executed beneficiary deeds naming the children as beneficiaries for all of her real estate (Missouri, like Arizona, is one of the minority of states that recognize a “beneficiary deed” or “revocable transfer on death deed” on real estate).

When Susan died in 2008, her son filed a simplified probate proceeding allowed under Missouri law, in which he recited that her probate assets consisted only of her personal property with a value of about $16,000. Since that amount was well under the Missouri limit of $40,000, he sought an order allowing transfer of all of her remaining personal property to the three children.

Not so fast, argued the bank which held Susan’s two notes. The bank claimed that Susan owed over $370,000, and asked the probate court to order her son to bring all of those non-probate transfers (the beneficiary deeds, the POD and TOD accounts) back into the probate proceeding to satisfy their claim. Meanwhile, the bank went ahead and foreclosed on the one property it had most direct control over — the commercial real estate, which secured one of its loans.

After sale of the rental building, the bank’s remaining claim was a little over $164,000. It continued to insist that it should be able to get her house, bank and brokerage accounts to defray the remaining debt.

Susan’s son explained to the probate court that there really hadn’t been all that much left in her estate. After payment of about $22,000 in other debts (presumably, but not clearly, including her final medical and funeral/burial expenses), the three children had split the house and about $60,000 — including about $30,000 in equity in Susan’s house. The bank asked for judgment against the three children for the $60,000.

The probate court disagreed about the equity in the house, noting that the children had borrowed $50,000 against the house in order to pay those last expenses and that values were lower than the bank thought (remember that all this was taking place in 2008/2009). It ordered that the house be listed and sold, and that any net proceeds after repayment of the loan taken out after Susan’s death should be given to the bank. The probate court also removed Susan’s son as personal representative and appointed a new, neutral personal representative.

The bank appealed, arguing that (a) the probate court should have entered a judgment against Susan’s children and ordered them to repay the estate, rather than ordering sale of the house for whatever it might raise, and (b) the proper valuation of damages should be based on the value of the house on the date it was transferred (that is, on the date of Susan’s death), not months later as property values slid. The Missouri Court of Appeals agreed on both points.

The result: the probate court was directed to calculate and enter a judgment against Susan’s three children for the amount they received (up to the bank’s debt, which clearly exceeded any valuation of the amount they received). Rather than ordering sale of the house and distribution of any net proceeds, the children would be liable for the value of everything they got — and that valuation would be as of the date of their mother’s death, not based on what they held at the time of resolution. Merriott v. Merriott, August 19, 2014.

Would the same result have occurred if Susan had lived and died in Arizona? Probably. Missouri’s statutes on bringing assets back into an estate to satisfy creditors are very similar.

In hindsight, Susan would have made a better plan by simply writing a will leaving her estate to her three children and keeping all of her assets in her name alone. Her son could have been appointed personal representative, listed her home and sold it for what it would have actually fetched on the market, identified the priority of claims against her estate (paying funeral and last-illness expenses first, plus his own — and his lawyer’s — fees for administration) and simply paid any remaining balance to the bank (and other creditors, if there were any). He (and his siblings) would not have borne the risk of a falling real estate market, would not have incurred additional administrative expenses, would not have suffered the indignity of being removed as personal representative of his mother’s estate, and would not have had a money judgment leveled against him (and his siblings). But sometimes you don’t know what traffic is going to look like until you’re already on the on-ramp.

Lessons From a Day in Probate Court

JULY 7, 2014 VOLUME 21 NUMBER 24

One day last week I found myself sitting in probate court, watching other cases get resolved while waiting for the Judge to get to my own cases. The matters I was listening to seemed to me to be instructive, and give me a chance to share some observations from the perspective of a veteran probate court participant.

In the almost forty years I’ve been practicing in probate court, some things have changed quite a bit. Others have not. One that has changed dramatically is the now-common practice of probate court litigants doing things themselves, without hiring a lawyer. That was almost unheard of in the 1970s, but is now commonplace. More than half of the cases I watched did not have a lawyer involved.

On top of that trend, Arizona has engaged in a decade-long experiment in certifying non-lawyers to prepare legal documents. The Arizona Certified Legal Document Preparer Program has been run by the Supreme Court since 2003, and there are more than 500 Certified Legal Document Preparers across the state. They have undergone a background check and passed a test — and they can prepare pleadings for probate, divorce and other actions, as well as wills (and even trusts). The key is that they are not supposed to practice law — they can help you fill out forms, but not be your lawyer. Other states (notably Washington) are following or considering a similar path.

Everyone knows that lawyers are expensive, that we complicate matters unnecessarily, that we are slow and unresponsive. Legal document preparers should alleviate those problems, right? That’s not exactly what I saw in my day in probate court. In two cases I think document preparers failed to serve their clients well. In a third, with no lawyer or document preparer involved, a little help would have made the litigants’ lives easier, I’m pretty sure.

Exhibit One: a simple probate (I’ve learned that “simple” is a dangerous word in this context, but let’s keep using it). It involved a decedent who left five children, a will and a house — and not much else. One son and a son-in-law were named as personal representatives in his will, and his son-in-law (as he explained to the court while I listened) took responsibility for getting the probate proceedings going. He contacted a document preparer to get him started.

The document preparer required a $1,200 fee up front, and promised to have the paperwork ready shortly. After months of trying to get back in touch with the document preparer, though, the son-in-law finally figured out that he was out of business — he had been charged with a felony (apparently unrelated to his business) and wasn’t going to be doing any more quasi-legal work for others. The new problem: the original will was somewhere in the document preparer’s files, and he was in prison.

Son-in-law explained that he had gone to a new document preparer, who had prepared a petition for probate of a copy of the now-missing will. That had cost another $650 up front, and required that the son and son-in-law attend a probate court hearing to explain why the original will was missing. The result: about $2,000 in initial costs (it wasn’t clear if more fees will be incurred), a wait of more than six months to get a simple probate started, and a confusing and frightening hour before a friendly but stern probate judge.

What would have happened if the son-in-law had visited a lawyer instead? It’s hard to say with certainty, but a best guess from the information revealed in court: the total cost would probably have been about $2,500-3,000 plus filing fees, the son and son-in-law would have had authority to sell the house in no more than five days, the lawyer probably would have waited to be paid from proceeds from sale of the house (so no one would have to write up-front checks), and the whole thing would almost certainly have been over in about four months. And that doesn’t consider the possibility that there might have been a summary proceeding available under Arizona law which would have saved a few dollars and several months of time. Oh, and no one would ever have had to appear in court, nervously or otherwise. Oh, and the son and son-in-law would have had the correct forms filled out, and wouldn’t have had to visit the County Bar Association office to get one more form the document preparer missed, consuming another hour of their day and causing more confusion and consternation.

You might think the problem was really just bad luck, that this hapless fellow chose his document preparer badly. After all, few document preparers end up in prison, and there’s nothing that keeps a given lawyer from going bad, either. True enough, though (a) most lawyers practice in groups, so if one lawyer in a firm drops out of sight there’s likely to be someone else to take responsibility, and (b) the document preparers do seem to have a high rate of discipline, with about 50 having their licenses suspended or revoked in the decade since creation of the listing. That looks like about a 10% rate of attrition, which seems higher than for lawyers.

Exhibit Two: In another case involving a document preparer but no lawyer, two women were involved in the life of a 14-year-old girl. The girl’s mother had gone to prison some years ago, and a family friend had adopted the 14-year-old and her four brothers and sisters. Now the 14-year-old had decided she wanted to live with her maternal grandmother, and so had just moved in. Grandmother had consulted a document preparer, and filed an emergency guardianship petition without giving notice to the adoptive mother. Last week’s hearing was the permanent guardianship proceeding, seeking to turn that emergency guardianship into a full guardianship.

The document preparer helpfully came to court with the grandmother, though of course he could not speak for her or even be acknowledged in the probate proceeding. He helped her get her documents together and prompted her about what to tell the Judge. The adoptive mother was also there, telling the Judge that she had no objection to the change in guardianship — she just wanted to make sure that everyone realized that she would no longer be responsible for the girl’s medical bills. The problem with that position: she is still responsible for her daughter’s medical bills — and there was no one available to explain that nuance to her (and the Judge, in his eagerness to get through a complicated and mildly contentious proceeding, didn’t help by reassuring her she was completely off the hook).

Would a lawyer have been more expensive? Almost certainly. Would the 14-year-old have been better served by having someone able to actually give legal advice in this complicated family situation? I’m pretty sure. Would the proceeding have been less stressful, less contentious and more suitable for the 14-year-old (who sat through the court proceeding, watching the tension and drama)? Darn straight.

Exhibit Three: a grandmother was seeking guardianship over her infant grandson. Her daughter lived with her, but had no job and no insurance; grandmother was just trying to get the baby on her own insurance plan. She did the paperwork herself, with no lawyer or document preparer. When she gave notice to the baby’s father, he showed up at the hearing and started talking about his pending petition to get custody, his desire to develop a relationship with the baby, and his lingering uncertainty about paternity. Grandmother got temporary guardianship, but the whole proceeding took a stressful hour and involved plenty of assertions and suspicion.

If grandmother had gotten the advice of a competent lawyer, she might have learned that it’s actually not that hard to get medical insurance for an infant, that she could have worked something out in writing with the putative father (and accelerated the process of figuring out whether he really is the father), and that her guardianship would be of little value (at least in Arizona) if the father’s status is confirmed. Maybe she would not have thought the lawyer’s advice was worth the money.

It was an interesting day. I came away with heart-felt sympathy for litigants who are frightened and confused by a, well, frightening and confusing system. I also appreciate the work of judges who have to explain legal principles to unrepresented litigants (without practicing law, of course) and try to help them navigate the system — all under the watchful eyes of other litigants and (sometimes) their lawyers, waiting for their own cases to be called. Finally, I remain convinced that lawyers have an important place in the legal system, and that even when we are under-appreciated we help people far more than they may be willing to concede.

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.

Transfer of Guardianship to New State Should Be Easy

DECEMBER 9, 2013 VOLUME 20 NUMBER 46

We have written before about transferring a guardianship or conservatorship to Arizona, or out of Arizona, when the subject of the proceeding moves to another state. In fact, Arizona has joined a number of other states (that number, incidentally, currently stands at 37 states, plus the District of Columbia and Puerto Rico) in adopting something called the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act — the UAGPPJA. A mouthful of a title, but a simple goal: it should be easy and inexpensive to move your Arizona guardianship to Arkansas, or to Alaska, if you and your ward move to one of those states.

One key element of the UAGPPJA’s efficiency goal involves each state’s courts giving up a little tiny slice of control. Guardianship and conservatorship proceedings are often tightly controlled by local judges, and for good reason. But the logic of the UAGPPJA says that when the local judge in another state has decided whether a guardian or conservator is needed, and who should be appointed, the local judge in the new jurisdiction should be able to take that determination at face value. That means no expensive proceeding to evaluate the proposed guardian and conservator, no additional imposition of costly proceedings or even appointment of investigators, medical examiners and attorneys — unless there is good reason to suspect that something is amiss.

That’s the theory, but the devil, as usual, is in the details. A recent Alabama case may be the first appellate court decision to address how the UAGPPJA should work, and that state’s Supreme Court comes down squarely on the side of efficiency and ease of administration.

Roberta Smith (not her real name) filed a guardianship and conservatorship proceeding regarding her mother Susan in 2010. Both Roberta and Susan lived in Kentucky at the time, and so she appropriately filed her petition in Kentucky courts. After notice was given and a hearing held pursuant to Kentucky’s normal appointment process, Roberta was appointed as her mother’s guardian and conservator.

Roberta then moved to Alabama, and took her mother with her. She wanted to transfer the guardianship to their new state, and it should have been easy — both states had adopted the UAGPPJA. The process requires several steps, but it is mostly clerical in nature. First Roberta had to get the Kentucky court’s permission to initiate the transfer, then get the Alabama court’s permission to make the transfer, then go back to Kentucky to show that the Alabama proceeding was underway, then once more back to the Alabama courts to accept final transfer. The UAGPPJA intends that the result would then be that Alabama had jurisdiction over the guardianship and conservatorship, and Kentucky could close its file on the matter.

But the Alabama probate judge had a different idea. He wanted to make sure Roberta was a suitable guardian and conservator, and that she was making decisions properly. So he appointed a guardian ad litem (a GAL, in lawyer lingo — which is not a comment on the appointee’s gender) to investigate and to represent Susan’s interests in the transfer proceeding. Months later the GAL reported that, while Roberta hadn’t done anything wrong, she thought the public guardian would be a better choice to make decisions for Susan. The probate judge agreed and appointed a new guardian and conservator.

Roberta appealed, arguing that the UAGPPJA was supposed to allow transfer of proceedings, not relitigation of issues already decided. Meanwhile, as an aside, the public guardian recommended that the GAL could be appointed as guardian for Susan, and the probate court went along — turning Susan’s lawyer into her decision-maker for health care and placement decisions, and raising more questions about the Alabama proceedings.

The Alabama Supreme Court looked over this record, reversed the probate judge and sent the entire matter back for entry of an order transferring the Kentucky proceedings to Alabama. The UAGPPJA does not permit the receiving court (Alabama, in this case) to make a new determination about who ought to be guardian and conservator, but only to transfer the existing guardianship and conservatorship. Of course, once the transfer is completed the new court has jurisdiction, and could review the actions of the guardian and conservator, direct her to handle things differently and even remove her and appoint a new person — but that would be a separate proceeding. Sears v. Hampton, November 22, 2013.

The Alabama case, though it deals with an issue near and dear to our lawyers’ hearts, will probably not have a large impact on guardianship and conservatorship across the country. But it does reflect a change in the way the world works. Twenty years ago it was relatively rare to see a guardian or conservator move — with the ward — to a new state, and the law was unsettled about how to handle such a switch. Most of the time the guardian/conservator would be required to file a new petition in the new state, incur significant legal expenses and hope to get appointed. Once appointed, they could go back to the original state, show the new state’s appointment, and ask to have the first state’s file closed.

But each state probate judge might have a different idea about who should act, what they should do, and what were reasonable decisions. There was the regular concern that the two courts might enter conflicting orders, or that the first state’s judge might object to the second state proceeding even being initiated, or that the second state’s judge might refuse to act while the first state still had jurisdiction. Our society grows more mobile every year, and these problems become more complicated. The UAGPPJA was intended to help simplify this process, and now it has — at least in Alabama. We would like to think that it will also simplify things in Arizona, Arkansas, Alaska and all the states that don’t even start with “A”.

For extra credit: is this the first appellate decision to interpret the UAGPPJA? It could be. In Hetman v. Schwade, a concurring justice in one of the other “A” states (Arkansas) strongly suggested that his state’s legislature should adopt the UAGPPJA — and they took him up on the suggestion two years later. The Tennessee Court of Appeals, in a July 13, 2013, decision (In re Proposed Conservatorship of Stratton), makes a passing reference to the UAGPPJA — but only to note that the appellant failed to preserve any argument she might have under the Act. So we think this Alabama case is in fact the first appellate interpretation of the Act.

Can You Change Your Will By Writing On It?

NOVEMBER 18, 2013 VOLUME 20 NUMBER 44

So you have a will, and you want to make some changes. Can you just write in the new provisions? How about if you sign somewhere on the document?Can it be a copy of your will, or does it have to be on the original to be effective? Do you need witnesses?

The correct answer: don’t make changes that way. There are too many variables, too many interpretations, too many ways for those changes to just add cost to the probate of your estate while not effecting the result you intend. Talk to your lawyer, get changes made formally, and have a new will drawn up. Can it just be a codicil? Yes, but there is frankly almost no reason in this age of computerization to ever sign a codicil to your will — just sign a new will. One drafted by your lawyer.

Sometimes, though, time just gets away from you. If you want to make changes, you probably ought not wait until just before your 100th birthday. That’s probably the biggest mistake Jenny Travis (not her real name) made.

Ms. Travis had signed a will in 2002, and a codicil a few months later in 2003. In 2010 she had her caretaker call her lawyer, asking him to make a visit to review her estate plan.

The lawyer made a photocopy of Ms. Travis’ existing will and codicil, and went to her home to discuss them with her. During their meeting, he hand-wrote several changes in the margins of his copy of her existing will. As she described the changes, he scratched out two individuals’ names next to a bequest and wrote in two replacements. In another place he deleted a paragraph, and in another made modifications to the way a bequest would be handled. Another was changed from $10,000 to $42,000, again in the lawyer’s handwriting. Finally, the two charities who were scheduled to get the remainder of her estate in the 2010 will were crossed out and replaced with Ms. Travis’ brother.

At this point the lawyer had Ms. Travis sign her name by each of the changes, and he signed as a witness. Then he wrote a note to his secretary at the top: “Linda, do a codicil that changes” the affected sections of the 2002 will and 2003 codicil. He took the document back to his office with him, and a codicil was prepared. Unfortunately, though, Ms. Travis died six weeks after her lawyer’s visit, without ever having signed the new, formally prepared codicil.

Did those handwritten changes constitute a will or a codicil? Not according to the Pennsylvania probate office, which declined to admit the handwritten changes to probate (but did admit the 2002 will and 2003 codicil).

Ms. Travis’ lawyer appealed, and the Superior Court (the second-tier appellate court in Pennsylvania) viewed things differently. The appellate judges ruled that Ms. Travis’ changes might be a codicil to her will — and that the probate court should conduct a hearing to determine whether that was what she intended when she signed (and her lawyer witnessed) beside each change. One of the nine judges considering the case would have gone further — he would have ordered the handwritten notes admitted to probate without any further testimony. Still, it seems likely from the language of the opinion that the lawyer’s notes will ultimately be given effect — it will just have taken a trip to the appellate court and a delay of several years before the issue is resolved. In Re Estate of Tyler, November 13, 2013.

Assuming that Ms. Travis really did want to make the changes her lawyer wrote down, what might have been done differently to make sure her wishes were carried out? And would the same result be reached if Ms. Travis had lived and died in Arizona?

One obvious thing to consider would have been to make the changes earlier. By the time of her death Ms. Travis was 100 years old — if she had been thinking about making the changes for very long, she probably should have called her lawyer earlier. Perhaps, though, she had just recently made up her mind about the changes when she met with her lawyer.

Apparently Pennsylvania law permits changes to a will to be effective if written by someone else and signed by the person making the changes. It may not even have been necessary for her lawyer to sign as a witness (we don’t practice Pennsylvania law, so we might have gotten that wrong). The same is not true in Arizona — changes like those made by Ms. Travis’ lawyer would require her signature and two witnesses in Arizona. It’s not even completely clear that the changes would have been accepted then, since there does not seem to have been any indication in the written notes that the changes were intended to be a will or codicil, and they were made on a photocopy of her old will.

In Arizona it would have been better for the lawyer to write out a separate document describing what it was and the intended effect, and to have Ms. Travis sign it in front of two witnesses. Such a document would probably have been effective. Another alternative, since Arizona permits “holographic” wills, would have been for Ms. Travis to write out her changes in her own handwriting, and to sign that document (no witnesses would have been required) — though that creates plenty of opportunity for her to get the changes jumbled, or leave out portions or make mistakes. Presumably the lawyer, familiar with will drafting, would have had an easier time making the changes correctly.

Of course it would have been wonderful if the lawyer could have returned to Ms. Travis’ home with a beautifully typed new will (again, just forget codicils) the next day and had her sign in front of two witnesses. It is unclear why that did not happen — whether Ms. Travis was unable to discuss her wishes shortly after the initial visit, or the lawyer’s secretary Linda was out sick the next day, or what else might have intervened. The central lesson: if you want to make changes to your estate plan, get to it promptly, and talk with your lawyer right away.

Can You Disinherit Your Spouse? It Depends

NOVEMBER 4, 2013 VOLUME 20 NUMBER 42

Most of us are fascinated by the lives and deaths of famous people. Their legal and financial affairs tend to be complicated, and they are sometimes messy. They may also provide some constructive information, useful to illustrate broader points applicable to many of us. One such illustration: the death and estate of the late, great country singer/songwriter James Travis Reeves — better known as Jim Reeves to his legions of fans.

The recently-decided Tennessee case isn’t actually about Jim Reeves’ estate at all. The singer died in a tragic airplane crash in 1964, leaving behind his wife Mary and a considerable collection of then-unreleased records. In the years since his death a number of “new” releases have helped maintain his legacy. In fact, two of his most famous recordings (Don Gibson’s “I Can’t Stop Loving You” and Cindy Walker’s “Distant Drums”) were released in the two years after his death.

In 1969 Reeves’ widow Mary remarried — to a former Baptist minister named Terry Davis. Mary Reeves Davis lived thirty more years, and during that time she helped maintain the public’s interest in the velvet voice of “Gentleman Jim” Reeves. In fact, in the last few years of her life the annual income from Jim Reeves’ songs and legacy was estimated at several hundreds of thousands of dollars.

When Mary Reeves Davis died in 1999, her will left $100,000 to her husband Terry Davis, and the bulk of the rest of her estate to a niece and nephew of Jim Reeves. That sets up the legal question involved, indirectly, in Jim Reeves’ “estate.” Since all of his assets, and his rights and recordings, had passed to his widow, it was his legacy that was subjected to her new husband’s challenge.

Here’s the legal question involved: can you disinherit your spouse, or significantly reduce their share of your estate? Assume (you will have to assume, because the information is not public enough for us to figure it out) that Mary Reeves Davis’ estate was substantial, and that the future rights to her late husband’s recordings will continue to produce income for decades. Could Mary Reeves Davis leave her husband of thirty years $100,000 and discharge any legal obligation she had to him?

The answer, as you might suspect, will vary significantly from state to state. In some states (not including Arizona, incidentally) a surviving spouse has the right to a minimum inheritance — if the deceased spouse’s will does not leave a sufficient amount, the surviving spouse may “elect against the will.” That means that they are entitled to a minimum share of the estate, with that minimum varying from state to state.

That’s the law in Tennessee, where Mary Reeves Davis lived and died. So did Terry Davis have the right to elect against her will, and receive a share of her estate exceeding the $100,000 bequest?

If you were reading this complicated story carefully, you will note that Mary Reeves Davis died in 1999 (on Veteran’s Day, in fact — almost exactly fourteen years ago). How could the legal question in her probate estate just be getting resolved?

Trial of the probate dispute actually was concluded two years ago, though that doesn’t help explain the long delay. Over the twelve years of litigation Terry Davis retained and discharged six sets of attorneys, with the final firing taking place just days before the long-delayed trial had been set to begin. The judge in the case allowed Mr. Davis to fire his lawyers, but refused to continue the trial any longer for him to secure new counsel. He represented himself in the 2012 trial. After losing in the probate court, he filed an appeal with the Tennessee Court of Appeals; that court’s ruling was finalized last week.

So what was the final issue, and what can we learn from it? It turns out (as it so often does) that the primary legal question was very narrow: could Terry Davis elect against his wife’s will when he had already accepted the $100,000 she bequeathed to him? The answer: no. Under Tennessee law, at least, in order to elect against the will, the surviving spouse must refuse any specific bequest in order to elect the statutory minimum to which he or she would be entitled. Oh, and Terry Davis had no legal right to be represented by a lawyer at the trial, so the judge’s refusal to grant him a continuance as his last law firm withdrew was not a legal error. Estate of Davis, October 28, 2013.

What does a Tennessee case, applying Tennessee’s very-different law, tell us about Arizona court proceedings, estate planning, or inheritance issues? Although Arizona law is very different (there is no “right of election” against a will in Arizona), there are still some valid points to take away, and the Jim Reeves music in the background of this case helps make those points more memorable.

Yes, you can disinherit a spouse. Under Arizona law, regardless of what the will says there is a minimum amount to which the spouse is entitled, however. That amount, though it varies slightly depending on other circumstances, is usually $37,000 (a figure, by the way, that has been unchanged for decades). Even that magnanimity is limited, however. If the spouse receives any other property — by operation of joint tenancy titling, or by a trust, or by beneficiary designations — that can reduce the amount to which the spouse is entitled.

Tennessee law is more protective of spouses, though it turned out that Mary Reeves Davis’ surviving husband did not get more of her probate estate than her will provided. There was testimony, however (and the probate court found), that Terry Davis had transferred more than $250,000 from Mary Reeves Davis’ accounts just before her death. That did not help his claim of entitlement to maintenance from her estate under Tennessee law. But the bottom line is clear: if you want to disinherit your spouse, you will have an easier time doing so under Arizona law.

Why is that so? Are Arizona legislators anti-family? Hardly. Arizona, as you may recall, is a “community property” state. That means that there is an assumption that half of the assets owned by a couple already belong to the surviving spouse, and so the minimum protection provided by probate laws makes more sense. It doesn’t, however, help figure out how to deal with the division when the deceased spouse had substantial separate property (like an inheritance, or separate property brought into Arizona and maintained as separate property) and the surviving spouse has few resources. That complicated problem is material for another day — and an Arizona case as illustration.

Trust Administration Dispute Ends Up Costly for Complainant

MAY 20, 2013 VOLUME 20 NUMBER 20
One of the reasons people create living trusts is to reduce the likelihood of disputes among family members. In fact, any well-written estate plan — whether it involves a living trust or not — should focus at least partly on that worthwhile goal. Most estates do get settled without disputes, and those with disputes are often easily resolved because the trust, will, and beneficiary designations are clear. But if family members are determined to be fractious, no amount of careful planning can completely remove the risk of a costly dispute.

Take the revocable living trust of Lorraine Bird (not her real name). It was prepared by a lawyer in 2003, and it contained straightforward provisions: most of Lorraine’s property was to be divided in half, with one half to go to her son Greg and the other half to her son Tony’s two children. Tony was named as successor trustee. like many revocable trusts, the document included a “Schedule A” listing the assets that Lorraine was transferring to the trust’s name.

The first problems arose when Lorraine started writing on the trust document directly. In 2004, 2006 and twice in 2008 she wrote on Schedule A, indicating what should happen to some items of her property. Also in 2008, while she was in hospice, she had Tony’s wife write out an amendment to the trust indicating that, among other things, her gold coins should be divided between her two sons. Lorraine died shortly thereafter, apparently without having her trust looked at or formally updated by her lawyer.

The next round of problems arose after her death, when Tony (the successor trustee) gave Greg the keys to their mother’s house. Greg removed some items; Tony asked for a listing of what Greg had taken, but the list he got back did not account for all the missing items. Tony hired a lawyer to assist him in administering the trust, and pursuing Gary for more detail about the property in his possession.

The most valuable item in Lorraine’s trust was a piece of real estate northeast of Phoenix. At first Greg wanted it sold and the proceeds divided between him and his niece and nephew. In fact, though he didn’t have any authority, Greg put a “For Sale” sign on the property and listed his own phone number. He also offered to let his niece and nephew buy out his interest in the property. Later he changed his mind, and insisted that his brother should distribute the property to the three beneficiaries and let them decide how to handle it.

Tony had the property appraised, and his children approached Greg with the appraisal results in hand. They offered to buy out his interest for $325,000. If he didn’t want to do that, they would sell him their interest for the same amount. Greg refused, and instead offered to purchase their interests for a total of $153,000. Then Greg filed a civil lawsuit against his niece and nephew, asking the court to divide the property. He also filed a complaint against his brother, alleging that Tony had breached his duties as trustee by not distributing the property in kind, had made allegations of theft against him, and had favored his own children over Greg in his handling of the trust.

The judge consolidated the two actions, and conducted a three-day trial. There were a number of questions to answer, including:

  • Did Lorraine’s handwritten notes on Schedule A modify her trust?
  • Was the separate amendment prepared by her daughter-in-law valid?
  • Did the trust require distribution of her property in kind? If the trust was unclear, is there a presumption in favor of in-kind distributions?
  • Who should pay the cost of the legal proceedings to resolve these questions?

At the very end of the trial, Greg and his niece and nephew struck a deal on the property: Greg bought out their interests for $325,000. There were still a number of issues to resolve, however, and the judge ended up making eight separate rulings. She found that Tony had not breached his fiduciary duty, but that Greg had initiated most of the problems by his own actions. She also ruled that Greg pay a total of $176,466 to the other parties for attorneys fees, and another $4,979.19 in costs.

Greg appealed, arguing that Tony had mismanaged the trust by not distributing the property in kind, pursuing him for personal property that turned out to have little economic value, and various other alleged breaches. Among them: Greg insisted that by asking his own son to help find a real estate broker for the property, without telling Greg, Tony had favored one trust beneficiary over the others. Similarly, Tony’s daughter had sent Tony an e-mail calling Greg names; when Greg later learned about it he insisted that Tony had breached his duty to all the beneficiaries by not promptly sharing that e-mail.

The Arizona Court of Appeals upheld the trial court ruling in pretty much every respect. It was not a breach of fiduciary duty to talk with one beneficiary without sharing every detail with the others. Tony did not violate his duty to resolve the trust administration just because Greg beat him to the courthouse with a petition asking the court to determine whether the handwritten amendments were valid. Even if there was an argument that Tony should distribute the property in kind, it was rendered moot by Greg’s agreement with his niece and nephew resolving the dispute. Greg’s own misbehavior made it inappropriate for him to complain about the cost of getting him to comply with the trustee’s requests for information about personal property he had taken from his mother’s house. It was proper to charge him the attorneys fees and costs incurred in defending his lawsuit. Perhaps most tellingly, the Court of Appeals added more costs and attorneys fees, awarding Tony and his children their requested fees and costs for having to respond to the appeal itself. In re Bower Revocable Trust, May 14, 2013.

It is worth pointing out (again — we make this point with some regularity) that the dispute was both expensive and time-consuming. In addition to approximately $200,000 in fees and costs Greg was ordered to pay for Tony’s and his children’s lawyers, Greg presumably had significant legal fees for his own side of the litigation. The Court of Appeals decision was rendered more than four years after Lorraine’s death (and that was speedier than most similar cases in our experience).

Are there clues and tips in Lorraine’s story that could help other families avoid similar costly delays in handling estates? Yes, there are several, including at least these:

  1. Don’t modify your estate planning documents by writing on them directly — even if you date and sign the changes (Lorraine didn’t). Although Lorraine might have paid a couple thousand dollars to have the changes done right, that would have been less than 1% of the total legal cost generated when she did not do that.
  2. Do your children not get along? Then include some language directing how to resolve disputes. Consider a mandatory arbitration provision in your trust as a way of speeding up dispute resolution — such a provision could prevent any beneficiary from forcing a complicated court proceeding.
  3. Are you administering a trust with a contentious beneficiary? Even though you may not have to, you might want to consider complete disclosure and transparency, and do not hesitate to affirmatively seek court direction rather than let problems fester and perhaps become intractable.
  4. Are you pretty sure you’re right, and your sibling/trustee/beneficiary is wrong? Do a reality check, and then do it again — there is a real risk that you could end up paying everyone’s legal fees.

New York Judge Takes Bank, Lawyer to Task Over Special Needs Trust

MARCH 9, 2013 VOLUME 20 NUMBER 10
We don’t very often focus on trial court decisions, and especially not in cases from outside Arizona. Trial judges are often very dedicated and bright, and their opinions may be eloquent and well-reasoned, but they do not establish precedent we can describe for our readers. Once in a while we come across a trial court opinion that speaks to our area of law practice, however, and we want to share it with you.

Such a case comes to us from now-retired New York Surrogate’s Court Judge Kristin Booth Glen. Surrogate’s Court is similar to Arizona’s probate court — it is where trusts, estates and guardianships are handled. Judge Glen handled a particularly challenging estate and trust, and wrote an opinion detailing the history of the case on her last day in office.

The case involved a guardianship of a profoundly developmentally disabled adult named Mark (his full name is not given in the judge’s opinion). Mark was 16 when his adoptive mother Marie died in 2005. Mark was then living in a group home, where Marie had placed him after she learned that she was terminally ill.

Marie’s living trust (which, as an aside, was apparently never funded) divided her assets between Mark and his brother. Mark’s share was to be held in a special needs trust, with JP Morgan Chase Bank and Marie’s lawyer acting as co-trustees. Her pour-over will left everything to the trust; in the probate proceeding initiated after her death, the total estate was described as just short of $12 million. Probate-related costs and expenses reduced that by almost a million dollars, and another $3.5 million was paid in estate taxes. Inexplicably, Mark’s one-half share of the remaining $8 million was reported as $1,420,343.29.

A year after Marie’s death, her lawyer sought appointment as Mark’s guardian. For reasons not explained in the written decision, no hearing was held for almost a year. When the attorney appeared before the judge, he told her that he was fulfilling a death-bed promise he had made to his former client, but that he had not actually seen Mark in more than ten years. He had not visited the facility where Mark was living, and he had not asked the staff whether Mark had any unmet needs. In the almost three years he had been co-trustee of the trust for Mark, not a penny had been spent on him.

Judge Glen ordered the lawyer and the bank to explain themselves — to file an accounting in the trust detailing income and expenditures. She also suggested that they ought to find someone to evaluate Mark and his needs, and to figure out whether there were things the trust could provide for his benefit. A professional care manager was eventually hired (though it inexplicably took a year before she was sent to visit Mark), and a program of providing for Mark’s needs finally began. Meanwhile, Marie’s considerable estate had sat idly, paying only administrative expenses, for almost five years after her death.

The judge’s written opinion details all that history, and the gradual improvement in Mark’s life and care over the two-year period since the care manager began visits and recommendations. It also leaves little doubt about the judge’s frustration at not getting sufficient information to determine how the estate shrank from $12 million to the $1.5 million (or so) in Mark’s trust, or how much had been paid to the bank or the lawyer in probate fees and trust administration fees. It laid out a few next steps to guide her successor after her own retirement. It did not resolve any potential or actual challenges to the fees charged by the bank or lawyer, but it clearly signaled her likely intention to reduce fees and potentially order return of some fees already collected. In the Matter of the Accounting by JP Morgan Chase Bank, N.A., v. Marie H., December 31, 2012.

Though this written opinion is from a trial court rather than a court of appeals, it is worth looking at and considering. Though it is a New York case, it speaks to judges, trustees, beneficiaries and families in other states, as well. It lays out a disturbing history of inattention to the needs of a severely disabled man even though there apparently were funds available for his benefit. It tells trustees that:

  • inaction can be as bad as affirmative misbehavior.
  • it can be helpful to bring in a professional care manager to assess needs and make recommendations.
  • the courts can initiate reviews on their own, even if no complaint has been filed, when it becomes apparent that oversight is needed.
  • beneficiaries who are unable to protect themselves need special protection.

What happens next? We really don’t know — though the three months the judge gave for a more detailed accounting and action plan will expire at the end of this month. It will be interesting to see what Judge Glen’s successor does with this case, and how her written decision affects professional trustees and lawyers in New York and elsewhere. We’ll let you know as we see updated information.

Meanwhile, we hope that Mark continues to see benefits from his mother’s trust. It sounds like he has made a lot of progress with a little protection, oversight and professional care recommendations.

 

Accounting Requirements for Irrevocable Trusts in Arizona

FEBRUARY 4, 2013 VOLUME 20 NUMBER 5
Arizona adopted a version of the Uniform Trust Code in 2008, to be effective at the beginning of 2009. The UTC has been the subject of much discussion across the country — it has been adopted in about half the states, and soundly rejected in a few others. Despite all that discussion, however, there are relatively few court cases addressing what the UTC provisions actually mean.

One concern commonly raised about the UTC has been its requirement that trust accounting information must be given to beneficiaries, including those who receive no benefit until after the death of a current beneficiary. Take, for instance, a common situation: in a second marriage, a wife establishes a trust for the benefit of her husband for the rest of his life, with the remainder to be paid out to her children (from her first marriage) after the husband’s death. Then the wife dies, leaving her house and brokerage account to the trust. Her surviving husband is trustee. Under Arizona’s version of the UTC, her children are entitled to receive at least annual reports from the husband.

But what should those reports contain? The Trust Code is less than completely explanatory. It says that the wife’s children are entitled to “a report of the trust property, liabilities, receipts and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values.”

In a recent Arizona Court of Appeals case, the meaning of that requirement was questioned. The history was slightly more convoluted than the scenario we describe above: the trust had been established by a husband and wife for the ultimate benefit of the husband’s two daughters. First the husband and then the wife died. The trust, by its terms, then divided into two shares — one share outright to  one daughter, and the other share to a local Certified Public Accountant as trustee for the benefit of the other daughter.

To try to make this convoluted story a little clearer, let’s identify the parties. In keeping with our usual attempt to avoid family names popping up in internet searches, and to make it easier to keep track, we’ll give everyone shortened names. We’ll call the combined trust — the original one set up by the husband and wife — the G Trust, and the trustee of that trust Geraldine. We’ll call the trust for the benefit of one daughter the S Trust, and the CPA/trustee of that trust Scott. The other daughter will be Doris.

Doris filed a court action asking for determination of the proper division of the G Trust. She noted that she had been named as beneficiary of an annuity and asked that it be determined that it was not part of the trust. Geraldine, the trustee of the G Trust, filed a proposed distribution schedule for the G Trust. Both Doris and Scott (the Trustee of the S Trust) objected, each arguing that their share should be increased. The probate court found that the annuity belonged to Doris, and that Geraldine should make her own calculation as to how to distribute the G Trust.

Months later, Scott filed a request that the court order Geraldine to file an “accounting” with the court. Geraldine objected that she had done everything the Arizona UTC required — and that all she was required to provide was a “report” under that statute. Scott argued that he was entitled to a more formal accounting. Ultimately the probate judge denied that request, finding that Geraldine’s reports (consisting of account statements and other documentation) were sufficient for Scott to protect his trust’s interest. Scott appealed.

With that background, the question before the Court of Appeals was straightforward: does the Arizona version of the Uniform Trust Code allow a beneficiary to make a demand for a formal, detailed accounting? No, ruled the appellate court. In fact, the UTC made the accounting requirements less onerous, rather than imposing more detail: the prior Arizona law had required “a statement of the accounts of the trust annually,” but that statute was repealed when the UTC was adopted.

According to the appellate decision, requiring an “accounting” would have included “establishing or settling financial accounts” and “extracting, sorting, and summarizing the recorded transactions to produce a set of financial records” (quoting from Black’s Law Dictionary 9th Ed.). The court also quoted from the commentary prepared by the UTC’s original, multi-state drafters: “The reporting requirement might even be satisfied by providing the beneficiaries with copies of the trust’s income tax returns and monthly brokerage account statements if the information on those returns and statements is complete and sufficiently clear.”

The bottom line: the main concern of the UTC is to assure that beneficiaries have the information they need to be able to protect their interests. Scott had sufficient detail that he could calculate whether Doris had received more than her share of the G Trust, and Geraldine was not required to prepare a more formal report. In the Matter of the Goar Trust, December 31, 2012.

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