MAY 7, 2012 VOLUME 19 NUMBER 18
We have written about contracts to make (or not to revoke) a will before. The question comes up infrequently, and usually only in a handful of ways: can you and your spouse make an enforceable agreement that you will leave your respective estates to, say, your children no matter what? Yes, you can — at least in Arizona.
For John and Martha Lindford (not their real names), the question came up during their divorce proceedings. Martha wanted to make sure that the couple’s two children, John, Jr. and Paula, would receive at least a share of John’s estate when he died. When the couple negotiated a property division as part of the divorce, it included a provision that required each of them to “execute a Will leaving fifty percent (50%) of their respective estates in equal shares to the children and twenty-five percent (25%) to each other.”
Eleven years after the divorce was final they both agreed that it was time to modify their first arrangement. John and Martha both signed an amendment that eliminated the requirement that any share of each estate be left to the other, and instead provided that 75% of each ex-spouse’s estate would go to the two children. Six months after that modification, John remarried.
Five years after the second marriage John was diagnosed with cancer, and he began to seriously plan his estate. He amended signed a new will and modified his existing living trust; the new documents specifically left several business entities to his new wife, and provided that she would also receive an additional amount to bring her share of his estate up to 25% if it did not already amount to that much.
In the months after his cancer diagnosis, John also transferred several assets — the family home, several bank accounts and one of the businesses — to his second wife outright. When he died eighteen months after diagnosis, the effect had been to leave his second wife substantially more than one-quarter of his entire estate — although she had gotten a large part of that share by lifetime gifts, not in his will or the trust.
John, Jr., and Paula and first wife Martha filed a claim against John’s estate. They argued that the effect of his gifts and the terms of his will and trust violated the marital property agreement as it had been amended. His second wife acknowledged that she had gotten more than one-quarter of John’s assets, but argued that the agreement only required him to have a will leaving 75% to his children — and that lifetime transfers were not prohibited by the agreement.
After a two-day trial, an Arizona probate judge ruled that John’s actions violated the property settlement agreement with his first wife. The second wife was ordered to return all the assets she had received from John, so that a new division could be made and her share could be capped at 25%. She appealed the ruling.
The Arizona Court of Appeals agreed with the probate judge, and upheld his ruling. The appellate judges calculated that John had given about $2.5 million — amounting to more than one-third of his entire estate — to his second wife, and that he had done so in an attempt to defeat the agreement he had signed with his first wife. Estate of Lockett, April 26, 2012.
Should John’s and Martha’s original agreement, signed in the course of a divorce nearly two decades before John’s eventual death, effectively tie John’s hands indefinitely, and despite his later marriage, growth of his estate and changes in his family relationships? That question is larger than the legal question posed by his probate case. For good or ill, John and Martha had signed an agreement that compelled them each to leave three-quarters of their respective estates to their two children. That agreement might have turned out to have been unwise or constraining, but it was their agreement.
What formalities are required for such an agreement to be effective, and to bind the parties? Arizona law (and other states may have different provisions, so be careful about generalizing from Arizona’s example) requires a contract to make a will — or not to modify or revoke a will — to meet only very basic formal requirements. Paradoxically, it would seem that a contract which does not satisfy basic will formalities (e.g.: unwitnessed and not in the decedent’s handwriting) might qualify as an enforceable contract, thereby effectively creating a will.
What landmines and roadblocks might people considering such a contract (e.g.: the lawyers representing a couple in a divorce proceeding) reflect upon before signing? Well, the opinion in John’s probate case turned, among other things, on a letter he wrote before the agreement was signed. In that letter John reported that he intended to leave 75% of his “entire estate” to his first wife and children. When the second wife later argued that the agreement necessarily only covered his will and his probate estate (and therefore should exclude property he gave away before his death), both the probate judge and the appellate court pointed to his letter as proof that he meant the contract to include his entire estate. If that is true, it certainly would have been a good idea for the agreement to spell that out in more detail, and to cover the possibility of living trusts, lifetime transfers, creation of limited liability companies or family limited partnerships, and other arrangements.
APRIL 23, 2012 VOLUME 19 NUMBER 16
Let us try to demystify probate avoidance for a moment. Note that for the purposes of this description, we are not going to argue with you about whether avoidance of probate is good, bad, desirable or a foolish goal — we start here with the assumption that probate avoidance is important. Another day, perhaps, we will discuss with you whether you ought to be concerned about probate avoidance.
Definition of terms first: probate is the court process by which your estate is settled and distributed to your heirs (if you have not made a valid will) or your devisees (if you have). Confusingly, “probate” is also the term applied (in most states) to the court where probate proceedings, guardianship, conservatorship and sometimes even civil commitment and adult adoptions are conducted. We are not talking here about how to avoid probate court altogether, but just about how to keep your estate from having to go through the probate process upon your death.
Arranged (more or less) from least desirable to most, here are some of the ways to avoid probate of your estate upon your death:
Die poor. In Arizona, an estate consisting of up to $50,000 of personal property can be collected by the people who claim to be entitled to it without the need of a probate court proceeding. The affidavit for collection of personal property is widely available and usually free. Your survivors can use it to transfer title to your auto, or to collect small bank (or other financial) accounts. The statute providing for collection of small estates also provides a mechanism for the surviving spouse to get a decedent’s last paycheck, and for beneficiaries to transfer title to real property up to another $75,000 in value. Most other states have a similar law, but with dollar limits that vary widely.
Give it all away. One sure-fire way to avoid probate: give everything to your kids (or whomever you want to receive your stuff) now. The main problem with this approach should be obvious — what if they won’t let you live in your house any more, or withhold the interest you counted on them returning to you each month? Things change: you might change your mind about leaving everything to that child, or to all your children. The child you transfer assets to might marry someone you don’t trust. Worse yet, that child might die — leaving you at the mercy of his or her spouse and children. Maybe you and the child you give your stuff to will end up disagreeing about when you need to go to a nursing home, or whether you ought to get married late in life, or even take in a roommate.
As an aside, it amazes us how often clients come to us after having given everything to their children. Things so often do not work out as planned. This is a very poor way to handle your estate planning — but it would avoid probate. We hear that those new-fangled strap-on jet packs avoid traffic jams, too — but we don’t recommend them as a means of getting to the doctors office.
Joint tenancy. People often refer to this method of holding title by its formal name: “joint tenancy with right of survivorship.” That makes the value of the title pretty clear — the surviving joint tenant(s) own the deceased joint tenant’s portion of the property upon death of one joint tenant. You can have more than two joint tenants — upon the death of any one, the survivors’ interests all increase. We liken this arrangement to a tontine — a lovely idea that combines the best elements of estate planning and lotteries.
Lawyers generally discourage the use of joint tenancy in estate planning. The problems are less obvious than simply giving away your stuff, but they are still real. You might later decide that the child you established the joint tenancy with should get a larger or smaller share of your estate — but the joint tenancy is always, by definition, an equal ownership interest with all the other joint tenants. People who favor joint tenancy as an alternative to good estate planning invariably, in our experience, seem to think it would be OK to name just one child as joint tenant, and to trust her (or him) to divide the property among siblings. That often works just fine — but it often leads to family disputes when the children have different expectations or understandings.
Other problems with joint tenancy: you subject your property to the creditors, spouses and business partners of the child you put on your title. You lose the power to refinance your home, to cash out your certificate of deposit, or to liquidate your government bonds — more accurately, you lose the power to do those things unless your joint tenant will also go to the title company or the bank with you and sign willingly.
Lawyers tend to dislike joint tenancy, except in one circumstance. Many people own their property in joint tenancy with spouses (homes are especially likely to be titled in that fashion), and we lawyers generally think that is alright. In Arizona, there is another alternative between spouses that we like a little better: community property with right of survivorship. That conveys some income tax benefits to a surviving spouse while still avoiding the necessity of any probate on the first spouse’s death.
Beneficiary designations. You probably have a beneficiary (maybe multiple beneficiaries) named on your life insurance policy, on any annuities you have been talked into buying, and on your retirement account (if there is any death benefit included). Did you know that you can do the same thing with bank accounts, stocks and bonds, and even (in Arizona and a handful of other states) real estate?
POD (payable on death) bank accounts — you can designate a POD beneficiary (some banks use the acronym ITF — “in trust for” — and it means the exact same thing) who has no current interest in your account but receives it automatically upon your death. You can even name multiple POD beneficiaries. And you can do this at banks, credit unions, savings and loans. Caution: if you go to your bank and say “I heard that there’s a way I can put my son’s name on my bank account” the clerk will almost always hand you a joint tenancy signature card. Make clear that you’re talking about POD designations — they are used less commonly but are a better fit for most people.
TOD (transfer on death) for stocks and bonds — there is a designation similar to the bank POD account for stocks, bonds, brokerage accounts and mutual funds. It is usually referred to by its acronym, TOD. It is actually more flexible than the POD designation available to banks — it allows you to designate what happens if a TOD beneficiary should die before you, for instance. Talk to your stockbroker about this titling arrangement if you think it might be a good idea for you — but talk to your lawyer first.
Beneficiary deeds for real estate — this one is available in only about a dozen states, but Arizona is one of those. It is like a POD or TOD designation for real estate — including your home. It only works on real estate located in Arizona or one of the other beneficiary deed states. The beneficiary deed conveys no current interest in your property, but avoids probate and vests directly in your beneficiary upon recording of your death certificate. You and your spouse can, for example, own your home as community property with rights of survivorship but upon the second death automatically transfer to your children in equal shares (with provisions about what happens if one of them should not survive both of you) upon the second death. We have written about beneficiary deeds in Arizona before, and our earlier explanations are still valid (even though our newsletter style has been updated).
What’s wrong with these beneficiary-based devices? Two things, at least: (1) they don’t provide for what happens if you make life changes that effectively adjust your estate plan (if, for instance, you live off of one account that was to go to one or two children, and thereby reduce their share of the estate) and (2) they make it hard to change your estate plan (if you decide to disinherit a child, for instance, you have to make sure to change all of the operative documents and titles). But in the right circumstance, beneficiary designations can effectively transfer your estate without probate — they act as a sort of a “poor man’s” trust.
Trusts. Which gets us to the most efficient way to avoid probate for most people — the living trust. To be clear, the trust doesn’t really avoid probate at all — but your trust assets do not have to go through the probate process and so anything you have transferred during life to the trust will avoid probate. It is the “funding” of the trust that avoids probate, not the trust itself.
So there you have it. Probate avoidance in a nutshell. But wait — what’s not on that list? Did you notice? There is so much confusion about the missing item, which does not avoid probate:
Making a will. Preparing and signing your will is a good thing to do. It avoids intestate succession, which might not be right for you. It designates who will be appointed by the court to act as your personal representative. It can name the person who will be your children’s (or your incapacitated spouse’s) guardian. It can even create a trust. But it does not avoid probate.
Your will is instead instructions to the probate court. It has no effect unless and until it is admitted to probate, which another way of saying that a court has determined that it really is your last will. Clients frequently say: “thank goodness I’ve signed my will today. Now I can sleep better knowing my children won’t have to go through probate.” We say: “sit down. We have some more talking to do. Obviously we have failed to get you to understand the distinction between wills and probate avoidance.” Then we talk about living trusts.
Did that help? Do you have a better idea for probate avoidance (we’ve left a couple of less common methods off)? We’d love to hear from you.
OCTOBER 31, 2011 VOLUME 18 NUMBER 37 Floyd Spence, a Republican Congressman from South Carolina, was a long-time survivor of a heart-lung transplant and a (separate) kidney transplant when he died in 2001, at the age of 73. He was survived by his second wife, Deborah Spence, and four adult sons from his first marriage (his first wife had died in 1978).
As Congressman Spence lay dying in a Mississippi hospital, Mrs. Spence realized that she might need legal counsel to sort out what she would receive from his estate and his congressional life insurance policy. She consulted Kenneth B. Wingate, a prominent lawyer in Columbia, South Carolina. They discussed the fact that she had signed a prenuptial agreement prior to marrying Congressman Spence, that he had initially named her as one of five beneficiaries (along with her stepsons) on his $500,000 life insurance policy, and that she believed he had changed the beneficiary designation to name her alone.
Mr. Wingate advised Mrs. Spence that she should consider entering into an agreement with her stepsons about how the estate would be divided upon Congressman Spence’s death, since there were uncertainties arising from his two different wills, the beneficiary designation and her possible rights under South Carolina law. She agreed, and a settlement of any possible dispute was quickly negotiated and signed. Congressman Spence died, as it happened, the day after the settlement was finalized. The settlement provided for a trust, to be funded with one-third of Congressman Spence’s probate assets and paying its income to her for the rest of her life.
About two weeks later, Mr. Wingate visited Mrs. Spence and informed her that he had been retained to represent the Estate of her late husband. He did not tell her that there might be a conflict of interest in that representation, and he did not ask her to acknowledge any conflict or sign a waiver. In fact, he told her that she would no longer need separate counsel, since the possible conflicts had all been resolved.
Over the next few months Mrs. Spence began to think that she had made a bad bargain. She became convinced that she would have received more from either her husband’s last will or South Carolina’s laws providing for surviving spouses. At a family meeting with her four stepsons and Mr. Wingate, however, her former attorney suggested that she should forgo her right to receive the entire life insurance policy in order to make the boys “whole again.” She did not want to agree, arguing that they should not alter her late husband’s wishes.
After the family meeting Mrs. Spence called Mr. Wingate and asked him to put his hat back on as her attorney and counsel her about the life insurance proceeds. He declined but, according to her, he did not tell her that she ought to seek new counsel or take any steps to protect her interest in the life insurance.
About a year after the Congressman’s death, Mrs. Spence filed a lawsuit seeking to set aside the agreement Mr. Wingate had negotiated for her. He promptly withdrew from representation of the Estate. Eventually the court set aside the agreement.
Mrs. Spence then sued Mr. Wingate, arguing (among other things) that he had breached his fiduciary duty to her as a former client by taking on a new client with an adversarial position. Particularly she argued that Mr. Wingate breached his duties to her in connection with the life insurance policy.
The trial judge dismissed that part of her complaint. Since the estate did not have any interest in or right to the insurance proceeds, the judge decided, Mr. Wingate could not breach any duty to her with regard to the policy. The South Carolina Court of Appeals, however, disagreed. The possibility of a breach of fiduciary duty would depend on the evidence at trial, ruled the appellate judges. The case should be returned to the trial court for further proceedings to determine whether there was in fact a breach of duty.
The South Carolina Supreme Court has now rendered its opinion on Mr. Wingate’s duties to Mrs. Spence. The state’s high court agreed with the Court of Appeals that more facts are needed, but made clear that the existence (or non-existence) of a fiduciary duty is a question of law for the trial judge to decide. In other words, the dispute was returned to the trial court for further hearings, and with an instruction to the trial judge to make a finding about whether Mr. Wingate owed a fiduciary duty to Mrs. Spence with regard to the insurance proceeds. If the judge decides that a duty has been shown, then a jury can determine whether Mr. Wingate breached that duty. Spence v. Wingate, October 17, 2011.
The decision of the Supreme Court was not unanimous, incidentally. Two of the five justices would have found that no fiduciary duty existed with regard to the insurance policy, and would therefore have upheld the partial summary judgment originally granted by the trial judge.
Is there a broader lesson in this story? Let us guess that Mr. Wingate today wishes he had declined to take on representation of the Spence estate, and stayed available to counsel Mrs. Spence as to her rights and her agreement. He may ultimately be vindicated, but that will be a less desirable outcome than never having been accused of breaching his duty in the first instance.
MAY 9, 2011 VOLUME 18 NUMBER 17
Let us give you some insight into how hard it can be to figure out how to interpret estate planning documents. At the same time we hope to explain why it is important to keep your own estate plan up to date.
Timothy M. Donovan was a successful New Hampshire businessman. Beginning in the 1980s he started his own company, Optimum Manufacturing, and built it into a leading manufacturer of optical housing, mirror blanks and satellite components.
At age 52, Mr. Donovan was married for the second time. He had no children from either marriage, but he had close relationships with his mother, his brothers and a niece and nephew.
In 2005 he signed a will and a living trust. The terms of his will were straightforward: he left all of his personal property, real estate — almost everything he owned — to his wife. There was one huge exception, however: he left his stock in Optimum Manufacturing, the real estate on which the plant was located, and any other interest in Optimum to his living trust.
Apparently Mr. Donovan had wrestled with what to do about the company he had built. His trust included detailed provisions about what was to happen to Optimum Manufacturing. His trustee was to continue to run the business for a short time, and then arrange for its sale. If possible, it was to be sold to employees of the company. If not, it was to be put on the market. Once the company was sold, the proceeds were to be divided into percentages. Forty-five percent would go to his wife, twenty-five percent to his mother, twenty percent was to be divided among his brothers, niece and nephew, and ten percent would go to the trustee. After distributing the Optimum sale proceeds in those percentages, everything else in the trust was to go to his wife.
So far, there is nothing extraordinary about Mr. Donovan’s estate plan, and it looks like it would be easy to understand and implement. But in 2008, things changed. Mr. Donovan sold his company to Corning Specialty Materials, a subsidiary of the giant Corning, Inc. The sales price: $15 million. The proceeds from the sale went into Mr. Donovan’s name individually, and not to his living trust.
Just under a year later Mr. Donovan (who was also an avid and accomplished pilot) died,tragically, in a glider crash. He had not updated his estate plan, and so questions now arose about what should happen to proceeds from the sale of Optimum Manufacturing.
You be the probate judge for a moment. Assume for the sake of your ruling that all the Optimum proceeds were held in one or more identifiable accounts, and that they had not been commingled with other funds (we don’t know that to be true, but let’s keep the legal issues simple for a moment). Assume, also, that Mr. Donovan’s wife’s name has not been put on those accounts. Tell us, judge: what happens to the $15 million?
You want some precedent? How about the recent case of Estate of Donovan, decided on April 28, 2011, by the New Hampshire Supreme Court? It would be hard to find anything more clearly on point.
The legal term for what happened in Mr. Donovan’s case is ademption. When property is sold, lost or no longer part of the estate at death, it is said to be “adeemed,” and a specific bequest of that property therefore fails.
In some circumstances the identifiable proceeds from a sale of specifically named property must be distributed as if the original gift still operated. That can be true when the “ademption” is involuntary, for instance — such as when the state condemns a parcel of property that has been listed in a will and the proceeds from that condemnation are still held in a separate account. But that was not the situation in Mr. Donovan’s case.
The problem is made slightly more interesting by the fact that Mr. Donovan had signed both a will and a trust. Since the sale proceeds were still in his name, they were governed by the will — which said that everything but Optimum Manufacturing was to go to his wife. That was what the probate judge decided, and the New Hampshire Supreme Court agreed.
Imagine, though, that Mr. Donovan had put the sale proceeds into an account titled in his trust’s name. Would the result have been any different? No, said the Supreme Court. His trust also left everything but Optimum stock to his wife, and the ademption principles would apply to the trust just as they did to Mr. Donovan’s will and estate.
There is no grade, nor any reward, for correct answers, but how did you do as a probate judge?
NOVEMBER 15, 2010 VOLUME 17 NUMBER 36
When we help you plan your estate our goal is to figure out who you would want to be in charge of your finances and personal affairs, who should receive your assets and in what proportion, and what you want done at a future time when you are unable to take care of things yourself. Our purpose is to figure all of that out and reduce it to writing — and to assure that your wishes are clearly and legally expressed. That is why we ask you all of those annoying questions about what should happen if your heirs or agents should die before you. That is why we spin out those disturbing scenarios of multiple deaths and incapacities, of family break-ups and failures.
There is a point at which it no longer makes sense to try to figure out every eventuality, and we recognize that we will not cover every conceivable sequence and circumstance. There are principles of probate law that help fill in the blanks for common issues — but sometimes they are not obvious, or do not seem quite right. Then the probate court may have to interpret a will or trust, or figure out the legal effect of the document.
A simple illustration of this principle arises in the Florida probate court interpretation of Cecelia Lorenzo. Her will was properly drawn up, and it was clear. Half of her estate was to pass to her brother, and the other half to her sister’s husband. If either of those recipients died before her, she directed that the deceased beneficiary’s share should go to his wife. That seems obvious, and easy to interpret.
The problem with Ms. Lorenzo’s will did not appear obvious at the time it was written. Later, but before her death, both her brother and her sister-in-law died. That meant half of her estate was supposed to pass to one of two people who were no longer living.
Long-standing principles of construction almost addressed the problem. Under the laws of Florida (the same rules apply in Arizona), if the will does not provide otherwise a deceased beneficiary’s share passes to the named beneficiary’s children if he or she dies before the will’s signer. One catch: that principle only applies if the named beneficiary is a relative (in Florida’s case, that means “descended from the testator’s grandparents”).
So, to recap: Ms. Lorenzo’s will left half of her estate to her brother, who was surely descended from Ms. Lorenzo’s grandparents. Her brother died after the will was signed but before Ms. Lorenzo died. Her will said that in that event her brother’s half of the estate was instead to go to her sister-in-law — who was not descended from Ms. Lorenzo’s grandparents. Does that mean that the two children of Ms. Lorenzo’s brother (and his wife) receive the brother’s share, or not?
The probate court said yes, the niece and nephew should share half of Ms. Lorenzo’s estate. The Florida Court of Appeals said no, and reversed the probate judge’s holding. Because the will named Ms. Lorenzo’s sister-in-law in the event that her brother predeceased her, the bequest was to a person who was not a blood relative. That meant the bequest lapsed as a result of the deaths of Ms. Lorenzo’s brother and sister-in-law, and her entire estate passed to her sister’s husband, who had been named to receive the other half. Lorenzo v. Medina, November 10, 2010.
That might have been Ms. Lorenzo’s intention, but it seems unlikely. If the scenario had been reversed, with her brother-in-law and her sister dying before her, the result would have been the opposite — and it is hard to imagine that she intended opposite results in the two scenarios. More likely, she (and her lawyer) just didn’t think through every permutation, and then she didn’t update her will after the deaths of her brother and sister-in-law.
The court opinion doesn’t tell us how old Ms. Lorenzo’s will was at the time of her death. We are left to speculate about how long she had known of the deaths of her brother and sister-in-law, and whether she had ever considered what effect their deaths had on her own estate plan. But there is another lesson to be learned from Ms. Lorenzo: it is a good idea to update your estate plan every five years or so, just to be sure your intentions are not overtaken by family circumstances.
SEPTEMBER 6, 2010 VOLUME 17 NUMBER 28
The question addressed in a ruling last month by the Arizona Court of Appeals seems provocative. In a lawsuit based on the Arizona law prohibiting abuse, neglect or exploitation of vulnerable adults, does the very life of the abused senior have any intrinsic value? The Court’s answer: perhaps, but the lawsuit can not recover damages for the loss of that life.
Mary Winn died about a month after being admitted to Plaza Healthcare, a Scottsdale, Arizona, nursing home, in 1999. Four years later her husband George Winn filed a lawsuit against Plaza, alleging that it had violated Mrs. Winn’s rights under Arizona’s Adult Protective Services Act. Under the APSA, a vulnerable adult who has been abused, neglected or exploited may recover damages suffered as a result of that abuse, neglect or exploitation. Mr. Winn argued (on behalf of his wife’s estate) that he should be able to recover on behalf of his late wife, and that she would have been entitled to actual damages for the loss of her life, as well as punitive damages.
Not so, argued the nursing home. Mrs. Winn obviously could never have collected damages for her own death, and her estate’s recovery was limited to what she could have recovered. In fact, the estate’s possible recovery was less than her damages, since any claim for pain and suffering she experienced at the end of her life ended with her death. With no actual damages to recover, her estate could not seek punitive damages.
Mrs. Winn’s estate argued that her life had some “intrinsic” value, and that it should be recoverable. The estate conceded that she was elderly and ill when she arrived at Plaza Healthcare, and that she could not be expected to earn a salary given her age and condition. But, insisted the estate’s lawyers, a human life has some inherent value.
The trial court agreed with the nursing home, and limited the estate’s proof to just actual damages. After an informal arbitration proceeding (the estate conceded that the remaining damages were less than $50,000, and therefore subject to mandatory arbitration rules) a judgment against was entered in favor of Plaza Healthcare.
The Arizona Court of Appeals reviewed the trial court’s ruling and agreed. There is no cause of action under the vulnerable adults statute, ruled the appellate judges, for the “intrinsic or inherent value” of a deceased claimant’s life. Mrs. Winn’s estate — and her husband — recovers nothing from Plaza Healthcare. Estate of Winn v. Plaza Healthcare, Inc., August 10, 2010.
To be fair, the appellate court did not rule that there is no value to the life of an elderly, disabled and vulnerable senior. All the ruling says is that there is no right to recover under the Arizona Adult Protective Services Act for the loss of life itself.
Does that mean that Mr. Winn had no claim for his wife’s alleged mistreatment? Not necessarily — he might have been able to file his lawsuit on his own behalf if he had acted more quickly. By the time he filed it had been more than four years since his wife’s death — too late for any wrongful death action but not too late for a viable lawsuit under the Adult Protective Services Act, which had a much longer statute of limitations.
There is another interesting footnote to the Winn case. Last month’s decision from the Court of Appeals is not the first time Mrs. Winn and her estate have been before Arizona appellate judges. In fact, her case had been appealed twice before — once in 2006/2007, and again a year later. The first trip through the appellate system involved the trial judge’s dismissal — ultimately reversed by the Arizona Supreme Court — on the basis that a probate proceeding filed more than two years after the decedent’s death did not permit filing of a lawsuit in the estate’s name. A year later the Court of Appeals dismissed an attempted appeal from the trial judge’s initial refusal to allow any recovery for the inherent value of Mrs. Winn’s life. That appeal had to wait for final resolution of the entire lawsuit, which was accomplished before the current (and probably final) appeal.
When Robert L. Johnson died in Mississippi in 1938, he was largely unknown. The 27-year-old had a musical gift, and he left a number of blues recordings. There did not appear to be any valuable property in his estate at the time, though, so no probate was initiated.
In 1991, after a resurgence of interest in Mississippi blues Mr. Johnson earned his first royalties. A probate estate was started to handle the payments and determine Mr. Johnson’s heirs.
Caroline Thompson had been Mr. Johnson’s last surviving sister, but she died in 1983. She left a will naming two of her relatives to receive her entire estate, and they claimed that they were entitled to Mr. Johnson’s estate as well, since it would have passed to Ms. Thompson.
Claud L. Johnson disagreed. Although his mother was unmarried when he was born, Claud Johnson had always been told that his father was blues singer Robert L. Johnson. His birth certificate even listed “R.L. Johnson” as the father.
The probate court at first refused to accept Claud Johnson’s claim, finding that it was too late to determine paternity of a 60-year-old man more than a half century after the death of the alleged father. The Mississippi Supreme Court reversed that decision and ordered the probate court to hold a hearing on Claud Johnson’s petition.
In addition to testimony from Claud Johnson himself the probate court received a deposition from Claud’s mother. She insisted that Robert L. Johnson was Claud’s father, that she had not had sex with anyone else at the time of conception, and that Robert L. Johnson acknowledged that he was the father. Two other friends testified that they had seen Robert L. Johnson with Claud and his mother.
Most poignantly, the court heard from a childhood friend of Claud’s mother, Eula Mae Williams. Ms. Williams testified that she and her then boyfriend spent time with Robert L. Johnson and Claud’s mother. She testified that the two couples went for a walk in the woods in the spring of 1931, and ended up having sex within sight of one another. When the lawyer for the other family members challenged her by suggesting that he would never have watched another couple making love, Ms. Williams retorted: “I’m sorry for you.”
Claud L. Johnson was found to be Robert L. Johnson’s son, and entitled to his estate. The other claimants appealed. The Mississippi Supreme Court, saying that Ms. Williams’ testimony “rings true,” agreed that the evidence in favor of Claud Johnson’s claim was clear and convincing. Estate of Robert L. Johnson, June 15, 2000.
In 1936 Robert L. Johnson recorded “Hellhound On My Trail” (among other blues songs). “You sprinkled hot foot powder all around your daddy’s door,” he sang. Indeed.
For more on Robert L. Johnson (including lyrics and, sadly, now-broken links to other resources), visit the Robert Johnson Notebooks. Considerable information can also be found at The Blue Highway.
“Undue influence” is usually thought of in connection with provisions in a will. It can also be cited in attempts to set aside transfers made during life, as a recent North Carolina case illustrates.
In early 1996 Irene J. Stephenson signed a deed conveying her home and sixteen acres of land to the Wake Forest Baptist Church. The deed reserved a “life estate” to Ms. Stephenson—that is, it allowed her to live on the property, rent it and use it as she wished for the rest of her life.
Shortly after she signed the deed, Ms. Stephenson moved to set it aside. She claimed that church members had brought the deed (and an attorney) to the nursing home for her to sign, and that no attempt had been made to involve her family, her attorney or the agent she had named in her durable power of attorney.
Ms. Stephenson had been eighty-seven years old when she signed, and had been living at a local nursing home for two years. Her mental health had allegedly begun to fail. In fact, Ms. Stephenson died before the case could be resolved, and it was continued by her probate estate.
After the complaint was filed, the Wake Forest Baptist Church moved for summary judgment, which was granted. Ms. Stephenson’s estate appealed.
The original complaint had not included a claim that church members unduly influenced Ms. Stephenson to sign the deed. The Court of Appeals directed that the case be returned for a decision on the possibility anyway, and it provided some guidance on what to look for when analyzing a transaction for undue influence. Among the factors the court found might tend to indicate undue influence in this or another transaction:
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“Old age” and mental weakness of the signer
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Change from prior disposition of the property
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Benefits flowing to a non-relative
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Involvement of the beneficiary in procuring the transfer
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Disinheritance of the “natural objects” of the signer’s bounty
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Constant association and supervision by the beneficiary, as when the signer lives with the beneficiary
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Lack of opportunity for others to visit the signer
In Ms. Stephenson’s case, said the court, there was at least some evidence on several of those elements.
Ms. Stephenson’s estate should be permitted to put on its case for undue influence, and so the case was remanded for further proceedings. Meanwhile, allegations of interference with a contract and unfair trade practices were dismissed. Stephenson v. Warren, March 7, 2000.
Arizona law is very similar to the North Carolina court’s holding. In a 1966 case the Arizona Supreme Court outlined eight factors tending to show undue influence, with much the same effect. One subtle (but important) difference: Arizona cases have expressly held since at least the mid-1940s that “advanced age” (by itself, at least) can not give rise to any presumption of undue influence.
A nursing home resident may qualify for and receive ALTCS benefits even though she owns a home and other exempt assets. Upon the death of the unmarried nursing home resident, however, the state may have a claim against the recipient’s estate for recovery of benefits paid during her life. When Congress made changes to the Medicaid program last fall, they included a provision that requires states to actively seek reimbursement from the estates of deceased recipients.
Congress specifically suggested that states might seek to recover from joint tenants and others who receive property by virtue of the death of recipients. Arizona has graciously declined to accept Congress’ suggestion.
According to new regulations just adopted in Arizona, the “estate recovery” program will pursue only those assets constituting the probate estate. This means that assets held in joint tenancy, or accounts naming a beneficiary, will not be subject to estate recovery. It also means that some planning options, such as sale of the elder’s residence to younger family members while retaining a life estate, will be even more attractive under the new rules.
The estate recovery program will most often be important with reference to the elder’s family home. Of course, transfer of a remainder interest (or transfer from the elder’s name into joint tenancy with children) will cause other problems. Either the transfer must be compensated at its fair market value (generating cash which will cause eligibility problems until it is spent) or it will result in a transfer penalty period. Still, planning options are increased, particularly for married applicants and for those who placed property in joint tenancy years ago.
Home Aide Shortage
Wall Street Journal, June 1, 1994
“Work-family juggling acts are being upset by a shortage of reliable home health aides.
Rising demand for aides to care for aged, disabled or ill people in their homes has made it the nation’s fastest-growing job, the Labor Department says. But poor pay and benefits and the hard tasks required are breeding shortages and turnover as high as 50% in some regions.
Just as child-care problems erode productivity, a tardy or absent home health aide can force those who oversee a family member’s care to miss work. ‘It’s a very serious issue for employed caregivers,’ says Barbara Lepis, director of the Partnership for Elder Care, a nonprofit consortium of 10 employers and the New York City Department for the Aging. Even if they get to work, family members may have to ‘spend all their time on the phone, patching together something for mom,’ she says.
When Elizabeth Kutza’s aged father moved in with her, she spent most of one summer at home because she couldn’t find a home health aide. The first person she hired quit after one day, and others were unable to lift her father or lacked transportation. She finally found someone to work part time. ‘I got almost nothing done. I was a nervous wreck by the end of the summer.’ says Dr. Kutza, director of Portland State University’s Institute on Aging. Qualified aides ‘are not easy to find and not easy to keep.’
Home care agencies, which have grown by nearly 50% in the past five years, can reduce turnover by screening and training aides, but many charge an hourly fee of several dollars that is added to the $4.25 to $8.50 an hour received by aides. Members of the National Association for Home Care, a Washington, D.C., industry group, are studying techniques to reduce turnover, among them improving benefits, including child-care aid.”
