Posts Tagged ‘right of survivorship’

“Right of Survivorship” Terminated by Co-Owner Unilaterally

MAY 9, 2016 VOLUME 23 NUMBER 18
First, a short primer on “joint tenancy with right of survivorship”:

In Arizona, there are two main ways that two or more people can own property together (assuming they are not married). One choice is for the owners to be “tenants in common.” The other is to be “joint tenants.”

What is the difference? There are several, but two stand out:

  1. Joint tenants must have an equal interest, while tenants in common can have any variation they choose (60%/40%, or any other variation they can come up with), and
  2. Tenants in common can leave their interests to the other tenant in common, or to anyone they choose. Joint tenancy automatically includes a “right of survivorship,” so that the surviving joint tenants automatically receive the share belonging to a deceased joint owner.

It is that second element — the right of survivorship — that most distinguishes joint tenancy. If three people own the property as joint tenants, and one of them dies, the two survivors are now 50/50 joint owners, with the right of survivorship as between themselves. So, for instance, if a married couple decides to transfer their home into joint tenancy with the wife’s daughter (from a first marriage) as joint tenants, and then the married couple both die before the daughter/stepdaughter, she is the sole owner of the property.

But here’s the less-known thing about joint tenancy: any of the joint tenants can, unilaterally and semi-secretly, turn the joint tenancy into tenancy in common. How? Simply by transferring their fractional interest to another person — even if the recipient promptly transfers the interest back to the original joint owner. In some states (including Arizona), the joint tenant can even transfer his interest to himself and get the same result. Of course, the transfer should be filed with the County Recorder (in Arizona, at least) to be effective, but no notice to the other joint tenants is required.

That’s what happened to Janet Smith (not her real name). Her mother and stepfather (we’ll call them Edna and Greg) owned their home, and Janet lived with them. In 2002, the couple transferred their home into three names: Greg, Edna and Janet, as joint tenants (with right of survivorship).

Edna died in 2006, and Janet continued to live in the home with Greg. She helped take care of him, and helped him to stay at home, until his death in 2013. Sometime before his death, however, Greg had transferred his one-half interest in the home into a trust, which named his two children (from his first marriage) as beneficiaries.

Janet filed a claim against the estate. She alleged that the care she had provided to Greg after her mother’s death was worth at least $100,000, and that there had been an understanding that Greg would not change the joint tenancy arrangement after Edna’s death. Part of the reason her name was put on the house in the first place, she said, was that Edna and Greg relied on her to take care of them, and that she was to receive the house in return.

Greg’s son, as personal representative of Greg’s estate, denied Janet’s claim. The probate court agreed with the disallowance of the claim, and granted summary judgment in favor of the estate. Janet appealed.

The Arizona Court of Appeals affirmed the probate court ruling. The appellate court first noted that there would likely be a problem with Janet’s claim in any event, since an agreement involving real estate ownership would ordinarily have to be in writing. But, since the appellate court agreed with the probate court on Greg’s ability to terminate the joint tenancy, the lack of a written agreement did not have to be considered.

The Court of Appeals ruled that Greg and Edna’s belief and expectation at the time they established the joint tenancy was simply unknown. Janet claimed that Greg had repeatedly told her that she would be “taken care of” after his death; that vague assurance was insufficient to support any agreement not to take the property out of joint tenancy. Janet’s claim failed again at the Court of Appeals level. Show v. Otto, May 3, 2016.

It is important to remember that Janet was not completely disinherited by the outcome. Upon her mother’s death she became an owner of a half interest in the property, and Greg’s later termination of the right of survivorship did not divest her of that interest. She just did not receive the entire property, as she had apparently expected. In fact, the Court of Appeals opinion mentions that the property was sold and the proceeds split. Her share of the proceeds will no doubt be reduced by the amount of attorney’s fees awarded against her by the appellate court decision.

Though the joint tenancy/tenancy in common distinction is most often thought of in the context of real estate, the same rules apply to personal property as well. The distinction is often, if somewhat imprecisely, characterized as a difference between “and” and “or” on a title. If, for instance, a vehicle title indicates that an auto is owned by “Greg AND Janet”, that amounts to tenancy in common — it takes both Greg and Janet to transfer the vehicle to a buyer, and if either of them has died then the decedent’s interest must be dealt with (by probate proceedings or otherwise). But if the auto title is “Greg OR Janet”, either can sign the title, and the result is equivalent to a joint tenancy (with right of survivorship).

And, just to confuse things further (sorry about that), there is an entirely different set of considerations when property is held by a married couple. But that’s a story for another day.

Step-Children and Disinherited Children Might Have Rights — It Depends

NOVEMBER 12, 2012 VOLUME 19 NUMBER 41
A prospective client asks: “Can my mother cut me out of her will after my father dies? His will leaves everything to the children after her death.” That deceptively simple question comes in a number of variations (like: “My mother’s will left everything to her children, but her estate was not probated. After her husband, my stepfather, died, we learned that everything went to his children from a prior marriage. Can we do anything about that?” Or: “Our father and stepmother had a joint trust leaving everything to all of their children — my siblings and my step-siblings — when the second one of them died. After my father’s death, my stepmother changed the trust to go only to her children. What rights do I have?”

To each of those questions the answer is almost certainly the same: “It depends.” That’s the classic lawyer’s answer, but it reflects a reality that we deal with whenever we talk to a new client or prospective client. We almost never have enough information to give a definitive answer after the initial consultation, and that is particularly true with these questions.

What does it depend on? State law, sometimes. The actual wording of documents, in most cases. Titling of the property, pretty often. The cost of pursuing the issue weighed against the value of the “lost” inheritance, almost every time.

Please remember that what we describe here is based on Arizona law. It’s what we know; we don’t know enough about other states’ laws to do more than speculate about whether the same answer would be true in another state. Heck, sometimes we don’t know enough to determine whether Arizona or some other state’s laws even apply to the question. So check these answers with a qualified lawyer in your state (or the state where your parent(s)/step-parent lived and died).

Disclaimers aside, let’s look at some of the more-common scenarios:

1. Herb and Vonda signed identical wills, leaving everything to one another and, on the second death, to their three children in equal shares. Herb died. No probate was even filed, since everything was owned as joint tenants with right of survivorship. All Vonda had to do was distribute Herb’s death certificate and everything was transferred to her name. Five years later Vonda changed her will to leave everything to one of the three children.

Vonda’s will might be subject to challenge based on undue influence or lack of testamentary capacity, but it is unlikely to be set aside based on Herb’s intention that his property be divided equally among his children. He left everything to Vonda — both in his will and by the joint tenancy designations. She was probably free to do what she wanted with what then became her own property.

Herb and Vonda might have signed an agreement to keep their wills the same. Their wills might have even included a provision that promised the survivor would not change her will after the first spouse died. But such a provision would be rare (not unheard of, but rare). Even if there was such a provision it’s not completely clear that it would apply in these circumstances, since Vonda did not acquire Herb’s interest in the jointly held property by his will — she got it by operation of the joint tenancy arrangement.

2. Richard and Fern signed a joint revocable trust. It provided that on the first spouse’s death, the survivor would have complete control over the trust and the property in the trust — including the right to amend the trust. If the trust was not amended, it would leave everything to Richard and Fern’s only son, Ralph. All their assets were transferred into the trust.

After Fern died, Richard amended the trust to leave everything to a neighbor. At least that’s what Ralph suspects. The neighbor is named as trustee and refuses to even give Ralph a copy of the amended trust. Ralph wants to know if he has a right to at least Fern’s half of the joint estate, and how he can find out about the circumstances of any amendment. He has a copy of the old trust showing him as beneficiary (though the copy he has does not show that it was actually signed). The lawyer who prepared that draft trust won’t return his phone calls.

Can Ralph get a copy of the new trust? Not necessarily. If he has been completely eliminated from the trust, the trustee is under no obligation to give him anything. How does he know if that’s the case? He doesn’t. He could bring a court case to have the Judge interpret the validity of the suspected amendment, but if it is as the neighbor says he will probably lose — he probably won’t get a copy of the trust document and he may end up paying the neighbor’s legal fees in addition to his own.

To be clear, if the neighbor consulted us we would advise that it’s easier to show Ralph the amended trust and be done with it. But we would also tell him (assuming Ralph has been excluded and the document appears to have been properly prepared) that he is not obligated to do so. Ralph is likely to get further by being reasonable and friendly than by being confrontational. Oh, and he is probably not entitled to any portion of “Fern’s estate,” since she appears to have left it all to Richard.

3. Grant and Julia were each married once before they got together. Grant has two children from the first marriage, Julia has three and the two of them had one child together. They signed a joint revocable living trust and transferred all their assets into the trust’s name. It provided that on the death of one of them, the entire trust estate was to be divided into two shares — with half of the combined assets assigned to each share.

One share of the trust would continue to be completely under the control of the surviving spouse (the trust refers to this as the “Survivor’s Trust Share”). The other (the “Decedent’s Trust Share”) is held in trust for the benefit of the surviving spouse (he or she is entitled to all the income and, if he or she needs it, principal of this trust share). On the death of the second spouse, according to the trust document, the “Decedent’s Trust Share” is to be divided equally among all six children. The surviving spouse is named as trustee of the Decedent’s Trust Share, but has no power to modify or amend it.

After Grant died, Julia continued to administer both halves of the trust. She never provided any accountings to any of the children, though her oldest daughter did help her keep bank records and took documents to the accountant for tax preparation every year. None of the children wanted to confront her about how she was handling the money, and so no one every challenged her.

When Julia died (more than a decade after Grant’s death), it turned out that the Decedent’s Trust Share was empty. Julia had withdrawn most of the money in the last five years of her life, and had used it to fix up her house (it was titled to the Survivor’s Trust Share) and to make substantial gifts to two of her children (including the one helping out with the accounting). She had also incurred significant medical bills, and had even paid for in-home care for most of her last two years. Most of the children — and especially Grant’s children — felt like she should have moved into an assisted living facility to save money during that period.

When Grant’s oldest son asked for more information, Julia’s daughter (who, it turned out, had been named as successor Trustee) blew up at him and accused him of just being about the money — not caring what his father would want or what his step-mother needed. He wants to know now what he is entitled to.

Can he get account information? Almost certainly — especially for the Decedent’s Trust Share. Is he entitled to information about the Survivor’s Trust Share? Maybe, if he is still a beneficiary (or if the finances of the Survivor’s Trust Share would affect what Julia had needed from the Decedent’s Trust Share).

We always encourage clients to ask themselves one more question, though: will Grant’s son be happy with any likely outcome? Probably not. The cost of pursuing his step-mother’s estate and his step-sister will likely be high, and the resolution will not give him everything he is entitled to receive. Depending on the size of the estate and the portion at issue, it might be financially worth pursuing. Basically: “it depends.”

Joint Tenancy Does Not Always Mean Equal Ownership

NOVEMBER 8, 2010 VOLUME 17 NUMBER 35
Elder law attorneys often see some version of the same story. Parents put child’s name on the deed to their home “just in case.” Dispute between parents and child breaks out when child asserts ownership interest. Sometimes litigation ensues. Child claims that joint ownership of the home means just that — the child owns an interest. The parents claim that putting the child’s name on the deed was just a convenience, or an estate planning device, or a mistake.

The resolution of the recurring story will depend very heavily on individual facts. It should be easy to see that evidence of conversations between the parents and child will tip the result one way or the other, and that written agreements will be even more persuasive than remembered conversations. Again and again, though, we see cases where family members just couldn’t imagine having disagreements in the future. Sometimes the analysis is complicated by the family’s failure to be clear about complicated legal relationships from the outset.

A good illustration of this repeating story is reported in a Missouri appellate case from a few weeks ago. Evan and Evelyn Hoit, who had lived on a Kansas farm for nearly four decades, decided to move closer to their two daughters in Kearney, Missouri. They told Mrs. Hoit’s son (from a prior marriage), Brent Rankin; he and his wife thought it might be a good idea to move closer to family, too. The Rankins suggested that the Hoits could look for a home in Kearney for them, too.

The Rankins had been pre-qualified for a loan, and had hired a real estate agent to find them some likely candidates. They asked the Hoits to check out a couple of the best candidates. The Hoits did, but also went looking for their own place; they found a house that they thought would be perfect for them, and told the Rankins they were going to buy it. The Hoits offered to let the Rankins live in the lower level, but Mrs. Hoit told her son that they intended to buy the house in any event.

The Rankins thought the house would work for them, too; they suggested that the Hoits buy it and let them live there. The Hoits put down 25% of the purchase price. The Rankins agreed to borrow the remainder, since they had pre-qualified for a loan and the Hoit’s farm had not yet sold. No one discussed exactly how the title would be taken, though everyone understood that when the Hoits died the Rankins would inherit the house. Mrs. Hoit later explained that she had intended to leave her other assets — all the couple’s cash and investments — to their two daughters.

Although the couples did not explicitly discuss the title arrangements, the lender apparently made a decision that it would be important to get all four names on the property (and the loan). The result: the four individuals ended up owning the property as joint tenants with right of survivorship.

When the Hoit farm in Kansas sold two months later, they paid off the mortgage with the proceeds. But when they tried to move into the house, they found that the Rankins had taken over one upstairs room that Mrs. Hoit had expressly reserved for her piano, and that there was little space for them to put the rest of their furniture. The family relationships began to fray almost immediately.

Within a few months the Hoits were demanding that the Rankins move out of the house. The Rankins refused, claiming that they owned the property. The Hoits ended up buying another house in Kearney and moving into it. Then they filed a lawsuit asking the courts to decide how much of the first home belonged to them, and how much (if any) to the Rankins.

The trial judge ruled that the Hoits had paid almost the entire cost of purchasing and maintaining the home — their contribution had been $192,734.26, as compared to the $2,757.48 paid by the Rankins. He awarded the home to the Hoits and imposed a lien against it in favor of the Rankins for their small contribution. The Rankins appealed, arguing that they owned half of the home.

The Missouri Court of Appeals affirmed the trial court holding. It noted that, though there is a presumption of equal ownership in joint tenancy titling, that presumption can be overcome by showing the unequal contributions of the joint owners. The appellate court expressly noted that one of the choices available to the Hoits would have been a “beneficiary deed” (recognized in Missouri, as in Arizona and about a dozen other states), but that the evidence showed that the choice of deed was made not by the Hoits but by the lender. Hoit v. Rankin, September 28, 2010.

Though both the trial judge and the appellate court agreed that the evidence was clear that the Hoits did not intend to make a present gift of the property, that successful (for them) outcome may be beside the point. This family, which once got along well enough to experiment with a shared living arrangement, has now spent thousands of dollars in legal fees and two years in the courts battling over what they intended when they started their experiment. Would they have gotten a happier result if one or both couples had talked with a lawyer in advance, and considered what might happen if things didn’t work out as well as they hoped?

Late-Life Marriage Leads To Property Dispute in Divorce

MARCH 15, 2010  VOLUME 17, NUMBER 9

Older individuals often get married, of course, and sometimes face legal issues as a result of separation or divorce. The legal problems associated with the end of a late-life marriage are not necessarily different from those faced by younger divorcing couples. A recent Arizona Court of Appeals decision addresses one difference that often occurs.

When Norman and Judy Flower married he was 76 and she was 55. She had a son from a former marriage, and each of them owned a home. Mr. Flower promptly transferred his home into joint ownership with his new wife; Mrs. Flower’s son was already on the title to her home, and she did not add Mr. Flower.

The couple lived together in Mr. Flower’s home for six months, while they fixed up Mrs. Flower’s residence. They took out a line of credit secured by Mr. Flower’s home and spent a total of at least $32,000 on Mrs. Flower’s home. They accumulated a total of $61,000 of debt during the marriage. After the work was done on Mrs. Flower’s home they moved into it, and her son moved into the jointly-owned home that had originally belonged to Mr. Flower.

A year after the marriage, Mr. Flower decided that his wife had been interested in him only for financial reasons and he filed a petition seeking an annulment. Mrs. Flower responded by asking for a divorce, and insisted that she was entitled to a half interest in what had been Mr. Flower’s home, all of her own (now improved) home, and no obligation to repay any of the costs of improvements to her home.

Arizona law, like that of many jurisdictions, assumes that the property division in a divorce proceeding will usually be roughly equal. The legal term, however, requires that it be “equitable,” and in rare cases that can mean something other than an equal division. The trial judge decided this was such a case.

Although the trial court denied Mr. Flower’s request for an annulment, it did grant the couple a divorce. The judge also returned Mr. Flower’s residence to him, although it required him to pay the majority of the debt the couple had accumulated. Mrs. Flower was awarded her home without any claim for the improvements made during the marriage, and she was ordered to pay $16,000 of the couple’s debts. Mrs. Flower appealed.

The Court of Appeals affirmed the unequal division of property and debts. Given the unusual facts of this case, ruled the appellate judges, the usual requirement of “substantially equal” division need not be applied. The appellate court noted that though Mr. Flower received his home, he was also required to pay most of the community’s debt incurred during a relatively brief marriage. Flower v. Flower, February 25, 2010.

Arizona, of course, is a “community property” state. Does that mean that the result in a state that did not apply community property rules would be different? Perhaps, but not necessarily. Most states apply some version of Arizona’s requirement that property division be “equitable” and assume that usually means “equal.” While Mr. and Mrs. Flowers did initially transfer his residence into “community property with right of survivorship,” the result in Arizona would not have been different if they had transferred it to “joint tenancy with right of survivorship.”

Is the result in the Flower case unusual based on unusual facts? Not really. The same day that the Arizona Court of Appeals decided the Flower property division issues, it also handled another, similar case. Retirees Carolyn and Lowell Inboden (the opinion does not give their ages) had married and purchased a vacant lot as joint tenants, but using $90,000 of Mrs. Inboden’s separate money from before the marriage. They then built a home on the lot, using $67,000 of her money, $46,500 of his, and a lot of sweat (they acted as their own general contractors).

When Mr. and Mrs. Inboden divorced a little less than two years after the marriage (and just a few months after the house was completed), the trial judge awarded her about three-quarters of the value of the home to reimburse her for her disproportionate contribution to its purchase and construction. The Court of Appeals reversed that result and returned it for further consideration.

In the case of the Inbodens’ property division, the appellate court was clear that the final result might well be an unequal division. The basis for any deviation, however, must be based on “equitable” principles, and not on a simple calculation to reimburse each spouse for their contribution of property that was previously separate. There is a presumption, difficult to overcome, that changes of title or transfers of assets are intended to be gifts, and those gifts can not be reversed if the marriage later falters. Inboden v. Inboden, February 25, 2010.

Why are these divorce issues “elder law” concerns? They are not, really — except that when older couples marry they are more likely to have property that they bring into the marriage, and less likely to have minor children. Consequently, if their later-in-life marriages fail they are perhaps more likely to present complicated property division issues and less likely to focus on child custody and support problems.

Of course, divorce is not the only venue for property division concerns. Even the popular press has begun to consider the possibility that later-in-life marriages might create property disputes between surviving spouses and children from prior marriages or relationships.

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