Posts Tagged ‘stepchildren’

Disappointed Heirs Not Permitted to Make Claim Against Dad’s Lawyers

JANUARY 25, 2016 VOLUME 23 NUMBER 4

Like a lot of Americans, Fred Brown (though that’s not his real name) had a complicated family life. He had been married twice, and had two daughters — Martha and Sally — from his first marriage. He was still married to Barbara, and she had two children from her first marriage (Patty and Richard). Fred needed to do estate planning, and he did — he hired a Colorado law firm to prepare his will.

The will his lawyer wrote for him followed his wishes: it left the condominium he and Barbara lived in to Barbara, and a $10,000 bequest to each of the four children (both his and Barbara’s). Everything left over after that would go into two trusts for Barbara’s benefit; on her death, the trusts would be equally divided among the four children.

Fred died in 2003, and Barbara hired her husband’s lawyers to handle the probate. Fred’s daughters Martha and Sally asked about their inheritances, and the law firm told them that they would each receive their $10,000 and that they would share the money in the trusts on Barbara’s death. The lawyers also told Martha and Sally that they represented Barbara, not the whole family, and that if Martha and Sally had any questions about the probate they should get their own legal advice.

Barbara properly established the trusts called for in Fred’s will; they totaled just under $1 million in value. She also hired the same lawyers to prepare her will, which left her condo to her daughter Patty and the rest of her estate to Patty, Martha and Sally.

When Barbara died in 2009, Martha and Sally were upset that they did not receive an equal share of the condominium once owned by their father. They complained that Patty had ended up with about 70% of Barbara’s assets, while they each received only about 15% (it apparently did not bother them that Richard did not receive anything from his mother’s estate). They acknowledged that they would still share the remainder in the trust established under Fred’s will, but objected that Patty would get about $3.2 million in total inheritances from Fred and Barbara, while they would only receive a little under $1 million each.

Martha and Sally sued the law firm that had prepared Fred’s estate plan, alleging that the lawyers had committed malpractice by not ensuring that Fred’s wishes were carried out. They also complained that the lawyers had failed to disclose all the information about the property ownership they had needed to protect their alleged right to receive a share of Barbara’s inheritance on her death.

After a series of motions, the trial court dismissed Martha and Sally’s lawsuit. The judge ruled that even if they could prove that a mistake had been made, Fred’s lawyer did not owe Martha and Sally any duty giving rise to a claim. The Colorado Court of Appeals affirmed the dismissal, and the state Supreme Court agreed to review the entire matter.

The Colorado Supreme Court upheld the dismissal of Martha and Sally’s claim. Colorado strictly applies the doctrine of “privity” to prevent lawsuits against lawyers by non-clients in most circumstances, and these facts did not persuade the state’s high court to modify its rules. Besides, as the Supreme Court Justices noted, it looks like Fred got exactly what he wanted: his home went to his wife, $10,000 went to each child on his death, and the rest of his estate stayed in trusts that got divided into four equal shares on his widow’s later death. Baker v. Wood, Ris & Hames, Professional Corporation, January 19, 2016.

Would a similar case be dismissed in Arizona, as it was in Colorado? The answer is uncertain. Arizona does not have cases expressly upholding, modifying or rejecting the “privity” doctrine. A growing body of law across the country indicates a general move toward higher liability for attorneys, but it is not clear whether that trend will likely come to Arizona.

Should Fred’s lawyers have been liable to Martha and Sally? Not if they followed Fred’s wishes, regardless of how unhappy his daughters might have been. The difficulty in such a case would be to establish with clarity what Fred wanted. Did he clearly contemplate what might happen between his own death and the death of Barbara six years later — and of course Fred did not know with certainty that he would die first, much less how long Barbara might survive him.

This is one of the challenges we face when counseling clients about estate planning. Married couples may be able to imagine what might happen after the death of the first spouse to die, but neither spouse is likely to have contemplated what their survivor’s life might look like six, or ten, or twenty years after the death of the first spouse. It’s impressive, actually, that Fred and Barbara got as much right as they did — many widows in Barbara’s situation might begin to modify the disposition of their assets more quickly than the six years Barbara left things (more or less) as they were.

New Florida “Trust Protector” Case Shows How the Idea Can Work

DECEMBER 8, 2014 VOLUME 21 NUMBER 44

We’ve written several times about the relatively new concept of “trust protectors.” The idea is that a trust can be much more flexible if someone — necessarily someone who is entirely trustworthy — has the power to make at least some kinds of changes after the trust becomes irrevocable. The precise power of a trust protector can usually be spelled out in the trust document, but frequently includes the power to amend the trust (or even terminate it), to change beneficiaries or to remove a trustee and name a successor.

While trust protectors have been the subject of much writing, they are still new enough not to have been spotted in the court system very often. Some of that, of course, is because the very existence of a trust protector can sometimes avoid the need for court action — or head off a court contest, if someone is unhappy with the trust’s administration. Mostly, though, the idea is too new, and has not even been formalized in many states.

Arizona has a specific statute allowing trust protectors. States are increasingly codifying similar provisions, often as part of the Uniform Trust Code, which has been adopted now in over half of the states. Florida is one of those states, having adopted its version of the Uniform Trust Code — expressly including a provision for trust protectors — in 2008. Now a new appellate case out of Florida gives some insight into how the trust protector might be used.

Zach Moore (not his real name) was a successful businessman who retired to Florida, where he lived with his second wife Patty. He had two children from his first marriage. Like many people, Zach decided that he should have a revocable living trust; he signed trust documents in 1999 and rewrote them in 2008, the same year that Florida adopted the Uniform Trust Code. His new trust included a provision permitting the trustee to name a trust protector in order to amend the trust to clarify any ambiguity in the future. He also included some specific language making it clear that after his death the trust was to be primarily for his wife’s benefit, and that his children’s shares would be created only on her death. He and Patty were named as trustees, and upon his death Patty would continue as sole trustee.

Zach died in 2010, and Patty took over as sole trustee. Not long after that, Zach’s two children brought a suit against Patty alleging that she was not managing the trust properly, and demanding an accounting from her. She filed a motion to dismiss, alleging that they were not beneficiaries of the trust at all — their separate-share trusts, she argued, would be created only upon her death.

The trial judge disagreed, ruling that the trust would divide into separate shares, not be transferred to new trusts. That meant that the children were beneficiaries, although their interests did not arise until Patty’s death. Still, they would have standing to challenge her administration of the trust.

Patty’s response: she appointed a trust protector, as provided for in the trust document. That trust protector amended the trust to make clear that upon Patty’s death the then-trustee was to distribute the remaining assets to a new trust, which would then split into two shares for Zach’s children.

Did that resolve the issue? Not quite. The trial judge ruled that the purported amendment by the trust protector was ineffective, because it did not benefit all the beneficiaries of the original trust — it would leave Zach’s children with no power to challenge Patty’s actions as trustee.

Patty appealed, and the Florida Court of Appeals reversed the trial court’s ruling. The appellate judges first noted that the then-new Florida Trust Code allowed for inclusion of trust protectors, and that the powers given to the trust protector in Zach’s trust were not outside the scope of the law. Importantly, the appellate court specifically rejected the children’s argument that the Uniform Trust Code makes court modification the only way to amend an irrevocable trust.

The Court of Appeals went on to note that the trial judge’s reading of the trust to find a single trust dividing into shares was not unambiguously clear from the trust document. That meant that the trust protector’s actions to clarify an ambiguous provision was clearly within his authority — and the amendment was valid. “From the trust protector’s affidavit,” wrote the court, “it appears that the husband settled on the multiple-trust scheme for the very purpose of preventing the children from challenging the manner in which the wife spent the money” in the trust he had established. That purpose should be upheld, decided the appellate judges; the court specifically approved the trust protector’s amendments. Minassian v. Rachins, December 3, 2014.

Arizona’s trust protector statute is, if anything, broader than Florida’s statute. Powers that can be assigned to a trust protector are spelled out, with the specific provision that they are not limited to those listed. Trust protectors can be an important and effective way to address possible future disputes; it can make sense to include a trust protector, especially in a case where future contentiousness is anticipated.

 

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.”

Is a Contract Not to Revoke Your Will Enforceable? A Good Idea?

AUGUST 20, 2012 VOLUME 19 NUMBER 32
Imagine this scenario: you and your spouse have been married for thirty years, and it is a second marriage for both of you. Each of you brought children to the marriage (your two and your spouse’s three), and all five kids were raised together from their teens as if they were each the child of both of you. You want to get your estate planning done, and you want to make sure that (a) when one of you dies, everything will go to the other, and (b) when the second of you dies — whichever that is and however long he or she survives the first to die — everything gets divided equally between the five children. Can you accomplish this?

The short answer is “yes.” But there are some issues to be considered here. One of those issues is the subject of today’s installment of Elder Law Issues: contracts to make (or not to make, or not to change) a will.

First the legal details. The principle is actually fairly straightforward. Arizona Revised Statutes section 14-2514 lays out the basic rules: “…a person may enter into a contract to make a will or devise or not to revoke a will or devise or to die intestate only by:

  1. Provisions of a will that state the material provisions of the contract.
  2. An express reference in a will to a contract and extrinsic evidence proving the terms of the contract.
  3. A writing signed by the decedent evidencing the contract.”

We have written about an Arizona case interpreting the statutory requirements before, and recently. In the case we described just a few months ago, the question was whether a decedent’s changes in his estate plan violated his divorce agreement to leave a share of his estate to his children from his first marriage — a slightly different question from the one we have posed here. (The answer, in case you were wondering and didn’t want to follow the link, was “yes” — and some of the changes he made in favor of his second wife were set aside by the courts.) We have also written about similar questions in other states — notably, an Iowa case in which a couple’s reciprocal wills were treated as creating an enforceable agreement to keep their estate plan the same.

But that’s not the question we pose here. Assume a happily married couple in complete agreement about how their property ought to be distributed on the second death. Each wants to assure that the other won’t later change his or her mind. Can they prevent that change, and if so, how?

If you have been reading along with us, you already know that the couple can enter into an agreement that neither will change their will, and that the agreement might be enforceable to set aside even lifetime transfers of property. Other cases we have described make it clear that it is at least theoretically possible to prevent even transfers of property to a living trust, or creation of joint tenancy, that would have the effect of changing the ultimate distribution.

When our clients ask us about these kinds of arrangements (and they often do), we first counsel that it is difficult to predict what the surviving spouse’s property, living arrangements and even family dynamics will look like twenty, ten — or even five — years after the first spouse’s death. Will the surviving spouse remarry, and spend two or three decades with a new spouse, commingling assets and developing new family relationships? Do the happily married couple sitting in our office want to try to preclude that from happening in the event that one of them should die much earlier than the other?

We have seen many cases in which stepchildren remain actively — and positively — involved in the lives of their deceased parent’s surviving spouse. But we have seen more cases in which the relationship slowly unravels, and a few in which the death of the first spouse to die leads to a terrific explosion in the family dynamics. Are you sure where on the scale of step-family relationships your own family fits, and how many years it will stay in that position?

Assume that you have gotten past all those concerns, and you and your spouse really do want to lock-in your estate plan so that it is not changeable after the first death. Is an agreement that neither of you will ever change your wills the best way to accomplish your desired result? Probably not.

First of all, there are many changes the surviving spouse might see which would not affect the ultimate disposition. Perhaps your selection of executor and agent under your power of attorney was influenced — positively or negatively — by your familiarity with the strengths and weaknesses of your children’s spouses. If they divorce, or one or more spouses die — you might want to change the sequence of appointment. Same if the surviving spouse moves to be closer to one of the children after the first death, or if the family home gets sold and turned into a small condominium, or into cash.

For those couples who want to provide for a particular distribution on the second death, we usually counsel that the best way to accomplish their goal is to create a living trust — all or a portion of which can become irrevocable upon the death of the first spouse. That means (in most cases) that the surviving spouse will be accountable to his or her step-children and children for the investment, distribution and use of the trust’s assets — possibly including the family home and other property in which the children are going to be given an enforceable interest. When clients protest that they don’t want to make the surviving spouse responsible to account to stepchildren, we have to ask: what protection are  you offering your children if you give them an interest in your marital property, but don’t allow them to have any information to monitor that interest?

This planning problem is one of the most persistently troubling issues our clients face. How do you strike the proper balance between giving the surviving spouse freedom to live life as they choose, and still protect the ultimate inheritance for children? We have some ideas and experience, but we predict that you (our client) will never be completely comfortable that you have found the correct balance.

Trustee Is Not Required To Create Special Needs Sub-Trust

DECEMBER 27, 2010 VOLUME 17 NUMBER 40
Kenneth Boyd established a revocable living trust in 2002. He named his daughter Carol Boyd as trustee, and directed that the trust be divided, upon his death, into three shares. One share each was to go to Carol, to Kenneth’s mother Elizabeth Boyd, and to Carol’s son Ben Scott. So far nothing is remarkable or unusual about Mr. Boyd’s trust arrangements.

Elizabeth Boyd entered a nursing home in November, 2007. Kenneth Boyd died a month later. When it came time to divide the trust estate among the three beneficiaries, Carol Boyd simply wrote checks to each one, and sent Elizabeth Boyd’s share to her in care of the agent under her durable power of attorney.

The agent refused to cash the checks. Putting the money into an account in Elizabeth Boyd’s name, she argued, would simply make her ineligible for Medicaid assistance with her nursing home costs, and assure that a third of Kenneth Boyd’s estate would go to nursing home care for Elizabeth. If Elizabeth Boyd’s share could stay in trust, it could benefit her during her life, allow her to remain eligible for Medicaid, and assure that there would be something to pass on to her heirs on her later death.

It seemed obvious to Elizabeth Boyd’s attorney-in-fact that the continued trust would be in her best interest. Language in the trust could be construed to permit Carol Boyd to do just that — to turn the distribution from the trust into a “third-party” special needs trust. Elizabeth, through her attorney-in-fact, ultimately filed suit in California, asking the court to compel Carol to continue to hold the funds in trust for Elizabeth but not distribute any proceeds outright to her.

Carol Boyd pointed to the language of the trust, which gave her the power to do what was asked but did not direct her to do so. She insisted that her father would have wanted his money to support his mother until her death (or until the money ran out), and she declined to establish a special needs trust. So the legal question became whether Carol had an obligation to do so.

In an unpublished opinion, the California Court of Appeals ruled that Carol did not breach her duty to Elizabeth by failing to segregate her trust distributions into a separate, third-party special needs trust. It was not completely clear to the appellate judges whether such an action would even be effective; in any event, the opinion makes clear that Kenneth Boyd’s trust gave Carol the power, but not the duty, to modify the distribution terms. Boyd v. Boyd, December 16, 2010.

As is so often the case, there were a number of complicating issues in the Boyd case. They help point up the importance of communicating clearly with the lawyer who prepares your estate planning documents, and keeping those documents updated. Among the complications:

  1. Kenneth Boyd’s trust actually left a larger share to his brother, James, who was scheduled to receive 40% of the remaining funds on Kenneth’s death. James, however, died just a year before Kenneth did, and the trust did not provide that his share would pass either to his surviving wife or his step-daughter. Despite the fact that James’ marriage was of long standing, he had never adopted his step-daughter — if he had, she would have taken his share of the trust as his child. Since he died without any legal “issue,” his share lapsed and was divided equally among the other three beneficiaries (Carol, Elizabeth and Ben).
  2. Carol Boyd was actually the adopted daughter of Kenneth Boyd. That makes no legal difference, and probably was explained to the lawyer who drafted the trust at the time. But the adoption had been completed when Carol was 32 years old, and she had never met Kenneth’s mother Elizabeth, his brother James or his wife.
  3. Kenneth and Carol lived in California. Elizabeth, James and his wife lived in New York. Consequently, the California courts had jurisdiction over the trust interpretation — but they had to consider the effect on New York Medicaid eligibility and trust law. Interstate proceedings often create additional confusion and difficulty.

It is extremely hard to know what Kenneth actually would have wanted in the facts as they developed. That is why estate planning lawyers go through the almost ghoulish routine of asking clients to imagine unusual sequences of family deaths and disability. The reality is that Kenneth Boyd died just a year after his brother’s death, and a month after his mother entered the nursing home (and qualified for Medicaid). If he had discussed the family situation with his lawyer during the year after his brother died, he might have made changes in his trust language. At least he might have clarified his wishes, so that the issue would not have to be decided by court proceedings.

Reciprocal Wills Enforceable After Death of One Spouse

JULY 26, 2010 VOLUME 17, NUMBER 23
Imagine a couple, each married for the second time. Perhaps each has children from a first marriage. Perhaps the couple has been married for years — even decades. They think of all the children as “their” children, even though they fully understand that the other spouse’s children are stepchildren.

One of the spouses — let us say the husband — dies. He leaves his interest in the family home, together with all the couple’s accumulated wealth, to his widow; his will specifies that on the second death all of the children share the estate equally. His children remain in contact with their stepmother for the next decade, though that contact lessens over time. When she dies, what happens to the home, the bank accounts and the remaining wealth?

This scenario plays out again and again. Most often, the deceased husband’s will is irrelevant. If the property all passed to the wife without restrictions, she is free to change her will, to transfer the property into trust, to spend it or even to give it away. But that is not always the case.

Ralph and Elaine Lawson married in 1971. They owned 12 acres of Iowa land as “joint tenants with right of survivorship.” They had three children between them: Ralph’s son and daughter Roger and Le Ann, and Elaine’s son Lonnie. Just to complicate things further, Ralph later adopted Lonnie.

In 1987 Ralph and Elaine signed identical wills. Each left everything to the other. On the second death, the wills provided that fifty percent of the combined estate would go to Lonnie, twenty percent each to Roger and Le Ann, and ten percent to the couple’s church. The wills contained an unusual provision: each included language that indicated the couple had agreed “that neither will change our will” without the other’s consent.

Ralph died first. The property passed to Elaine automatically because of the joint tenancy title, so Ralph’s will was not filed with the Iowa probate courts.

A few years later Elaine changed her estate plan. First she transferred the acreage to her son Lonnie, reserving a life estate for herself. Then she signed a new will, leaving the same proportions of her estate to Lonnie (50%), Roger (20%) and Le Ann (20%), but changing the church which would receive the remaining 10%. Shortly after that, Elaine died.

Roger and Le Ann sued to enforce the terms of their father’s and stepmother’s original wills. They alleged that the wills amounted to a contract, that Elaine’s transfer of the property to Lonnie violated that contract, and that the court should impose a trust upon the property to secure its return to the original beneficiaries. The trial judge reviewed the two wills and agreed with Roger and Le Ann.

The Iowa Court of Appeals upheld that ruling, ordering the imposition of a trust on the 12 acres. The language of Ralph’s and Elaine’s wills made it clear, according to the appellate judges, that their intent was to prevent the survivor from changing the estate plan by a new will or by transferring property during lifetime.

Lonnie argued, unsuccessfully, that the reciprocal wills should not prevent transfers of the acreage because it did not come into Elaine’s estate by virtue of Ralph’s will. The court dismissed that objection, noting that the language of the wills was broad enough to encompass any estate planning technique, whether it might be a will, a gift, or a living trust. The appellate judges also rejected Lonnie’s argument that his parents’ wills should not have been admitted to the court proceeding; the wills were not being admitted to probate, said the judges, but were being admitted to prove a contract. Consequently, the standards and requirements for admission were those governing contract documents rather than wills. Cunningham v. Lawson, July 14, 2010.

Would Arizona courts reach the same result? It is not completely clear, since the law of reciprocal wills (sometimes called mutual or contractual wills) is not well developed. What is clear in Arizona law is that reciprocal wills can be enforceable; what is less clear is whether they might prevent lifetime transfers of property by the surviving spouse.

One reason that the law is less than clear is that truly reciprocal wills are uncommon. Arizona’s probate code makes clear that the mere fact that wills are identical does not mean they embody a contract not to change the terms; in order to make the agreement binding it must be expressly stated in the wills or in a contractual document. Because that is uncommon, there is little law interpreting such terms.

What is more clear is that the question we hear so often is usually easy to answer. “Does my stepmother [or stepfather] have the right to leave the house she inherited from my dad [or mom] to her kids from her prior marriage?” Absent a clear contract not to change the will, or a trust provision prohibiting the transfer, the answer is likely to be: “I’m sorry, but yes.”

Dispute Over Family Home Pits Children Against Stepchildren

OCTOBER 19, 2009  VOLUME 16, NUMBER 58

More than a decade ago we told you about a Utah case involving a widower’s remarriage (see Surviving Spouse Revokes Trust–Children Disinherited from February 2, 1998) . Although the children of the deceased woman and her surviving husband were supposed to receive everything on his later death, the widower revoked his living trust and transferred everything to his new wife. The children were effectively disinherited.

Of course we see that result all the time, as unanticipated shifts in family dynamics follow death and remarriage. When two people with grown families marry, they seldom consider, much less carefully plan, what will happen when the inevitable occurs. Now an interesting case — and, interestingly, again out of Provo, Utah — raises an unusual variant of the same story.

Harold and Edith LeFevre had seven adult children. After Edith died in 1987, Harold married Ellen Stout, who had five grown children of her own. When Harold died in 1993, he had made no estate plan at all. The second Mrs. LeFevre met with her late husband’s children to discuss his estate, and they all agreed that she should live in the family home for the rest of her life. She agreed that she would create a trust that left the home to the children, and that she would handle the probate of Harold’s estate to get the house into the trust.

One month after Harold’s death his widow met with her attorney to plan her own estate. The trust she had him prepare, however, did not resemble the agreement she had entered into with her stepchildren. Instead, the LeFevre family home was left half to her stepchildren and half to her own children.

Ellen then handled the probate of her late husband’s estate, transferring the residence into the trust she had created. Two years later, she amended the trust to disinherit the LeFevre children altogether, leaving the home and all her other assets to her children only.

For nearly a decade Ellen LeFevre lived in the home, becoming increasingly reclusive and withdrawn. Her son encouraged her to cut off communication with her stepchildren, and when she died in 2004 they were not even aware of the fact for some months. After they learned of her death and requested a copy of the trust, they were surprised to learn that they would not receive any portion of their father’s estate.

In a contested proceeding, the probate judge imposed a “constructive” trust, ruling that Ellen LeFevre had agreed to place the home in trust and then had violated that agreement. The Utah Court of Appeals agreed, and ordered that the home be transferred back to the LeFevre children.

According to the appellate judges, Ellen LeFevre had entered into a valid agreement, she had breached the terms of that agreement, and her children had been “unjustly enriched” as a result of her breach. The appellate court did not agree with the children that they should have their attorney’s fees paid by Ellen LeFevre’s estate. In the Matter of the Estate of LeFevre, October 9, 2009.

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