NOVEMBER 22, 2010 VOLUME 17 NUMBER 36
Our clients usually have similar goals in their estate planning. They want to take care of their children. They may want to leave something to charity. They usually want to minimize taxes that they, their estate or their beneficiaries might have to pay. And they often tell us they want to make sure there is no quarrel among their beneficiaries, and that the process will not be contentious. We tell our clients that we understand, and that we will do what we can to meet those goals, but that the last one is hard to assure. We have no control over what the beneficiaries might do, and we simply can not promise that there will be no contest or litigation.
Will contests are actually quite rare. Contests over living trust provisions are even rarer. There are three good reasons that they are rare:
- The wills and trusts are usually valid, and any contest would be frivolous. It’s actually hard to win a proceeding contesting a well-drafted estate plan.
- Most people leave the bulk of their estate to the same heirs who would receive it if they did not prepare a valid estate plan. No one has any reason to contest your will if they would get exactly the same amount even if they could prove the will was invalid.
- The amount of money involved is most often not worth the legal expense — particularly if the likelihood of success is not good.
Sometimes, though, the amount of money, the change in distribution plans and the circumstances lead one or more beneficiaries to challenge the validity of a will or a living trust. They usually do not prevail — especially if the documents were carefully drafted and executed under the supervision of a competent attorney. But they may still raise the challenge.
That was what happened with the beneficiaries of Mercedes Kibbee’s estate. Ms. Kibbee lived in the small town of Sheridan, Wyoming. Her late husband Chandler Kibbee had been an important business executive, and the couple had ranched in Wyoming for years. In fact, Ms. Kibbee was worth about $32 million.
In 1996, after her husband’s death, Ms. Kibbee signed a trust which (at her death) would have left a trust for her daughter paying $50,000 per year, and divided the rest of her assets between trusts for her son and for her granddaughter (her daughter’s daughter). Her son and granddaughter had powers of attorney to handle both financial and health care issues for her, and were named as successor trustees. That would have exposed her estate to a substantial estate tax liability (depending, of course, on the year in which she died) of as much as half of the total estate.
In 2005 Ms. Kibbee fell and broke her hip, and ended up in a nursing home for rehabilitation. She wanted to return home, and she believed she had plenty of resources to provide whatever care she needed in her home. Her son and granddaughter thought she should stay in the care facility, and they arranged to take over as trustees of her trust and to keep her at the nursing home.
With the help of a long-time secretary and bookkeeper, Ms. Kibbee made contact with a local Wyoming attorney, Deb Wendtland. Ms. Wendtland helped Ms. Kibbee revoke the powers of attorney and remove her son and granddaughter as co-trustees of her trust. Instead she named herself and a local bank as co-trustees, and she returned to her home. The bank officer and Ms. Wendtland discussed her estate planning with her, and pointed out that she would be liable for a huge estate tax bill if she did not make changes to her documents. She was very disturbed by that prospect and asked the two to contact an estate planning lawyer to help organize her plans.
Robert H. Leonard, an experienced estate planning lawyer from Laramie, Wyoming, began visiting with Ms. Kibbee. Mr. Leonard was chosen because he was recognized as an authority on estate planning; he is, for example, a Fellow of the American College of Trust and Estate Counsel (ACTEC). At about the same time Ms. Kibbee asked her local lawyer, Ms. Wendtland, to make contact with Ms. Kibbee’s daughter and get her to visit and help with arrangements.
After many visits and much discussion, Ms. Kibbee signed a series of documents prepared by Mr. Leonard and Ms. Wendtland. She adopted a fairly complicated estate plan, which included charitable remainder trusts for her son and daughter, charitable lead trusts for her granddaughter and great-grandson, and a charitable foundation to receive much of her estate. Each document was carefully explained to her before signing, and her questions indicated that she understood them and agreed. Each document was reviewed with one or both of the attorneys and her bank trust officer. The entire plan was explained to her children and granddaughter as it was adopted.
Notwithstanding all of those careful plans, Ms. Kibbee’s son filed a challenge. He objected to the change in his mother’s estate plan, and particularly alleged that her daughter had unduly influenced her to make the changes. He argued that by the time of the signing she had become incompetent, and that the plan reflected her daughter’s wishes rather than her own. He filed his action while his mother was still alive, and argued that the successor trustee provisions should become effective immediately.
Ms. Kibbee, through her lawyers, answered the allegations and countered that she was fully competent and the planning reflected her own wishes. Unfortunately, Ms. Kibbee died just two months after her son filed his challenge.
It took more than two years to frame the legal issues for resolution, but in 2009 the trial judge dismissed all of the son’s allegations. He appealed, but the Wyoming Supreme Court agreed with the lower court and let the dismissal stand.
The preparation of Ms. Kibbee’s estate plan was comprehensive, thoughtful and reflective. It involved two different lawyers discussing her wishes with her, as well as a trust officer who was very familiar with her finances (and, by that time, with her family). She expressed her wishes clearly and consistently. On some issues, when she wasn’t sure how she wanted to proceed, she asked thoughtful questions and had heartfelt discussions with her advisers. In short, it is hard to imagine how a physically frail but mentally alert elder could have done better at addressing a complicated and difficult subject. The contest was not successful, but it was not prevented, either.
Two vignettes stand out in the Wyoming Supreme Court’s recitation of the case:
- When Ms. Kibbee was considering whether to leave significant sums to the local YMCA for the benefit of youth programs, her advisers arranged for a group of children to visit her ranch house. They played in the pool, enjoyed a barbecue and chatted with Ms. Kibbee as she sat on her terrace in her wheelchair. She asked if they could return the next weekend.
- When her attending physician was asked about her mental status, he described an inquisitive, playful, alert elderly woman who not only answered his questions but also challenged him. “…she had wit and intelligence, and I thought that she had kind of an ironic sort of personality where she would be almost like she was testing me,” said her doctor. “I was the so-called tester, and she was testee; but she had turned it around.”
Kibbee v. First Interstate Bank, November 5, 2010.