Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, October 17, 2017

State Law on After-born Children Leads to Revocation of a Will

Download (1)A number of states have enacted statutes that serve to revoke a decedent’s will, in whole or in part, if the decedent’s life-circumstances later change in specific ways. Hobbs v. Winfield, a recent case out of Georgia, highlights such a scenario. Alphonzo Hobbs executed a valid will in 1989 and died in 2007. In the interim, Hobbs had three children outside of marriage. The Supreme Court of Georgia held that because Hobbs did not draft the will with a consideration of future children, it was not valid under Georgia law. Hobbs’s assets passed under Georgia’s  intestacy scheme. Because laws may vary drastically from state to state, it is important to seek out professional advice to make sure a previously valid will remains intact after death.

See Michelle Soto, State Law on After-born Children Leads to Revocation of a Will, The National Law Review, October 12, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.

October 17, 2017 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)

Friday, September 29, 2017

JPMorgan Ordered to Pay More Than $4 Billion To Widow and Family

Dbpix-hack-facebookJumboMax Hopper, a former American Airline executive, is credited with pioneering an innovative reservation system for the massive airline. When he died in 2010 without a will, his estate was valued at more than $19 million. JPMorgan Chase & Co. was charged with independently and impartially dividing and distributing Hopper’s assets between the appropriate beneficiaries. Instead, the bank took an egregious amount of time to release interests in furnishings, jewelry, art, and the 900 bottles of wine and 6,700 golf putters left in the estate.

This lapse led to a lawsuit spearheaded by Hopper’s wife, Jo Hopper, and two stepchildren. A Dallas jury found that the bank’s actions constituted a breach of fiduciary duty and fraud. Most surprising however, is the $4 billion in punitive damages they awarded to the family. In response to the verdict, Jo Hopper stated: "The nation’s largest bank horribly mistreated me and this verdict provides protection to others from being mistreated by banks that think they’re too powerful to be held accountable.”

See Thomas Korosec, JPMorgan Ordered to Pay More Than $4 Billion To Widow and Family, Bloomberg, September 26, 2017.

Special thanks to Cassandra L. Hill, Jim Hillhouse (Professional Legal Marketing (PLM, Inc.), & Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

September 29, 2017 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility | Permalink | Comments (1)

Thursday, September 28, 2017

Waiting for the Other Shoe

F6b170f28abd909b187cb856c3cd3ed9--children-play-children-booksAt the time of her death in 2009, Victoria Dieringer held the majority of both nonvoting and voting stock in Dieringer Properties Inc. (DPI). DPI managed residential and commercial properties primarily located in the Portland, Oregon area. These stock holdings comprised the bulk of Dieringer’s estate, which she left to a number of charities in trust through a pour-over provision in her will. Dieringer intended for the gifts to these charities to be funded through sale of the corporate stock. DPI redeemed the stock to fund the trust, but did so at substantially reduced rates relative to its reported value. Despite this, the trust executor reported the decedent’s stock at its full value on the estate tax return and sought a charitable deduction reflecting the reported value. The Tax Court held that this was not allowed and assessed a tax deficiency and penalty of over $5 million. The case is on appeal, but it looks as though tumultuous times are ahead for the executor.

See Russell A. Willis III, Waiting for the Other Shoe, taxnotes, September 18, 2017.

Special thanks to Russell A. Willis III, J.D., LL.M., director, The Greystocke Project, for bringing this article to my attention. 

September 28, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, New Cases, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Tuesday, September 26, 2017

MetLife Stuck Between Wife and Girlfriend in Benefit Battle

161020102345-metlife-retires-snoopy-540x304A federal judge, in Metro. Life Ins. Co. v. Teixeira, refused to allow Metropolitan Life Insurance Company to remove itself from a litigation triangle between the company and a decedent’s wife and girlfriend. Metlife filed with the court in 2016 anticipating the court would make the determination as to whether the company owed the wife or the girlfriend $40,000 from the decedent’s life insurance policy. The decedent-insured named his wife as the beneficiary of the policy over the phone. Later, he changed the beneficiary to his girlfriend via another phone call. This was in violation of Metlife’s own policies requiring beneficiary designations to be done in writing. Part of the cause for the judge’s refusal to dismiss Metlife stemmed from the company’s atypical handling of the situation that leaves it open to liability for negligence.

See Jacklyn Wille, MetLife Stuck Between Wife and Girlfriend in Benefit Battle, BNA Convergence, September 11, 2017.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.

September 26, 2017 in Current Events, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0)

Tuesday, September 5, 2017

Constructive Trusts Can Catch Wayward Trust Assets

CinderellaThe California Court of Appeals, in a case styled Higgins v. Higgins, invoked the powers of a constructive trust to recover misappropriated assets. Maria Higgins, along with her husband, created the Higgins Family Trust in 1994. By 2007, Maria’s husband had passed and Maria, now 91, was suffering from cognitive decline. In 2009, as Maria continued worsen mentally, she added her step-son, Clive, as a joint account holder to her checking and savings accounts that were held by the trust. Clive was diagnosed with cancer in 2012 and became unable to attend to his stepmother’s finances. To remedy the deficiency, Clive named his wife, Lupe, as an account holder on a set of new created accounts.

After Clive’s death, Lupe placed the accounts in her name. When Maria died, Lupe distributed $10,000 to each of Maria’s eight grandchildren and treated the remaining funds as her own. Clive’s brother, Arthur, who was the successor trustee of the Higgins Family Trust, filed suit to recover the funds. At the trial court level, the judge held that Lupe had the right to do what she wished with the funds since Clive named her a joint account holder. The appellate court disagreed, held that Lupe’s repudiation of the trust was unjust, and ordered a constructive trust.

The Higgins case serves as a reminder to trustees to appropriately title trust accounts in order to make sure trust assets pass to the intended beneficiary.

See Jeffrey S. Gavin, Constructive Trusts Can Catch Wayward Trust Assets, Trust on Trial, May 15, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

September 5, 2017 in Current Events, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Wednesday, August 23, 2017

Article on Catching the Gold at the End of the Rainbow: The Impacts of Retroactive Recognition of Same-Sex Marriage on Community Property Division

RainbowKaitlin E.L. Gates recently published an Article entitled, Catching the Gold at the End of the Rainbow: The Impacts of Retroactive Recognition of Same-Sex Marriage on Community Property Division, 9 Est. Plan. & Community Prop. L.J. 263 (2017). Provided below is an abstract of the Article:

This Comment begins by presenting two hypothetical questions that have become relevant in Texas post-Obergefell. Specific legal questions raised in this Comment include: (1) if a same-sex couple currently living in Texas was legally married in another state pre­-Obergefell, what date should Texas use as the date from when they started accumulating community property; and (2) when does a same-sex couple who met the requirements of a valid common-law marriage in Texas pre-Obergefell begin to acquire community property?  Second, this Comment provides a brief history of same-sex marriage in both the United States and Texas, as well as a background of the recent seminal Unites States Supreme Court case, Obergefell v. Hodges. Third, This Comment discusses marital rights for heterosexual couples in Texas, including the types of marriage the state recognizes. Next, the Comment explains available marriage alternatives for same-sex couples pre-Obergefell, namely civil unions and domestic partnerships. Fifth, this Comment addresses spousal property rights and property division for both opposite-sex and same-sex couples in Texas. Next, the Retroactivity Doctrine is described and applied generally to same-sex marriage in Texas. This comment then revisits hypothetical questions raised in Section II and analyses potential outcomes of the two legal questions. Finally, the Comment suggests amendments to Texas’s statutes that are currently written to reflect a limitation of marriage in the state to opposite-sex couples.

 

August 23, 2017 in Articles, Estate Planning - Generally, New Cases | Permalink | Comments (0)

Tuesday, August 22, 2017

Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied?

FreedomIt is common practice for spouses to take out life insurance policies and to then name their partner the beneficiary of the policy. As the majority of marriages now end in divorce, many states had to answer the question of whether the named spouse-beneficiary would still receive the insurance benefits upon the death of the spouse that took out the policy. Some states, Florida for example, answered the question with a hard statutory “no”. This simple answer is coming under fire from Constitutional attack as opponents to such statutes claim that it violates individuals’ freedom to contract. The Supreme Court is scheduled to hear a petition in Sveen v. Melin regarding this exact issue.

See Donna L. Eng and Scott Konopka, Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied?, The Florida Bar Journal, August 7, 2017.

Special thanks to Paul M. Cathcart, Jr. for bringing this article to my attention.

August 22, 2017 in Current Events, Estate Planning - Generally, New Cases | Permalink | Comments (0)

Monday, August 21, 2017

Article on Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts

ArbSteven D. Baker recently published an Article entitled, Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts, 9 Est. Plan. & Community Prop. L.J. 191 (2017). Provided below is an abstract of the Article:

With the recent decision in Rachal v. Reitz, the Supreme Court of Texas enforced a trust provision requiring binding arbitration of disputes between a trustee and a beneficiary, joining Florida and Arizona in explicitly recognizing the validity of such clauses. Settlors and testators who seek to minimize the delays and costs of potential conflict between beneficiaries will enjoy the favorable decision. But while the Rachal court answered, at least in part, the question of whether the settlor of a Texas trust can impose arbitration on the trustee and beneficiaries, the conscientious estate planning practitioner must also consider whether a client should do so in its will and trust instruments.

Accordingly, the first part of this article discusses the advantages and disadvantages of arbitration—a vehicle for avoiding litigation developed for the commercial world—in the realm of settling trust controversies. The second part of this article considers the impact of the Rachal opinion, as well as statutes in other jurisdictions that have recognized the use of such provisions. The third part addresses the particular limitations of mandatory arbitration in the context of resolving trust disputes. And the last part discusses the implementation of trust arbitration, both in terms of the summarizing the procedures set forth in the Texas Arbitration Act (TAA) and the drafting of the clause itself.

August 21, 2017 in Articles, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility, Trusts | Permalink | Comments (0)

Thursday, August 17, 2017

Definitions in Shareholder Agreements Matter When Transferring Family-Owned Business Stock

DictionaryOwners and shareholders of a family-owned corporation will often enter into contractual arrangements limiting to whom an owner may transfer their shares. Many times, these agreements provide the company or other shareholders the right of first refusal if a shareholder desires to sell their ownership stake in the company. If the language in the contract is unclear, there is potential for possible challenges to a transfer of stock.

A current case in which this was the predominant issue is Saccani v. Saccani. This California Court of Appeal decision saw two nephews challenge their uncle’s right to exercise an option to purchase their father’s stock from a trust upon his death. For the nephews, a court decision in their favor would have forced their uncle to return the stock to the corporation, granting them a one-half interest in the company instead of the one-third interest they held. The question for the court was whether the language in the contract, specifically language dealing with the term “transfer”, was defined broadly enough to allow for a transfer of stock through the exercise of an option to purchase. The court noted that the definition of the term “transfer” was very liberally defined in the original agreement and interpreted it to allow the purchase. While the uncle was the victor in both the trial and appellate courts, this case serves as a reminder that definitions are extremely important when parties draft a shareholder agreement.

See Michael P. Connolly, Definitions in Shareholder Agreements Matter When Transferring Family-Owned Business Stock, The National Law Review, August 8, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 17, 2017 in Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Friday, August 11, 2017

Corpus Christi Court Upholds Undue Influence Verdict

CorpusA Corpus Christi Court of Appeals upheld a lower court’s jury verdict denying probate of a will based on allegations of undue influence. To show undue influence, a plaintiff must prove three elements: “(1) the existence and exertion of an influence; (2) that subverted or overpowered the testator’s mind at the time he executed the instrument; (3) so that the testator executed an instrument he would not otherwise have executed but for that influence.” In Estate of Jose M. Rodriguez, the jury found that the decedent’s daughter was the sole beneficiary of the will, that she wrote checks on his account until they bounced, chose the lawyer that drafted the will, and that the testator disinherited seven of this other children in favor of his daughter; one of the children is confined to a wheelchair. While no piece of evidence, on its own, is usually enough to justify a finding of undue influence, the aggregate of these factors was enough for the jury to find the daughter exercised undue influence over her father.

See J. Michael Young, Corpus Christi Court Upholds Undue Influence Verdict, Texas Probate Litigation, August 1, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 11, 2017 in Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)