Wills, Trusts & Estates Prof Blog

New York Court Addresses Estate Planning Malpractice

The Supreme Court of New York, New York County, recently dismissed a widow's claim alleging estate planning malpractice. 

Decedent bequeathed half of his estate to his wife, Plaintiff.  Plaintiff sued, arguing that Defedants committed malpractice by failing to remind decedent of a separation agreement from a prior marriage.  Plaintiff alleged that as a result, the agreement was not figured into decedent's plan for Plaintiff's inheritance and plaintiff lost $9 million as a result.

Defendants moved for summary judgment, arguing there was no attorney-client relationship between Defendants and Plaintiff.  Plaintiff argued there was such a relationship and alternatively, Plaintiff argued there was a relationship of "near privity" that permitted her claim.

The court held that although Defendants made separate estate plans for both Plaintiff and decedent and represented them jointly on other issues, there was no joint estate plan to create an attorney-client relationship.  Despite a letter from Defendants to Plaintiff with regard to a change to decedent's will, there was insufficient contact to establish "near privity."

According to Mark Fass, "this decision raises the question of who, if anyone, may sue in New York for malpractice when attorneys make mistakes in planning estates."  Widow Lacks Standing to Sue Husband's Lawyers Over Mishandled Will, Judge Finds, NY L.J., July 10, 2009;

See Leff v. Fullbright & Jaworski, LLP, 2009 NY Slip Op. 31445(U) (NY County June 30, 2009); See also

Special thanks to Bridget J. Crawford (Professor of Law and Associate Dean for Research and Faculty Development, Pace Law School) for bringing this case to my attention.

Loans by trust to insurance trust violated prohibition on retention of unproductive property

An income beneficiary objected to the trustees’ accounting which showed that the trust had made loans to a second trust to pay premiums on a life insurance policy on the income beneficiary.

The court granted summary judgment for the income beneficiary. Because the loans had never produced income in the fifteen years they had been outstanding, they were unproductive property retention of which violated the trustees’ duty to the income beneficiary and the express language of the trust prohibiting the trustees from retaining unproductive property beyond a reasonable period of time.

In re Terranova, 873 N.Y.S.2d 651 (N.Y. App. Div. 2009).

Ninth Circuit Decision: Posthumous Children and Social Security Benefits

On May 6, 2009, the Ninth Circuit Court of Appeals held that a child conceived with a man's sperm three years after his death is not eligible for Social Security survivorship benefitsunder California Law.  The sperm was retrieved from the man's body after his death and without any indication that he wanted to father children posthumously. 

The court held that under Ninth Circuit precedent and a ruling from the SSA, a child must prove that the insured was the child's parent, or that the child is both legitimate and  was dependent on the biological parent. 

The court first held the child at issue to be a legitimate child of the man because of their biological relationship.  

Turning to the dependency determination, the court held that it was impossible for the child to have been actually dependent on the sperm donor at the time of his death because she was conceived three years after his death.

The court next held that the California family code focuses on the parent child relationship, never a biological relationship without anything more, to establish "natural parentage" and dependency. 

Finally, the court held that the California Probate Code does not provide a method of intestate succession for children conceived and born posthumously without the deceased biological parent's consent, and therefore, the child could not prove dependency under the laws of intestate succession.

The court also held that it's holding did not present an equal protection violation because it did not exclude all posthumous children from eligibility for benefits, only those who do not qualify.

See Vernoff v. Astrue, No. 08-55049 (9th Cir. July 8, 2009).

As previously mentioned, Mary F. Radford (Professor of Law, Georgia State University College of Law) has posted on SSRN her article entitled Post-Mortem Retrieval and the Social Security Administration: How Modern Reproductive Technology Makes Strange Bedfellows, which discusses the very issue discussed in Vernoff. 

Massachusetts AG challenges Defense of Marriage Act

On July 8, Massachusetts AG Martha Coakly filed a federal lawsuit claiming the federal Defense of Marriage Act is unconstitutional.  The details are below.

• The Defense of Marriage Act defines marriage as the union of one man and one woman.
• As a result, same-sex marriages are not eligible for many federal benefits, including social  security survivorship benefits and federal estate and gift tax benefits.
• The lawsuit was filed in U.S. District Court of Massachusetts against the U.S. Dep't. of Health, Dep't. of Veterans Affairs, and others.
• The lawsuit asserts that the Act is unconstitutional because it violates the state's sovereign authority to regulate marriage.
• The lawsuit also asserts that the Act is unconstitutional because it exceeds the permissible restrictions congress can place on federal funding.

See Sheri Qualters, Masachusetts AG challenges Defense of Marriage Act, Nat'l L.J., July 8, 2009.

Man Claims to be Son of JFK and Marilyn Monroe

A U.S. District Court in New York recently granted a motion to dismiss a case filed by a man claiming to be the son of John F. Kennedy and Marilyn Monroe.  The facts of the case are as follows:

• The plaintiff, aptly named John Fitzgerald Kennedy, originally sought an order for genetic testing against the trustees of JFK's will.
• Plaintiff submitted a picture of himself showing a resemblance to Kennedy, which was the sole basis of his claim.
• Plaintiff asserted a breach of fiduciary duty based on his claimed kinship.
• The complaint was amended, seeking an order compelling the trustees to investigate his kinship claim and upon confirmation of such kinship, an inheritance.
• The court first held that the trustees did not owe plaintiff a fiduciary duty under applicable Massachusetts law.
• Under applicable Massachusetts law, "issue" includes only children born during wedlock for trust instruments executed before 1987.
• The court also held that plaintiff's tort claim for breach of fiduciary duty failed under applicable New York law.
• Under applicable New York law, the rights of individuals with a possible interest in an estate are fixed at the date of death, and out-of-wedlock children did not have an interest in Kennedy's estate at the date of Kennedy's death.

See Kennedy v. Trustees, No. 08 Civ. 8889 (S.D.N.Y. June 19, 2009).

Special thanks to Saul Elnadav (attorney, Vishnick, McGovern, Milizio L.L.P.) for bringing this case to my attention.

Damages for failure to sell real property not properly measured by appraised value

A coal mine was the sole principal asset of a testamentary trust created in 1921. The testator directed the co-trustees to hold the mine absent “very radical change” from current conditions.

The revenue from the mine began to decline greatly during the mid-1980s and in 1987, the then sole trustee obtained an order from the appropriate court allowing the mine to be sold. In 1986, the mine was appraised at $1.1 million and was finally sold for $350,000 in 1997.

In 2007, the beneficiaries sued the trustee and won damages for failure to diversify based on a failure to sell for $1.1 million in 1987.

The Supreme Court of Virginia in Suntrust Bank v. Farrar, 675 S.E.2d 187 (Va. 2009), reversed and rendered judgment for the trustee because the beneficiaries failed to bring forward evidence showing the existence of a willing buyer at the appraisal price at any time after 1987.

Exchange of life insurance policies not imprudent

The Indiana intermediate appellate court upheld as prudent a trustee’s decision to exchange variable universal life (VUL) insurance policies on the life of the settlor for a standard whole life policy with a death benefit less than one-third that of the VUL policies.

The VUL policies were losing money because of declines in the stock market and maintaining them would require additional contributions to the trust which were beyond the financial capacity of the insured. The opinion contains an extensive review of the application of the Prudent Investor Act.

In re Stuart Cochran Irrevocable Trust, 901 N.E.2d 1128 (Ind. Ct. App. 2009).

Implied requirement of good faith allows beneficiaries to recover

A prenuptial agreement provided that if the husband died first, wife would maintain a valid will giving not less than one-quarter of her entire estate to each of her husband’s three sons. The husband’s will left a substantial portion of his estate to his wife.

After the husband’s death, his wife made transfers to irrevocable trusts which greatly reduced her probate estate. Her will left her probate estate to husband’s sons.

After the wife died, his sons sued and the Supreme Court of Kansas upheld the imposition of a constructive trust in their favor. The confidential relationship between the husband and his wife gave rise to an implied duty in the wife not to make gifts inconsistent with her obligations under the agreement. The nonclaim statute does not bar what is in essence an action by the wife’s estate to marshal assets nor is the action barred by the statute of limitations because the right of action did not accrue until the wife’s death.

Estate of Draper v. Bank of America, N.A., 205 P.3d 698 (Kan. 2009).

Estate of Third Wife of Drew Peterson Reopened

An Illinois Appellate Court recently upheld reopening the estate of a deceased ex-spouse of Drew Peterson.

At the time of Kathleen Savio's supposedly accidental drowning death in 2004, the final order in her divorce from Drew Peterson was pending.  A hand written will named James Carrol, the uncle of Peterson, as the executor of her estate and left all of her property to Peterson.  As executor, Carrol fired Savio's divorce attorney, appeared in the divorce pro se, and turned most of Savio's property over to Peterson. Carrol was discharged by the court upon completion of his duties and the estate was closed in 2006.

In March of 2008 Savio's father and siblings filed a petition to reopen the estate and remove Carrol as executor due to new evidence from Savio's exhumed body showing that her death was probably a homicide.  The petition claimed that a wrongful death claim against Peterson and Carrol's poor performance as an executor supported their request.  The trial court agreed and appointed Savio's father as the new executor.

The appellate court affirmed because the manifest weight of evidence supported the trial court's holding.  First, the court held that the estate could be reopened because the wrongful death claim was a newly discovered asset of Savio's estate under the state's Wrongful Death Act.  Under Illinois law, a newly discovered asset is one ground for reopening an closed estate.  Second, the court held that Carrol's removal was justified because his actions in Savio's divorce case were contrary to the best interests of the estate and its beneficiaries.  Finally, although Savio's children were next in line to be appointed executor under Illinois law, the appellate court felt that a court would not likely allow the minor children's guardian, Peterson, to be appointed as executor.  Since Savio's father was the proper choice after the children, the court upheld the appointment.

In re Estate of Savio, No. 04-P-118 (Ill. App. Ct. 3d Dist. Feb. 4, 2009).

Drew Peterson has since been charged with the death of Kathleen Savio. See AP, National Briefing: Midwest; Illinois: Ex-Officer Charged in Wife's Death, NY Times, May 8, 2009.

Thanks to James Krupp (Attorney, Krupp & Krupp, LLP, DeKalb, IL) for bringing this case to my attention.  

Oral contract barred by statute

Alaska Statute 13.12.514 (identical to UPC § 2-514) requires that all contracts to make a will or devise be in writing.

In its opinion in Cragle v. Gray, 206 P.3d 446 (Alaska 2009), the Alaska Supreme Court held that an oral agreement between a grandmother and her granddaughter providing that the grandmother would give her house to her granddaughter if the granddaughter cared for her for until her death was a succession contract and there void because not in writing.

Contingency Fees: 40% of a $100 Million Estate?

At the end of 2008, New York Court of appeals held that without more facts, it could not decide whether a 40% contingency fee from a $100 million dollar estate is unconscionable.  Graubard Miller, the law firm trying to collect, already collected $18 million in legal fees from the estate and would collect the contingency fee as payment for about five months worth of work. 

In a footnote, the court stated that it is not unconscionable for an attorney to receive more through a contingency fee than the attorney would receive at an hourly rate.  Whether outlandish fee agreements can be undone with an unconscionablility claim is yet to be determined.

See Lawrence v. Graubard Miller, 11 N.Y.3d 588 (Ct. Ap. 2008).

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this case to my attention.

Court may impose constructive trust on basis of unjust enrichment alone

In its extensive opinion in Nelson v. Nelson, 205 P.3d 715 (Kan. 2009), the Kansas Supreme Court held that proof of actual or constructive fraud is not necessary for the imposition of a constructive trust.

The decedent’s children claimed that the decedent had failed to comply with the property settlement agreement incorporated into the divorce settlement with their mother by diminishing his estate through inter vivos transfers, thus depriving them of the income of his “entire estate” as stipulated in the agreement.

Although unjust enrichment of the beneficiaries of the inter vivos transfers is a sufficient basis for the imposition of a constructive trust in favor of the decedent’s children, the court affirmed summary judgment against the children because they failed to make a timely claim against the decedent’s estate under the Kansas nonclaim statute.

South Carolina: No Attorney Duty to Prospective Will Beneficiaries

The South Carolina Supreme Court recently held that an attorney does not owe a duty to a prospective beneficiary under a non-existent will and therefore, the prospective beneficiaries cannot sue the attorney for negligently failing to draft the will.  The plaintiffs in the case were prospective beneficiaries under a will that an attorney was supposed to draft, but failed to, before the testator became incapacitated and died intestate. The court distinguished the case from cases in other states where an attorney owes a duty to beneficiaries under an executed will and ruled that imposing a duty to prospective beneficiaries would "wreak havoc" on the attorney's ethical duty of undivided loyalty to the client.  Rydde v. Morris, No.  26619 (S.C. Mar. 23, 2009).

Special thanks to Michael Hatfield (Professor of Law, Texas Tech University) and Robert C. Peithman (attorney, South Carolina) for bringing this case to my attention.

 

Initials of witness on each page of the will deemed insufficient as an attestation

In its opinion in In re Estate of Leavey, 202 P.3d 99 (Kan. Ct. App. 2009), the Kansas intermediate appellate court affirmed denial of probate for lack of due execution.

 While the testator and one witness signed the will at the end and also signed the self-proving affidavit, the intended second witness, the scrivener, did not sign the line provided for his signature. The initials of the scrivener, the testator, and the witness did appear on the bottom right-hand corner of each page.

The court held that the initials did not substantially comply with the statutory requirement that the witnesses attest and subscribe the will in the presence of the testator.

Oregon Court Rules Revocable Living Trust an Expectancy

The Oregon Court of Appeals, in a case of first impression, recently held that a husband's interest in a revocable living trust is an expectancy and therefore not subject to division during divorce.  The court reasoned that the husband's interest is more akin to an expectancy under a will than a contingent interest in a trust, which is a divisible property interest because the settlor has given up all interest in the trust property.  The court also noted the difficulties associated with dividing an interest in a revocable living trust or taking it into account in dividing the rest of the marital assets.

The dissent thought the husband's interest more akin to a contingent interest in a trust than an expectancy under a will.  The dissent concluded that a contingent interest in a trust and an interest in a revocable living trust are the same in practice, the only difference being that the former interest is lost because a contingency fails to occur and the latter is lost because a settlor revokes.  The dissent noted the disparity that resulted in this case: 

As a result, wife emerges from this dissolution of the marriage (during which she enjoyed, according to the trial court, a "reasonably good standard of living") with a maximum income from employment of less than $13,000 per year, no housing, and nothing to show for her contributions of money and labor to the home in which she and husband lived for 23 years, while husband will have rent- or mortgage-free housing, a larger income, and, in all probability, a soon-to-be-realized half interest in two parcels of Willamette Valley farm property. 

Githens v. Githens, A130128 (Or. Ct. App. April 1, 2009).

Special thanks to Susan N. Gary (Professor of Law, Associate Dean for Academic Affairs, University of Oregon School of Law) for bringing this case to my attention.

No statute of limitations on trustee removal

The probate court removed Trustee from office.  Trustee appealed claiming that the removal action was barred by the four-year statute of limitations governing breach of fiduciary duty claims because the underlying reason for the removal was for an alleged breach of duty.  The Houston First District Court of Appeals agreed that the removal action was barred because it was brought more than four years after the accrual of the removal action.

In Ditta v. Conte, 52 Tex. S. Ct. J. 823 (2009), the Texas Supreme Court reversed holding that “no statutory limitations period restricts a court’s discretion to remove a trustee.  A limitations period, while applicable to suits seeking damages for breach of fiduciary duty, has no place in suits that seek removal rather than recovery.”  Ditta at 824.

The court studied Trust Code § 113.082(a) which grants the court broad discretion to remove a trustee for certain enumerated conduct as well for any “other cause” which the court finds sufficient to justify removal.  The court stressed that a decision to remove “turns on the special status of the trustee as a fiduciary and the ongoing relationship between trustee and beneficiary, not on any particular or discrete act of the trustee.”  Ditta at 826.

Moral:  A person dissatisfied with the conduct of a trustee may bring suit for removal no matter how long in the past the alleged improper conduct occurred.

Class gift, or not?

In the case of In re Estate of Womack, 280 S.W.3d 317 (Tex. App.—Amarillo 2008, pet. denied), Testator’s holographic will provided for his entire estate to be divided among his nieces and nephews, his predeceased wife’s nieces and nephews, and one named beneficiary.  A later holographic codicil removed this named beneficiary as well as two nephews.

The trial court determined that these documents taken together resulted in a class gift with the class containing thirteen individuals.  Nephew appealed claiming that only twelve individuals were entitled to Testator’s estate.

The appellate court affirmed.  Nephew asserted that Testator’s will did not make a class gift.  The court did not find it significant that Testator’s original will stated a total number of beneficiaries.  Because Testator did not name the nieces and nephews, other than to exclude two of them, the gift was a class gift and not a gift to specific individuals.

Moral:  A class gift must be drafted with care to avoid an allegation that the gift is actually one to specific individuals.  Perhaps a direct statement such as, “This is a class gift,” would be helpful.

Conflict of interest not enough to justify removal of executor

Beneficiaries’ Mother (the testator’s ex-wife) moved to have Independent Executor removed from office because he shared ownership of certain estate property with his deceased brother and allegedly had a conflict of interest with the beneficiaries.  Mother argued that he could not adequately represent the estate while seeking to retain his own share of the property.  The trial court denied the motion.

The Tyler Court of Appeals reversed.  In re Estate of Kappus, 242 S.W.3d 182 (Tex. App.—Tyler 2007).  The court explained that great deference is given to the testator’s choice of an independent executor.  However, the named executor may be removed for the reasons specified in Probate Code § 149C.  In this case, the estate and the executor are in conflict regarding a 4.86% interest in the property because both claim ownership to this property.  The court concluded that the existence of this conflict requires the trial court to remove the executor.

The Texas Supreme Court reversed.  Kappus v. Kappus, 52 Tex. Sup. Ct. J. 754 (2009).  The court examined § 149C and pointed out that “conflict of interest,” either actual or potential, is not one of the listed grounds for removal.  The court explained that being in a conflict situation is not the same as misapplication, embezzlement, gross misconduct, gross mismanagement, or being incapacitated.

The court noted that a trial court has broad discretion to disqualify a person as being “unsuitable” pre-appointment but that once a person is appointed, the only grounds for removal are expressly stated in the statute.  Because Mother did not prove one of the enumerated removal grounds, the removal was improper.

Moral:  A person dissatisfied with the testator’s choice of independent executor has a better chance of keeping that person from being appointed originally than in obtaining a court order removing that person once he or she is appointed.

English Proficiency not Required to Be an Administrator in New York

On June 1, 2009, A New York Surrogate Court held that the court may appoint a person as administrator of an estate when the person is unable to read, speak, and understand English.  The court relied on the fact that New York has made great strides to accommodate its overwhelming immigrant population, that legal counsel can, and probably will, assist the administrator in carrying out his legal duties, and that an inability to understand English does not equate to a disqualifying want of understanding.  See In re Toribio, 2009 NY Slip Op. 29237(Sur Ct, New York County 2009). 

Special thanks to Bridget J. Crawford (Professor of Law and Associate Dean for Research and Faculty Development, Pace Law School) for bringing this case to my attention.

Same-sex marriages may no longer be performed in California

Earlier today (May 26, 2009), the California Supreme Court by a 6 to 1 vote agreed with the citizens of California that same-sex marriages are banned because of Proposition 8 which was passed in November.

However, the court also held that the approximately 18,000 same-sex marriages that were entered into between the court's earlier ruling allowing same-sex marriage and the passage of Proposition 8 are valid.

Note that although same-sex couples may no longer marry in California, they may still enter into civil unions.

For more information, see John Schwartz, California Supreme Court Upholds Ban on Same-Sex Marriage, NY Times, May 26, 2009.