Sunday, March 26, 2006
The case of Combs v. Gent, 181 S.W.3d 378 (Tex. App.—Dallas 2005, no pet. h.), shows that an attorney needs to be extremely careful in accepting employment when the client issues a dire prediction about the possibility of litigation after the client’s death. If the attorney decides to accept employment despite the risk, careful attention to detail and meticulous record-keeping is advised. Here's what happened in this interesting case:
After being contacted by Caretaker, Attorney met with Client about handling Client’s affairs. Client explained that she was tired of dealing with Nieces & Nephews regarding her financial affairs and warned Attorney that they were likely to sue him. After much discussion, Attorney drafted a trust for Client and Client agreed to pay him a 5% fee. Attorney served as the trustee with his children being co-trustees if Attorney could no longer serve. Client wanted attorneys to be the trustees and all of Attorney’s children were either lawyers or in law school. Client was the sole beneficiary until her death when the trust property would be divided among 18 beneficiaries which included Nieces & Nephews. As time elapsed, Attorney helped Client transfer her property into the trust and was paid for his services. After Client died, Nieces & Nephews quickly became very demanding about estate matters. Attorney resigned and the court appointed a successor Trustee. Over two years later, Trustee sued Attorney claiming breach of fiduciary duty and legal malpractice. At trial, the jury found in favor of Attorney and ordered Trustee to pay Attorney’s legal expenses which were in excess of $150,000. Trustee appealed.
The appellate court affirmed. The court examined the evidence that Attorney charged excessive fees and mismanaged the trust. The court placed great weight on the fact that the jury heard the evidence and concluded that Attorney’s actions had not harmed the trust in any way. In addition, the court enumerated the steps Attorney took to be certain Client was fully informed regarding his actions and fees. It was also significant that Client repeatedly warned Attorney that there would be a “bloodshed war” after her death and that four other attorneys had refused to take on the task. The court held that the jury’s failure to find a breach of fiduciary duty was not so against the great weight and preponderance of the evidence as to be manifestly unjust.
The court conducted a similar analysis and held that the evidence was sufficient for the jury to find that Attorney had not committed malpractice. Finally, the court agreed that the trial court had the power under Property Code § 114.064(a) to award attorney’s fees and that under the circumstances, the award was equitable and just.
Saturday, March 25, 2006
Here are the top downloads from the SSRN Journal of Wills, Trusts, and Estates Law for papers announced in the last 60 days for the period January 23, 2006 to March 24, 2006:
|1||46||Book Review: A Romantic Conception of Fiduciary Obligation |
University of Saskatchewan,
Date posted to database: December 14, 2005
Last Revised: December 15, 2005
|2||18||A Marriage Skeptic Responds to the Pro-Marriage Proposals to Abolish Civil Marriage |
Nancy J. Knauer,
Temple University - Beasley School of Law,
Date posted to database: March 10, 2006
Last Revised: March 20, 2006
Friday, March 24, 2006
Richard Acello, Taking up UPL: California Law Helps State Bar Fight Unauthorized Practice, ABA J. e-Report, March 24, 2006, discusses "California’s new UPL law [which] went into effect Jan. 1. Under it, the state bar files a petition with the appropriate superior court. The court can issue an interim order to cease an illegal law practice * * *. This kind of order may appoint attorneys to seize files, bank accounts and computers, and to redirect mail and phone calls. After a later evidentiary hearing, the judge may either vacate or modify the order or make it permanent."
The article also discusses the experience in Florida where Lori Holcomb, director of the UPL Department of the Florida Bar, places part of the blame for sham practices on a person's "misplaced confidence in one’s own legal abilities, often caused by experience with * * * probate."
Home made holographic wills continue to be a source of litigation. Will preparation should be left to a licensed attorney with expertise in estate planning.
For example, in Ajudani v. Walker, 177 S.W.3d 415 (Tex. App.—Houston [1st Dist.] 2005, no pet. h.), a seven page consecutively numbered handwritten document was offered for probate as Decedent’s will. The first six pages contain discussions of various matters which arguably relate sufficiently to the disposition of Decedent’s property at death to show testamentary intent. None of these six pages contain Decedent’s signature. The seventh page is a power of attorney by which Decedent granted an attorney the power to handle various real property transactions. This page contains Decedent’s signature. The trial court granted a summary judgment that Decedent did not sign the alleged will (pages one through six), page seven was a separate document (a power of attorney), and the signature on the power of attorney could not be treated as being on the alleged will.
The appellate court affirmed. The court explained that although Decedent numbered the power of attorney as page seven, it was nonetheless a separate document. The court explained that the first six pages were a "unit" – they were written on the same type of paper and page six had a postscript written in the margin showing that page six was the end of the purported holographic will. In addition, evidence showed that Decedent signed page seven before finishing pages one through six. The court concluded that the alleged holographic will and the power of attorney are "unambiguously two separate documents." Id. at 419. Accordingly, Decedent’s signature on the power of attorney cannot be used to provide the signature which a holographic will needs to be valid under Texas Probate Code § 59.
Thursday, March 23, 2006
In re Estate of Cornes, 175 S.W.3d 491 (Tex. App.—Beaumont 2005, no pet. h.), the lower court determined that a holographic will did not meet the requirements of a valid will but failed to specify the exact reason. [Note: Another part of the lower court’s opinion found that will was not in Testatrix’s handwriting but that holding was overturned on appeal.]
The appellate court conducted a review of the requirements of a valid will focusing its attention on the “sound mind” requirement of Texas Probate Code § 57. The court explained that Proponent had the burden of proving testamentary capacity and that to overturn the lower court’s finding, Proponent must establish that Testatrix had capacity as a matter of law. After reviewing the evidence, the court determined that there was insufficient evidence of her capacity as of the date of will execution and thus the trial court’s finding was upheld. The court pointed out that although witnesses were available who could have testified as to Testatrix’s capacity around the time of will execution, they had not done so.
The court’s holding had the effect of causing Testatrix’s estate to pass by intestacy because it is coupled with a holding that an earlier will was not subject to probate because the proponents were in default in waiting more than four years. Proponents filed a will for probate after four years had elapsed from the date of Testator’s death. Proponents explained that they were “not in default” in failing to present the will within the four year period under Texas Probate Code § 73(a) because they delayed probating their mother’s will “out of respect” for their step-father. They feared that their step-father would be hurt that their mother included an express provision in the will which provided that she “intentionally made no provision in this Will for my husband * * * and I direct that he shall take none of my property either under this Will or by the laws of intestacy.” Id. at 495. The lower court admitted the will to probate.
The appellate court determined that Proponents’ excuse was insufficient to justify a late probate. The court explained, “we have found no opinion [that] has recognized respect for potential heirs as an excuse for the devisees’ delay in presenting a will for probate.” Id. at 495.
Prof. June Entman of the University of Memphis School of Law noticed something that I have seen in class way too often -- students who use laptop computers turn into "scribes" or "court reporters" attempting to type every word spoken rather than thinking about what is being said and taking well-reasoned "notes." In addition, she noticed the inability to make eye contact with students because the laptop screens block the view of the students' faces.
Prof. Entman decided to take action. On March 6, 2006, she sent an e-mail message to her students prohibiting her first-year students from using laptops in class.
Student outrage followed. Students are collecting signatures in hopes a petition will lead to a reversal of the new policy.
The students also filed a complaint with the American Bar Association. The ABA did not take too kindly to the complaint and dismissed it quickly stating that a professor is entitled to make the decision regarding use of laptops in class.
See Law professor bans laptops in class, over student protest, USA Today, March 21, 2006.
Wednesday, March 22, 2006
Samuel P. King (Judge, U.S. District Court for the District of Hawai'i) and Randall W. Roth (professor, University of Hawai'i School of Law) have recently published an extremely well-researched and highly interesting (and shocking) account of the problems arising from the Bishop Estate in Broken Trust: Greed, Mismanagement & Political Manipulation of American's Largest Charitable Trust (2006).
The following is from the description provided by the University of Hawai'i Press:
Princess Bernice Pauahi Bishop was the largest landowner and richest woman in the Hawaiian kingdom. Upon her death in 1884, she entrusted her property--known as Bishop Estate--to five trustees in order to create and maintain an institution that would benefit the children of Hawai‘i: Kamehameha Schools. A century later, Bishop Estate controlled nearly one out of every nine acres in the state, a concentration of private land ownership rarely seen anywhere in the world. Then in August 1997 the unthinkable happened: Four revered kupuna (native Hawaiian elders) and a professor of trust-law publicly charged Bishop Estate trustees with gross incompetence and massive trust abuse. Entitled “Broken Trust,” the statement provided devastating details of rigged appointments, violated trusts, cynical manipulation of the trust’s beneficiaries, and the shameful involvement of many of Hawai‘i’s powerful.
No one is better qualified to examine the events and personalities surrounding the scandal than two of the original “Broken Trust” authors. Their comprehensive account together with historical background, brings to light information that has never before been made public, including accounts of secret meetings and communications involving Supreme Court justices.
The book makes captivating reading for the layman—and for the attorney whose focus is in the field of trusts and estates. I suspect the book’s other readers will be as appalled at the abuses which were sanctioned by the Hawaiian public officials, judges, and lawyers as I was. In fact, as I read the book, I could not help having Lord Acton’s maxim that absolute power corrupts absolutely pop up in my mind as Roth and King describe the pattern of scandals plaguing the Bishop Estate. * * * I applaud the authors for their continuing courage in this fight, and highly recommend the book to remind us all as lawyers of our responsibilities to police the systems that we see everyday in our offices!
On April 1, 2006, the Federal Deposit Insurance Corp. will raise the insured amount of IRAs and similar accounts (self-directed 401(k) plans, 457 plans, Keogh plans) from $100,000 to $250,000, a 150% increase. This is the first raise since 1980.
But, the raise is not for regular accounts -- they remain insured for only $100,000.
Also, only accounts like certificates of deposit and traditional savings/checking accounts are covered -- not mutual funds, annuities, etc.
For more information, see FDIC Consumer News, What You Should Know About Higher FDIC Coverage for Retirement Accounts, April 2006 - Special Bulletin.
Tuesday, March 21, 2006
In Estate Planning and the Pending Deal: Lessons from the Merger Arbitrage Market, 31 ACTEC J. 338 (2006), Espen Robak (Senior Vice President in the New York City office of FMV Opinions, Inc.,) provides "[a]n examination of the treatment of pending transactions on valuation in both estate tax and estate planning situations." Here is the summary of his article:
Numerous court decisions have indicated that the gain from a postmortem sale of securities will not be considered IRD unless the decedent was truly “entitled” to the proceeds from the sale and all remaining acts were insignificant and “ministerial” in nature. This is similar to how such pending deals ought to be treated and valued in the estate planning context. Data from merger arbitrage can help the valuation analyst determine the proper weighting of deal and no-deal scenarios when determining the fair market value of a stake in a possible acquisition target. A thorough analysis and proper empirical support can result in significant tax savings compared with naively using the anticipated deal value.
Duncan E. Osborne (partner, Osborne, Helman, Knebel & Deleery, L.L.P, Austin, TX) and John A. Terrill, II (partner, Heckscher, Teillon, Terrill & Sager, P.C., West Conshohocken, PA) have recently published their article entitled Fundamentals of Asset Protection Planning, 31 ACTEC J. 319 (2006), which provides "[a] practical guide to advising clients on asset protection strategies short of onshore or offshore trusts." This is an especially well-written and useful article.