Should an undue influencer be responsible for paying the legal fees incurred to rectify the undue influence?

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by Kelly Cooper

In a recent unpublished decision, the Colorado Court of Appeals held that a niece who unduly influenced her uncle was not responsible for the payment of the uncle's legal fees, which were required to rectify the undue influence and return the property to the uncle.

Specifically, the niece was accused of unduly influencing her uncle to give her pieces of real estate during his life. A jury found that the niece did unduly influence her uncle and that she breached her fiduciary duty to her uncle. As a result, the court ordered that the real estate be transferred back to the uncle. In addition, the jury awarded $315,000 in legal fees against the niece to make the uncle whole.

On appeal, the niece argued that she should not be responsible for the payment of attorney's fees because Colorado follows the American rule that parties in a dispute must pay their own legal fees. The uncle, through his conservator, argued that an award of legal fees was appropriate in this case under the breach of fiduciary duty/trust exception to the American rule. This exception was first recognized by the Colorado Court of Appeals in 1982. See Heller v. First Nat'l Bank of Denver, 657 P.2d 992 (Colo. App. 1982). The Colorado Supreme Court recognized the exception in 1989. See Buder v. Satore, 774 P.2d 1383 (Colo. 1989).

Despite the recognition of this exception, the Colorado Court of Appeals found that the Colorado Supreme Court has cautioned it against liberally construing any of the exceptions to the American rule.

In finding that the exception did not apply to this case of undue influence, the Colorado Court of Appeals held that the niece's breach of fiduciary duty did not closely resemble a breach of trust. In addition, the Court of Appeals found that the niece breached her duty as an individual, rather than any fiduciary duty to manage property, and that abusing personal influence is not similar to mismanaging property as a fiduciary.

The citation for the case is: In the Interest of Phillip Delluomo, Protected Person, 2012CA2513.

Letters of Wishes: Helpful or Hurtful?

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by Kelly Cooper and Desta Asfaw

Most of the trusts we see instruct the trustee to consider making distributions for “health, education, maintenance and support.”  While the typical HEMS standard provides certainty in regard to taxes, it does not provide the trustee with any insight into what types of distributions the settlor wanted the beneficiaries to receive from the trust.  In addition, many trusts give the trustee broad discretion in regard to distributions (through the use of the words, “sole” or “absolute”), which puts even more pressure on the trustee to figure out if the settlor would have agreed to make distributions.  Typically, a trustee has little to no guidance from the settlor about his or her desires for the beneficiaries or his or her purposes in creating the trust (other than tax deferral or avoidance).

One solution to this problem is for the settlor of the trust to send to the trustee a non-binding letter of wishes.  Letters of wishes include personal information about the settlor and the beneficiaries, their relationships, the beneficiaries’ abilities and limitations and the settlor’s specific concerns or desires regarding each beneficiary.  Letters of wishes give the trustee more insight into the state of mind of the settlor when exercising discretion, which is helpful when exercising discretion in regard to distributions.

While letters of wishes are generally recognized in the estate planning community, there is very little law regarding the effect of a letter of wishes on a trustee’s discretion, whether reliance on a letter of wishes provides any liability protection to a trustee or if a letter of wishes must be disclosed to the beneficiaries.  If a settlor provides opinions and concerns about the beneficiaries in a letter of wishes that may be hurtful to the beneficiaries, the trustee will then be faced with the difficult decision – do you provide a copy of the letter of wishes to the beneficiaries?  If a claim for breach of the trustee’s fiduciary duty should arise, it may be that the trustee is left with no choice but to make the letter available to the beneficiaries.  In Colorado, there is no case law regarding letters of wishes so it is unknown if the letters of wishes must be disclosed to beneficiaries under C.R.S. § 15-16-303 or whether a trustee can rely on a letter of wishes when making a distribution decision.

Even with the uncertainty relating to the disclosure and use of letters of wishes, any peek into the settlor’s mind and his or her intent regarding distributions will be helpful to a trustee.  If a letter of wishes is admitted into evidence during a dispute, the letter could also prove to be compelling evidence for a judge reviewing a trustee’s exercise of discretion.

What Do Probate Judges Do?

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by C. Jean Stewart

Since I last posted an article on this blog, I was elected president of the National College of Probate Judges at its fall conference in Nashville, Tennessee. The College is the only national organization focusing exclusively on probate matters.  Its mission, to support, educate and provide resources to state and local judges who handle probate matters contributes to the efficient administration of justice in the probate courts in the United States.  Because I feel strongly about the role probate judges have historically played and continue to play in the fabric of the American court system, I embark on this role with both enthusiasm and resolve.

While the term “probate” historically referred only to the limited process of proving a testamentary document to be the decedent’s last will, probate has come to refer to a group of case types that include not only the administration of decedent’s estates, but also trust administration (a growing area), appointment of guardians and conservators (in some states the terms used are: guardian of the person and guardian of the property), disposition of last remains, declarations of death, civil mental health commitments and treatment of the mentally ill or addicted, and in some jurisdictions, the adoption of children. 

Some or all of the probate judges in 15 states are elected or selected to serve only in probate jurisdiction; in another 33 states judges of general jurisdiction have jurisdiction over probate cases, along with their civil and criminal dockets.  In 3 states, such as Colorado, there is a hybrid system where one or more localities have specialized judges while other areas rely on general jurisdiction judges for probate decisions.

Probate judges hear complex trials (including jury trials) arising from fiercely-contested cases, many of which are sensationalized and reported in the local or national press, such as the claim brought by Ryan O’Neal in the Farrah Fawcett estate litigation that was decided yesterday by a California jury.    Probate judges also hear many uncontested proceedings focused on the deteriorating physical and mental condition of injured, ill, and incapacitated citizens who rely on the courts to protect their rights while insuring that they receive appropriate care and support under the supervision of the probate court.  

The National College of Probate Judges plays an important role in assisting probate judges address these challenging and often emotionally-charged cases with educational seminars, publication of resources and materials (such as the National Probate Court Standards) and providing opportunities for collegial interactions with colleagues.  I look forward to working with judges around the United States during this coming year to assist with their important mission. 

Probate and Trust Issues in Colorado’s Upcoming Legislative Session

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by Kelly Cooper

Colorado’s General Assembly will reconvene on January 8, 2014.  At this time, it appears that at least two probate and trust related issues will be the subject of debate by the Assembly.

The first is a proposed change to the Colorado Civil Unions Act that would permit partners to a civil union to file joint income tax returns if they are permitted to do so by federal law.  Under the current proposal being considered by the Colorado Bar Association, there would be changes to both the Civil Unions Act and Colorado’s income tax statutes.  This is partly in response to the issuance of Revenue Ruling 2013-17 by the Internal Revenue Service, which permits married same sex couples to file joint federal income tax returns. 

The second is a proposal to codify a testamentary exception to Colorado’s attorney-client privilege.  The necessity and proposed scope of the testamentary exception are currently being discussed by a subcommittee of the Statutory Revisions Committee of the Trust & Estate Section of the Colorado Bar Association and will likely be discussed later this week at Super Thursday meetings.

The Colorado Supreme Court has previously recognized that the attorney-client privilege generally survives the death of the client to further one of the policies of the attorney-client privilege – to encourage clients to communicate fully and frankly with counsel.  The Colorado Supreme Court has also held that a “testamentary exception” to the privilege exists, which permits an attorney to reveal certain types of communications when there is dispute among the heirs, devisees or other parties who claim by succession from a decedent so that the intent of the decedent can be upheld.

Keeping up to date with ICCES

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by Jody H. Hall, Paralegal 

The latest updates and enhancements to ICCES (Integrated Colorado Courts E-Filing System) were released on October 19, 2013.  The release bulletin, which can be found on the ICCES Home page, is attached here for your easy reference. 

We found a couple of items of specific interest to those of us that work in the probate and trust arena:

  • The new event type of Amended Trust Registration Statement will allow us to file updated information on those trusts requiring to be registered under C.R.S. 15-16-101, including the termination of these trusts, without the system automatically charging a filing fee (as required by the originating event type Trust Registration Statement) or having to be manipulated by the Court. 
  • The Court will also now have use of two new party types for Probate Cases: Professional Conservator and Professional Guardian. 

We recommend that you (and/or others in your office) read the entire bulletin and implement those practices that will help you stay up to date with the most current information on e-filing in Colorado – the Court Clerks, as well as other interested parties in your case, will appreciate you for it.

Where Art Jurisdiction?

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by C. Jean Stewart

Because Colorado is a "hybrid" state in that only one judicial district has a specialized probate court (a distinction we share with only Indiana and Missouri), confusion about jurisdiction can sometimes contribute to discussion and debate. I have collected here several articles and a case relating to jurisdiction to assist in understanding the subject. One is an article I wrote for The Colorado Lawyer in 2004 about how probate courts are identified around the state. Subsequently, I wrote an article for Council Notes more specifically directed to how cases are assigned and coordinated between the Denver District Court and Denver Probate Court. Finally, the Colorado Court of Appeals, in reversing me in the Estate of Edna Murphy, provided substantial helpful guidance to all probate courts in determining what subjects fall within the meaning of the Colorado Probate Code and are appropriate for designation as "probate" cases to be heard by Colorado district court judges "sitting in probate."

Practicing Law in Three States

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by Carol Warnick

I practice law in three Rocky Mountain states, Colorado, Utah and Wyoming.  As would be expected, there are significant differences among them, but also significant similarities.  It does provide a useful perspective with regard to the trends in estate, trust and fiduciary law — at least in the western United States.

We were living in Wyoming when my youngest of four children was ready to start school full-day, which was when I finally had the opportunity to go to law school.  Naturally, after graduating from law school, Wyoming was the first state in which I applied for admission to the bar and was admitted in 1990.  After successfully passing the Wyoming bar exam, I was surprised and pleased to be invited to apply for admission in Colorado.  Of course, I did so and waived into Colorado in 1992.  Interestingly enough, about 7 years after waiving into Colorado, we moved to Denver.  I kept some of my Wyoming clients and began building up a new practice in Colorado.  How convenient it was to already be admitted in Colorado!  I happily worked in both states, and for a while we even had a small Holland & Hart office in Casper, WY. 

After working at Holland & Hart LLP in Denver for several years, it became apparent that there was an unmet demand for an attorney with estate and gift planning expertise, as well as fiduciary litigation expertise, in our Salt Lake City Office.  The firm was willing to fly me back and forth to Salt Lake as needed to meet those needs.  I was pretty familiar with Utah since I had attended college there, so it seemed to make sense.  I actually had 3 children attending college there at the time I applied, and I was allowed to waive into Utah in 2004.  Now the stage was set.  I found myself with work in all three states and having to learn not only the differences in the law but also the variations in the accepted methods of doing things in all three states. 

As I mentioned, there are similarities and differences.  Both Colorado and Utah have adopted the Uniform Probate Code, but Wyoming has not.  Both Utah and Wyoming have adopted the Uniform Trust Code, but Colorado has not.  Colorado has had a beneficiary deed statute for several years, and the Wyoming legislature has just adopted one, but Utah does not have such a statute.  Of course, the specifics of these supposedly uniform laws as adopted by these states contain numerous variations. 

When going into court in a fiduciary litigation case, I have found the practices in the different states related to filing pleadings, getting courts to act, and what to expect at various court proceedings to be notably different from one another.  When I first started practice in Wyoming, I could simply walk over to the courthouse, visit with the judge about an uncontested matter, and get his signature on an order right then and there.  I’m not sure that can still be done, even in Wyoming, but it is certainly not an acceptable practice in Denver where we use the nonappearance docket for such uncontested matters, or in the Third District Court in Salt Lake City where the probate docket is heard every Wednesday morning.  Of course, there are significant variations in all three states between rural counties and the more populated ones.

It definitely keeps me on my toes to adapt to the setting I am in and go with the flow in the various jurisdictions in which I represent clients.  Thankfully, one constant is that there are honest and highly professional lawyers with which I have worked in each jurisdiction. 

I keep copies of the court rules and the probate and trust statutes for all three states in my office and I have learned not to rely on my memory.  I always look it up, whether it be a variation in a court rule or a difference in one of the provisions of a statute such as the probate code.  Even if I think I know, I don’t trust my memory to keep all the nuances straightened out and in the right state box in my mind.  

I have heard people say they like the practice of law because it is never the same — the issues are always new.  I agree wholeheartedly with that and when you add the complexity of practicing in three states, nothing about such a practice is boring!  My knowledge of the laws in the three states has also brought up some interesting issues for my clients who have ties to more than one of my states with regard to where to situs a trust and also possibly changing situs down the road after a trust has been established.   It is also an interesting analysis to look at where best to bring an action in those few cases where circumstances would allow them to be brought in a couple of states. 

I didn’t start out to be an attorney actively practicing in three states, it just worked out that way.  But I wouldn’t change anything about it. 

I’ll Be the Judge of That

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by C. Jean Stewart

I’ve been in San Antonio, Texas attending the Spring Conference of the National College of Probate Judges this week, catching up with old friends and learning about new trends and concerns among probate courts from Alabama to Oregon to Maine.  This has been an outstanding program in a very special setting.  Our thanks to Judge Mike Wood from Harris County Probate Court No. 2 (Houston) and Judge Ponda Caldwell from Spartanburg County Probate Court (Spartanburg, South Carolina) who assembled a group of outstanding judges and speakers to lead our conference. 

Probate judges and their probate court administrators continue to be restricted by severe budget cuts; nevertheless, we all share common concerns about probate court procedures in trust and estate litigation, abuse and financial exploitation of the vulnerable and elderly, and recent developments throughout the country in all areas of the law that impact probate cases.

Joanne Woodruff, Elder Fraud Prosecutor in the Bexar County District Attorney’s Office inspired and challenged us with the many accomplishments of her office in gaining convictions and significant sentences against con operators, opportunistic neighbors, greedy relatives, unscrupulous caregivers, and others bent on improperly taking funds from vulnerable elderly citizens.  Joanne’s position (her office includes an advocate assistant) has been made possible by a grant from the Texas governor’s office but her substantial track record (nearly 100% success) clearly arises from the passion and expertise she brings to her work.  Many judges expressed a desire to replicate programs like Joanne’s that would provide every community with a fearless and committed prosecutor to stem the tide of financial exploitation of the elderly.

Stanley Johanson, the James A. Elkins Chair in Law at the University of Texas School of Law, is one of our favorite lecturers in probate law and procedure.  He raised multiple issues of interest to probate judges under the new federal estate and gift tax laws and introduced multiple ways in which estate planning and changes to estate plans will impact probate judges in the years to come.  He even offered a little advice for probate judges thinking about their own estate plans. 

We were heartened to hear from several of our speakers that the Uniform Adult Guardianship and Protective Procedures Jurisdiction Act (UAGPPA) has now been adopted in 37 states (presently on the New York Governor’s desk for signature).  Perhaps no single uniform act has done more to insure the safety and security of vulnerable citizens in our mobile society by giving real legislative substance to the concept of “home state” and reducing the risks of conflicting court orders originating from multiple states than this uniform law created, in part, with the participation of NCPJ members.  The 13 states that have not adopted UAGPPJA will be the focus of the many groups committed to bringing an end to interstate support and involvement in disputes over physical control and custody of the incapacitated elderly.

No conference of probate judges is complete without a presentation on the special evidentiary rules – Dead Man’s statute e.g., that accompany probate court litigation.  Frank N. Ikard, Jr., a prominent Texas fiduciary litigator gave us his perspectives on many of these unique and complex rules.  Frank elaborated on the duties of a fiduciary to disclose complete, detailed records of the trust/estate account because (1) the records belong to the beneficiary who owns equitable title to the trust/estate account and (2) the fiduciary has an unquestioned duty to keep the beneficiary(ies) informed about the beneficiary’s property.  Frank refers to this as “equitable discovery” and lauds its virtues compared to the civil rules of discovery; most importantly, he has enjoyed great success in applying his analysis in his local practice in Texas.

At Friday evening’s spring banquet, NCPJ gave our annual Judge Isabella Horton Grant Guardianship Award to Erica Wood of the American Bar Association Commission on Law and Aging.  The Isabella Award was established to honor the memory of the late Judge Isabella Grant, for many years the highly respected and innovative presiding judge of the San Francisco Probate Court. The Award, sponsored by The Rutter Group of California and administered by NCPJ, recognizes and encourages achievements in the field of guardianships of minors and adults.  Erica Wood is particularly suited for this award because she has dedicated over 30 years to the improvement and adoption nationally of appropriate rules and procedures for guardianship proceedings involving our most vulnerable citizens. We congratulate and applaud Erica’s outstanding accomplishments.   

We leave San Antonio to return to many diverse states, inspired and confirmed in our views about the unique and particularly human aspects of probate jurisdiction and looking forward to meeting in Nashville for the fall conference in November (meet us at Sheraton Music City November 13-16) and then in Vail, Colorado next May at the Four Season’s Hotel (May 15-18).