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/in Administration of Estate, Administration of Trust, Fiduciary Litigation, Legislation, Personal Representative, Trustee, Will & Trust Constructionby Kelly Cooper
Lawyers that regularly litigate in the probate world always have an improbable story to tell. Here is one of those stories that ended up in front of the North Dakota Supreme Court last year:
A couple, Lee and Robyn, were engaged and planned to be married on July 18, 2009. On June 26, 2009, Lee and Robyn signed a prenuptial agreement that required Lee to make gifts to Robyn and her daughter upon his death.
Also on June 26, 2009, Lee executed a Will that contained the provisions to comply with the requirements of the prenuptial agreement. The Will gave property to Robyn, describing her as “my wife, Robyn.” The Will also stated, “My spouse’s name is Robyn Risovi and all references in this Will to “my spouse” are to her only.” However, a footnote followed stating, “This Will has been prepared in anticipation of the upcoming marriage of …Lee Paulson and Robyn Risovi set for July 18, 2009.”
Lee died on July 15, 2009 – three days before the wedding.
Before you read any further, answer this question: should Robyn receive the gifts under the Will even though she was not yet Lee’s wife?
Technically, one of the questions before the North Dakota Supreme Court was whether the term “wife” being used to describe Robyn in the Will resulted in a conditional gift or whether the term “wife” was a merely a description. In addition, the North Dakota Supreme Court had to determine whether the prenuptial agreement, which was not effective since the marriage did not occur before Lee’s death, had any impact on the interpretation of the word “wife” in the Will.
The North Dakota Supreme Court held that the Will was unambiguous, the term “wife” was only descriptive, and ordered distribution to Robyn. The Court held the prenuptial agreement had no effect on the interpretation of the Will for a variety of reasons.
This is just one more example of the ways that the best laid plans are derailed by unexpected events.
Real Lessons From the Gandolfini Will?
/in Administration of Estate, Life Insurance, Testamentary Intentby C. Jean Stewart
In the six weeks since the death of Soprano’s actor, James Gandolfini, the web-based criticism of his will that was lodged in the New York Surrogate’s Court last month has exceeded the entire analysis of his career as Tony Soprano or genuine expressions of sympathy on his untimely death while in Italy with his son—maybe I’m just reading the wrong posts?
Much of the commentary is highly sensationalized, presumably to draw the readers’ attention to the pages where advertisements lurk, and does little to advance the dialogue about sound and sensible estate and tax planning. The small part of the plan that is actually public, a brief will, has been described as “clumsy,” a “disaster,” and “a catastrophe” by critics who reveal how little they knew about the man, his motives or his assets.
I think there are some real lessons for the public about the actor’s death and about the small part of his estate plan that was published on the world-wide web:
Estate Planners Alert: Are Your Clauses Coordinated? Are Your Terms Clearly Defined?
/in Administration of Estate, Administration of Trust, Estate Planning, Fiduciary Litigation, Will & Trust Constructionby Carol Warnick
What is the definition of the "residuary" of a trust or a will? Is it clearly defined in all of our documents or do we assume that it will be easy to figure out? Or do we even think about it since we clearly know what the residuary is? I have seen several instances lately where the actual residuary was not well-defined in the document and thus became the subject of very expensive litigation.
It is not just a matter of who gets what assets, but since taxes and administrative costs often come out of the residuary, it is important to make sure it is clear what that means. In one instance I have seen, it was clearly defined where taxes were to be paid from, but very unclear as far as administrative expenses are concerned. In some estates or trusts, that might not be such a big deal because the costs may be fairly nominal. However, there may be unexpected circumstances. (What percentage of our trusts/estates actually don't have something expected arise?) What happens if the trust or estate, through no fault of its own, becomes embroiled in litigation between the beneficiaries or if the fiduciary has to defend the document against an undue influence claim? The allocation of administrative expenses in that situation can create additional litigation even after the first lawsuit has been resolved.
Remember that the attorneys chosen by a beneficiary to litigate such an issue very often are not lawyers with a background in trusts and estates. As such, they are not familiar with what many of us consider the "common sense" assumptions we make with trust and estate administration. General trust and estate concepts that we work with every day will not be recognized by attorneys outside of this practice area. When other attorneys in a litigation case ask me for authority for such concepts, the actual authority is often hard to come up with. "Because we all know that is the way it is," is not a helpful comeback. In addition, how many of our state court judges actually have a trust and estate background?
It may make sense to have someone else in your office read through the will or trust (perhaps with a prepared checklist) to look for problems like this that may arise. Often, when drafting, we become so engrossed in the document and adding in all of the "special things" that our clients request in their documents, that we don't see it when provisions don't track in the document. Often we have added in other language, and possibly deleted a sentence or two here and there, and unwittingly created another problem that we don't see because we are too close to the document. Such a problem may not only relate to defining the residuary for the purpose of tax and cost apportionment clauses, but could also easily create issues with tax clauses, conflicting powers given to the fiduciary, unintended consequences related to trustee removal and replacement, or other types of problems. Another option would be to let the document sit for a day or two and then reread it. This has to be done with a critical eye, however. It is still easy for the drafting attorney to not look critically at how the provisions might be interpreted or to think about what unintended circumstances might occur. As drafters, we know the family (or so we think) and we just tend to look to see how the document will play out in the circumstances we expect to occur.
The more trust and estate litigation I do, the more critical I become about the documents that I draft. If there is a way for a clause to be interpreted differently by a beneficiary who has a beef with the way the assets are being divided, you can bet it will be read that other way and will provide fodder for a lawsuit. It behooves all of us who draft to look for clauses in our documents that might be unclear or might be the subject of multiple interpretations. In doing so, there will be less work for those of us who litigate these cases, but we will all have happier clients years down the road.
Dangers in Charitable Giving – Colorado’s Attorney General Takes Action Against Charities
/in Charities, Fiduciary Duties, Fiduciary Litigation, Legislation, Personal Representative, Powers of Attorney, Trusteeby Kelly Cooper
Normally, when the topic of charitable giving comes up with a client, the discussion is a positive one. The client is excited about the great work being done by a charity, wants to ensure that their charitable work is continued after their death or has a desire to create a legacy. However, when representing clients that are fiduciaries who are making distributions for charitable purposes, a danger lurks – donating money to a corrupt or fake charity.
This danger was brought to the forefront last week in Colorado when Attorney General John Suthers filed suit against Boobies Rock! Inc., the Se7ven Group, Say No 2 Cancer and owner Adam Cole Shryock. In the lawsuit, the Attorney General has claimed that these charities deceived consumers into thinking they were donating money to a cancer-related charity when consumers were actually giving money to a for-profit business that provided only small amounts to charity. Allegedly, the charities would hire models to take donations on behalf of Boobies Rock! at various venues and events and tell people that their donations would go to other charities fighting breast cancer. The Complaint filed by the Attorney General also alleges that these charities used the names of other legitimate charities in its fundraising efforts without their consent and that Mr. Shryock used a portion of the funds collected to pay for an online dating service, buy a BMW, pay for his cleaning service, and pay his bar tabs.
This is a harsh example, but is a good reminder to counsel clients to thoroughly investigate any charity they wish to give to and any charitable solicitation they receive. To read the Complaint filed by the Attorney General, click here.
Trying to Do the Right Thing – Ethics and Estate Planning
/in Administration of Estate, Administration of Trust, Personal Representative, Trusteeby: Kelly Cooper
Many readers of this blog are familiar with (or even attended) the CBA’s Trust and Estate Section’s Estate Planning Retreat two weeks ago in Snowmass Village. As always, the Retreat was a great time to reconnect or catch up with our colleagues who work in the estate planning and administration areas and attorneys who do estate planning, administration and litigation. More importantly, each year the Retreat presents an opportunity for attorneys from all over the state to discuss issues and exchange ideas with each other in small groups. This year, Jean Stewart and I hosted one of those small discussion groups. Our discussion group focused on ethics and the conflict and confidentiality issues that arise during the course of representing a family – from the initial representation of a couple for estate planning, to representing the family business, pre-nuptial agreements for the couple’s children, divorces, the differing treatment of children (Greedy, Needy and Speedy), and eventually, the disability or death of a client.
For those who were not able to attend the Retreat (or just not able to attend our session), here is a summary of the issues that received the most attention during our four sessions:
client shares information with you and does not want the other half of the couple to know that information. Do you have an affirmative obligation to share that information with the other joint client? Do you only have to share the information if it affects the estate plan? Do you only have to share the information if it requires you to end the engagement? Do you only have to share it if the other client asks for advice that requires you to use the information that was shared? What conversations should you have with the couple before they become clients regarding these issues? What type of written correspondence do you send discussing these types of issues?
I always enjoy the Retreat’s discussion group format because it provides a unique opportunity to pose interesting questions, pick people’s brains, challenge the status quo and hear real life war stories (there are some doozies out there!). My thanks to all of you that participated in our discussion group and those that supported the Retreat.
Mediator Moment – Finis Origine Pendet
/in Arbitration, Mediationby C. Jean Stewart
I have spent the last few days at the Straus Institute for Dispute Resolution at Pepperdine University in Malibu, California participating in one of their excellent advanced mediation courses with alternative dispute resolution practitioners from around the world. We devoted plenty of class time to the discussion and appreciation of designing dispute resolution scenarios that will yield success.
Spending the time and effort to design an appropriate alternative dispute resolution model can pay handsome dividends. I have always observed that cases that are rushed into mediation, without adequate attention paid to the design and preparation phase, frequently yield dissatisfaction in one or more dimensions. I thought I would report here on a satisfying result that recently came from a thoughtfully planned process.
Counsel in a contested trust matter approached me to design an arbitration/mediation session that has persuaded me to encourage parties and their counsel to consider this idea when faced with a certain kind of dispute.
Here’s how it worked: In preparation for Stage One of the session, counsel presented statements that were NOT confidential, but were shared with me and with each other. Counsel included some stipulated exhibits and pleadings. The engagement included an understanding that there would be NO ex parte communications with me until Stage One of the session was completed. The parties had agreed to abide by whatever award/decision I made on the issues, but more importantly, agreed that before I informed them of that award/decision, they would participate in good faith mediation.
On the day the session began, Stage One was an arbitration in the form of a mini-trial complete with opening statements, direct and cross examination of a witness on each side of the case, admission of the stipulated exhibits and closing arguments. At the end of the mini-trial, I took a brief recess, recorded my decision in a brief written summary, placed it in a sealed envelope that I signed and laid aside.
We then adjourned to Stage Two, which was a mediation, including private caucuses, where the parties made confidential disclosures to me and participated in meaningful, good faith negotiations leading to a settlement of the issues which was reduced to written form and signed by the parties. Ultimately the sealed envelope containing the award/decision was shredded without being revealed to either party or to counsel.
This model is appropriate in cases where the parties want a final and definitive resolution without additional litigation in a case with discrete, identifiable issues. It addresses the several ethical issues that have prevented me from agreeing to participate in arbitration after a mediation session for the same parties. Some of the other factors that contributed to the success of this model were: These attorneys were both excellent, presenting crisp and efficient arguments and witness examinations. Their clients were attentive and engaged and left me with a clear understanding of the issues. I applaud these attorneys for creating this opportunity for dispute resolution that I will surely recommend again when the occasion arises.
I also appreciate the opportunity to apply the Latin expression that was emphasized in our sessions at the Straus Institute, Finis Origine Pendet - “the end depends on the beginning.”