Archive for the 'Estate Litigation' Category

Estate Planning Malpractice – NY Court Has A Warning For Ohio Planners

Published on August 14, 2010 in Estate Litigation, Estate Planning and Recent Cases worth noting. 0 Comments

I’ve written on the issue of estate planners committing malpractice against their clients here and here on this blog before.   Its an issue of interest for Ohio attorneys  because Ohio still clings to the antiquated rule of privity to decide who has standing to sue the attorney who allegedly gave the bad advice.  Basically, requiring privity means you must have been the one in a contractual relationship with the attorney – the client.  In the estate planning context, however, this is a little complicated because if the bad advice was given during the client’s lifetime its more than probable than not that damages for the bad advice won’t accrue until the client dies.  Therefore, you’ve got no one left to sue the attorney for malpractice because the client is dead!  Kinda dumb, I know, I complain about it all the time.

However, tn The Estate of Saul Schneider v. Victor M. Finmann, N.Y.3d 2010 N.Y, Slip Op 05281 (pdf of opinion) decided this past June 17th, the New York court held:

the legal representative of a decedent stands in  that person’s shoes for the purpose of being able to maintain a malpractice action against the decedent’s estate planner where improper advice or negligent estate planning has resulted in a loss.

Imputing this legal fiction on the fiduciary means a malpractice action can now be maintained.  So there you go Ohio courts!  Lets get this done.  If you don’t want to update the law (to the much preferable California rule that follows the harm and allows the party that suffered as a result of the bad advice to bring a malpractice case) then lets give this a try…  Its a little awkward but its about time in Ohio stepped up and allowed aggrieved clients to sue the attorney who rendered the poor advice.

Thanks to Philip Bernstein of the New York Probate Litigation Blog for pointing this out to me.

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Probate Creditor Deadlines Are Important

Published on April 11, 2010 in Estate Litigation and Recent Cases worth noting. 0 Comments Tags: , .

The above is actually important to point out.  Should be self-evident right?  Nope.

Too many talented and experienced attorneys blow their cases for failing to adhere to probate creditor claim rules and time lines.  This post by Juan Antunez of The Florida Probate & Trust Litigation Blog is a perfect example of how wrong things can go if you’re not paying attention to probate court rules.  The below summary of 2010 WL 479862 (Fla. 1st DCA Feb 12, 2010) is from Mr. Antunez:

Wald was involved in an automobile/motorcycle accident with the decedent and brought a personal injury lawsuit to recover damages. Wald eventually prevailed in his lawsuit, but the judgment was not rendered until after the decedent’s death. Some time after obtaining the judgment, Wald filed a claim against the probate estate.

The personal representative argued she had served notice on Wald’s attorney as required by Florida Probate Rule 5.041(b) (2009) on May 23, 2007, thus triggering the time constraints of section 733.702(1). Therefore, under the statute, Wald had until June 22, 2007, to file any claim he might have. Since Wald’s claim was not filed until July 2, 2007, the personal representative argued it was untimely and forever barred.

Scary stuff right?  Well, it happens all too often.  Juan wisely points out:

Plaintiffs suing estates often fail to realize that they’re really litigating their claims in two separate courts in front of two separate judges:

  1. The trial court adjudicating their lawsuit (this is where the decedent’s liability is established); and
  2. The probate court administering the decedent’s probate estate (this is where you go to collect on your judgment)

Ohio’s rules for presenting claims against an estate are found in R.C. 2117.  2117.06 gives a creditor 6 months after a decedent dies to present a claim or, as in Florida, the claim is forever barred.  A distinction is necessary here though.  If the above case had happened in Ohio, the Plaintiff still likely could have won something from decedent defendant’s non-probate property.  I’m thinking here of decedent defendant’s auto insurance coverage.  Assets from insurance that are recoverable as damages in a tort action are non-probate property (typically).  Thus these assets aren’t governed by 2117.06.  You have the regular time allowed under Ohio law to bring a claim of this type – 2 years I think in Ohio for personal injury claims.  However, if the defendant dies during the case, or perhaps died as a result of the accident before the case was filed, you still have to pay attention to the probate court deadlines if you want to retain the ability to recover from defendant’s estate.  Hypothetical:  Plaintiff wins their case against defendant for liability stemming from a car accident.  Defendant died as a result of the accident.  Plaintiff gets a $1 million dollar judgment against Plaintiff.  (I know that’s high but its my hypothetical.)  Defendant had insurance which will pay Plaintiff, however, Plaintiff’s insurance company will not pay any more than policy limits.  SO, the insurance isn’t sufficient to pay the full claim and now Plaintiff wants to/has to recover the deficiency against decedent’s estate but we’re now more than six months from the date of defendant’s death.  Plaintiff is out of luck.  Nothing they can do about it.  Even if defendant dies with a multi-million dollar estate, Plaintiff gets nothing from that estate if their claim wasn’t timely filed.  This situation, similar to the one linked to above = a malpractice lawsuit against the attorney who failed to adhere to the probate code’s deadline.

In the opinion of the linked-to case (available here as a PDF), the court was none-too-pleased with plaintiff’s attorney for blowing this deadline:

Filing a probate claim is a relatively simple act and requires nothing more than submitting a written statement of the case. If for some reason Wald’s attorney was unable to file the claim, he certainly could have referred Wald to another attorney or advised Wald about the need to timely file a claim. Wald’s attorney failed to accomplish this simple task.

Ouch.  Probate deadlines are important people!  If you’re litigating a personal injury case or any other claim that even may have to be collected from a probate estate, find yourself a good probate attorney to advise on the collection procedures in your local probate court.  Otherwise you may need a good malpractice attorney.

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Bo Schembechler Trust Battle

Published on November 17, 2009 in Estate Litigation and Recent Cases worth noting. 0 Comments

Andrew Mayoras posts a good story here about Bo Schembechler’s son suing his step-mom over his dad’s trust.

Andrew writes:

From an estate planning perspective, Bo did everything right to avoid a family fight after he passed.  He created a living trust, which was quite detailed and left the income from his assets to his wife, Kathryn, passing from there to his son Glenn III (known as “Shemy”), and then onto his grandchildren and Kathryn’s grandchildren. 

He chose Kathryn as his successor trustee to manage his trust after he passed. From an estate planning perspective, Bo did everything right to avoid a family fight after he passed.  He created a living trust, which was quite detailed and left the income from his assets to his wife, Kathryn, passing from there to his son Glenn III (known as “Shemy”), and then onto his grandchildren and Kathryn’s grandchildren. 

He chose Kathryn as his successor trustee to manage his trust after he passed.
Sounds fine to me…  Apparently though the trust was specific that Kathryn had to report on the trust’s assets every so often to Shemy which, according the to the complaint (which is available here as a PDF) she hasn’t been doing.
Shemy’s case is bolstered by Ohio Revised Code Section 5808.13 which requires a Trustee to “keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests” by annually sending to all “the current benficiaries, and to other beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets, and, if feasible, the trust assets’ respective market values.”
According to the complaint, Kathryn hasn’t disclosed anything since Bo’s death in 2006.  Oops.
This one seems pretty open and shut to me.  I have to say though, its an awfully gentle complaint.  There’s only one count that asks the court to force Kathryn to render an accounting (and for attorney’s fees obviously) but they don’t ask to have Kathryn removed.  Under these circumstances that’s usually my first advice…  Considerations of family harmony, who the named Successor Trustee is, the procedure for replacing Trustees, etc., are additional bits of info that I’m ignorant about so the gentle approach may be appropriate here…  But once you’ve sued someone in federal court you’re usually not also thinking about what to get them for christmas, especially when christmas is about a month away.
Despite coaching “that team up north” for many years, Coach Schembechler’s ties to Columbus, Ohio run deep.  I was dissapointed to see this happening but I wish Shemy well in his apparent efforts to honor his father’s testamentary wishes.  That being said, I wish both parties luck in holding the family together. 
And ok, that being said, I’m still looking forward to OSU kicking the holy hell out of Michigan this weekend.  O-H!
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Income From Restricted Endowment Can Be Used For Construction Project at Cleveland Museum of Art

Published on October 8, 2009 in Estate Litigation. 0 Comments Tags: , , .

The Cleveland Museum of Art’s Endowment fund may use the income from four “art-purchase funds” to contribute to the cost of renovating the museum even though such use is against the original intent of such funds, the Cleveland Plain Dealer reported this morning.  Yesterday’s ruling was handed down by Judge Anthony J. Russoof the Cuyahoga County Probate Court thus helping “the museum move its $350 million construction project to completion by 2013. The project is $138 million short of the goal.”

Russo said the museum may draw an annual minimum of $5,498,000 from the four art-purchase funds — a figure based on this year’s total draw. By providing income — not from the principal — for the construction project at an annual draw of 49.99 percent, the original purpose of the funds will be maintained through an allocation of 50.01 percent for the purchase of art.

[...]

The art-purchase money for the museum construction project will come from the J.H. Wade Trust (established in 1920), John L. Severance Trust (1935), Mr. and Mrs. William H. Marlatt Fund (1939) and Leonard C. Hanna, Jr. Purchase Fund (1952).

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The Case That Will Never End – Anna Nicole Smith Investigated in Murder Plot

Published on October 8, 2009 in Estate Litigation. 0 Comments Tags: .

I thought all elements of this case had been covered…  Oh how naive I can be.

This article muses about Mrs. Smith’s possible involvement in a plot to kill her late husband’s son while they were battling over her husband’s estate.  And, while hundreds of millions of dollars is a pretty solid motive, the investigation doesn’t appear to have gotten anywhere beyond motive.

Smith’s FBI records, obtained exclusively by The Associated Press, say the agency investigated Smith in 2000 and 2001 in a murder-for-hire plot targeting E. Pierce Marshall

[...]

The documents released under the Freedom of Information Act depict an investigation going on as the fight raged over J. Howard Marshall II’s estate. Vast sections of the 100 pages of released materials – a fraction of Smith’s full FBI file – are whited out, and no evidence of her involvement in such a plot is detailed.

It is also unclear that killing Jr. would have yielded any benefits to Mrs. Smith anyways given the trusts involved, but the FBI, for reasons the AP is not aware of, nonetheless thought an investigation was warranted.

Stay tuned folks, the “original” case is still on remand from the Court of the Supremes which will decide just how much money, if any, will be inherited by Mrs. Smith’s sole surviving heir, her 3 year old daughter.  Poor girl.

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Heir to IBM Fortune Adopts Her Lesbian Parter in Maine – Supreme Court Upholds Adoption’s Validity

Published on July 24, 2009 in Estate Litigation, Estate Planning, Recent Cases worth noting and Trust Litigation. 0 Comments

This seemed as good a topic as any to ease myself back into the blog-o-webs, so here goes:

According to this story at 39online.com (a CW network affiliate out of Houston),

Maine’s highest court gave a legal victory Thursday to a woman who stands to stake a claim to a share of one of America’s premier business fortunes thanks to her adoption by her lesbian partner.

Back in ’91, Olive Watson, daughter of Thomas Watson Jr. – the guy who built IBM – adopted Patricia Spado.  At issue in the case was whether the adoption was legal at all.  The two longtime partners spent “several weeks” each summer in North Haven.  Like many other states, Maine requires peitioners for adoption to live in the state and, after Mr. Watson, Jr. and his wife passed away, the Trustees for Mr. Watson’s trust ”alleged that the couple obtained the adoption through fraudulent means by not disclosing their relationship to the court. The petition further alleged that Spado and Watson, as New York residents, had not fulfilled the statutory requirements of living in Maine at the time of the adoption.”  On appeal, the Trustees further argued “that the adoption should have been annulled on the grounds that it was obtained by two partners seeking to manufacture inheritance rights who did not intend to establish a normal parent-child relationship.”

In yesterday’s decision, Maine’s supreme court ruled that even if Spado did not live in Maine under the law, the adoption should not have been annulled [in the lower court] because there wasn’t enough evidence to support the claim that Watson had committed fraud.

The court also rejected the trustees’ claim that the adoption should be annulled based on a public policy prohibiting adoptions involving same-sex couples. Historically, adult adoptions have been recognized as a means to convey inheritance rights, to formalize an existing parent-child relationship or to provide perpetual care to a disabled adult adoptee, the decision reads.

Its interesting to ponder what would have happened if Watson and Spado were allowed to marry…  Under the terms of most standard trusts, its unlikley that Spado, as Watson’s spouse would have inherited anything given that most trusts attmpt to keep assets in the bloodline of the Grantor.  Being the adopted child of Watson, however, Spado is deemded to be just that.  Interesting.

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To Restate Or Not To Restate – That Is The Question

Published on April 18, 2009 in Estate Litigation, Estate Planning and Recent Cases worth noting. 0 Comments Tags: , .

Professor Berry tangentially raises the above question in a post today on the Wills, Trusts & Estates Prof Blog via his telling of the case of Soefje v. Jones, 270 S.W.3d 617 (Tex. App.—San Antonio 2008, no pet. h.).

The case pits brother against sister in a dispute over the meaning of a trust amendment to dad’s trust.  “Brother argued that the amendment only added to the property to which Sister was entitled under the original trust instrument but left the property to which he was entitled intact.  On the other hand, Daughter claimed that the amendment revoked the entire property distribution provided for in the original trust causing property originally given to Brother to pass under the trust’s residuary clause permitting her to share in that property.” Sounds like brother was being reasonable, sister was being greedy.  But I haven’t read the trust yet folks so shelve the mail bombs.

Daughter won.  Brother appealed.  Appellate Court reversed:

The court began its analysis by recognizing that a trust amendment does not revoke a provision of the original trust “unless the words used in the amendment clearly show the [settlor’s] intent to revoke the trust.”  Soefje at 629.  The court studied the trust and the amendment and held as a matter of law that the instruments are unambiguous.  The amendment merely added to Sister’s entitlement by giving her certain properties to which Brother was originally entitled under the original trust.  The amendment did not act to revoke gifts of other property to Brother.

The case is interesting in and of itself but its more useful as a tale of the trouble with amending one’s trust.  If you want to substitute a fiduciary, amend how qualified assets are handled, even expand/reduce the fiduciary’s authority, an amendment can be fine.  But they’re tricky.  They muddle the Grantor’s original intent which is drawn from the whole of the original document, its one more piece of paper for you to lose as the years pass and they’re usually more expensive than the change alone is worth.

The question therefore is, do you amend the trust?  Or do you restate the trust in its entirety?

More often, I’m a fan of the latter option.  The sanctity of the single document is maintained and you lessen – to the extent possible – the likelihood of interpretive litigation.  Also, believe it or not, the cost is about the same.

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Iowa Supreme Court Strikes Down Gay Marriage Ban

Published on April 3, 2009 in Estate Litigation, Estate Planning, Insurance and Recent Cases worth noting. 0 Comments Tags: , , .

This is what happens when I schedule early morning meetings…  Everyone else gets the good stories out first.

The ABA Journal, The Volokh Conspiracy and Professor Berry’s ever-timely Wills, Trusts & Estates Prof Blog all wrote this morning to report on the Iowa Supreme Court striking down the state’s ban on same-sex marriages.  The decision was unanimous.

The court ruled the ban violates the equal protection clause of the Iowa Constitution, according to the Associated Press and the Des Moines Register.

“Our responsibility … is to protect constitutional rights of individuals from legislative enactments that have denied those rights, even when the rights have not yet been broadly accepted, were at one time unimagined, or challenge a deeply ingrained practice or law viewed to be impervious to the passage of time,” the opinion (PDF) said.

I added the emphasis there in the last sentence because it reminded of Lawrence v Texas overruling Bowers v Hardwick.  Bowers had been invoked more times than I care to count for its “deeply rooted in our Nations history” standard/B.S., that had, until the Lawrence case, stood as an insurmountable barrier to the equal rights of more than the just the GLBT community.

“We are firmly convinced the exclusion of gay and lesbian people from the institution of civil marriage does not substantially further any important governmental objective. The legislature has excluded a historically disfavored class of persons from a supremely important civil institution without a constitutionally sufficient justification. There is no material fact, genuinely in dispute, that can affect this determination” the Court stated.

The Court stated further.

The court stated that “a statute inconsistent with the Iowa constitution must be declared void even though it may be supported by strong and deep-seated traditional beliefs and popular opinion.”

Also interesting, according this story at the New York Times, is Iowa’s lack of a residency standard for marriage licenses…  I think you see where this is going.  Have you ever seen a Pride Parade adjacent to a cornfield?  Neither have I.  But I bet its pretty cool.

Above The Law writes:

Not surprisingly, a spokesperson for the Iowa Family Policy Center was deeply sadden [sic] that more people will be allowed to get married:

Bryan English, spokesman for the Iowa Family Policy Center, a conservative group that opposes same-sex marriage, said many Iowans are disappointed with the ruling and don’t want the courts to decide the issue.

“I would say the mood is one of mourning right now in a lot of ways, and yet the first thing we did after internalizing the decision was to walk across the street and begin the process of lobbying our legislators to let the people of Iowa vote,” Mr. English said. “This is an issue that will define (lawmakers’) leadership. This is not a side issue.”

Iowa is now the first Midwestern state, and the fourth nationwide, to allow same-sex marriages.

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Anna Nicole Smith Case Update(s)

Published on March 13, 2009 in Estate Litigation. 0 Comments Tags: , , .

Special thanks up front to Professor Berry for these updates.  Without his lasting diligence I would have been forced to get my news from other, much less reputable places ;) .

1.   Linking to this post at The Daily News, the Good Professor reports that a writ was filed before the U.S. Supreme Court asking that lawyers for the late Anna Nicole Smith be allowed to start collecting on $88 million awarded her by a Santa Ana judge from her husband’s estate.

The writ, filed with the court [on March 9, 2009], asks in the alternative that the heirs of Smith’s husband, Texas oil tycoon J. Howard Marshall, post a bond in that amount to assure that the money is there when when the legal battle concludes. * * *

However, David Margulies, who represents the heirs of J. Howard Marshall and his son, E. Pierce Marshall * * * denied the award by U.S. District Judge David Carter in 2002 is still valid.

Margulies said the 9th U.S. Circuit Court of Appeals threw out Carter’s award, finding that he overstepped the jurisdiction of the Probate Court.

Even though the U.S. Supreme Court in 2006 found that Smith had the right to pursue a claim on her husband’s estate, it did not uphold the $88 million award, Margulies said.

2.   According to the Associated Press and the Los Angeles Times. Anna Nicole’s boyfriend and lawyer, Howard K. Stern and her doctors Sandeep Kapoor and Khristine Eroshevich, have been charged with the felonies of conspiracy to provide drugs to an addict and unlawfully prescribing a controlled substance.  Mr. Stern was further accused of funneling the drugs to Smith from 2004 to January 2007, a few weeks before she died of an overdose.  Not looking good for him.  Professory Berry is linking to this CNN story.

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Debts Owed By A Decedent/Their Estate

Published on March 4, 2009 in Estate Administration and Estate Litigation. 0 Comments Tags: , , , .

An interesting, and disappointing article this morning from the NYT, “You’re Dead? That Won’t Stop the Debt Collector.”  I’m not disappointed in the NYT, its a fine article I guess, rather, I’m disappointed by the number of people who are apparently willing to pay the debts of their deceased relative(s):

The people on the other end of the line often have no legal obligation to assume the debt of a spouse, sibling or parent. But they take responsibility for it anyway.

Troubling…

In Ohio, if an individual passed away owning a debt, that debt becomes a debt of their estate.  In order to collect that debt, the creditor has 6 months from the date of decedent’s death to make a claim against the estate or the claim is forever barred.  (See R.C. 2117.06) …  Forever!

In order to make a claim, the creditor just has to send notice to the fiduciary (Executor or Administrator) of decedent’s estate, in a writing that hopefully gives the fiduciary enough information to make judgement as to the claim’s validity.  What does “writing” mean?  Case law in Ohio has left the definition pretty, broad…  It just has to be written down; some form, any form of writing will do…  I suppose it should legible, but that’s really it.  So long as that writing is received within 6 months from decedent’s death, you have made a valid claim.  (Whether the fiduciary accepts or rejects the claim is a whole separate matter.)

Ok, well what happens if someone has passed away but their estate hasn’t been opened yet so there is no fiduciary appointed by the court to serve?  In that case, as a  creditor, you can open the estate yourself even if your only reason for doing so is to collect a debt.  I see it all the time.  Hell, I do it all the time.

So, don’t just go paying a decedent’s debts…  Make the creditors work for it!  Or, if you’re a creditor, call a probate attorney who knows what they’re doing to make the claim on your behalf.  I wrote an article on this that was published a while ago, so I would qualify as one of those people to call, but please just call someone.  Money is tight right now so don’t go making deals to pay someone else’s debts if you don’t have to.

Don’t even get me started on Franklin County Local Rules (e.g. 62.1, hint hint)…  Very few people understand that rule – why its there, why it says what it does, how to comply with it, etc…

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