Monthly Archives: January 2015

January 20, 2015

Avoidable Litigation as a Threat to the Assets of An Estate

by Carol Warnick

It wasn’t that long ago when the real threat to the financial well-being of a person’s estate was death taxes.  People were concerned about losing close to 50% of their estate to taxes without proper planning.  But with the increased exemption amounts, death taxes are not a big issue in most cases.  But something else is taking its toll on the hope of a smooth and simple passing of assets at death, and that is litigation. 

Much of the current estate litigation relates to family disputes, some of which might have been avoided through better estate planning.  But a certain amount of these family disputes would have occurred anyway simply because the families were upset enough to litigate over anything once mom and dad have passed away.  There is a different type of litigation beginning to crop up, however, that may create just as many problems for an estate as family in-fighting, and one which can be totally prevented.  I am speaking of litigation over wills and trusts drafted with forms obtained over the internet.

Unfortunately, with the increased exemption amounts (currently $5.43 million per person) and since many people no longer need tax planning they are more apt to decide they can do their estate planning documents themselves and not involve an attorney.  While self-drafted wills are not new and have been creating estate administration problems for years, I believe that the current ease of finding forms on the internet, making a few changes, and printing them at home will likely make this a more significant problem in the future. 

Cases are starting to crop up regarding mistakes made by consumers using internet forms.  One Florida case is a good example.  The case is Aldrich v. Basile, 136 So. 3rd, 530 (Fla. 2014).  In this case, Ms. Aldrich used a form and listed all the assets she owned at the time (her home and its contents, an IRA, a car and some bank accounts) and stated they should go to her sister.  If her sister didn’t survive her, she listed her brother as the one to receive everything. 

As luck would have it, her sister predeceased her and left her some additional assets which weren’t listed in Ms. Aldrich’s will because she didn’t own them when she drafted her will.   Either because the internet form didn’t contain one or because Ms. Aldrich took it out when she printed the will because she thought all her assets were covered, there was no residuary clause in the will.  As a result, after a trial court decision, an appellate court reversal, and ultimately an appeal to the Florida Supreme Court, it was decided that the listed assets would go per the will but the after-acquired assets inherited from her sister would pass through intestacy, bringing in two nieces who were the daughters of Ms. Aldrich’s deceased brother to share in the estate.

Although the living brother offered a note left by Ms. Aldrich and other extrinsic evidence that Ms. Aldrich intended all of her assets to go to him, the court refused to consider them because of the “four corners” doctrine. There was no ambiguity within the four corners of the will, therefore no extrinsic evidence was admitted.

It is easy to see how Ms. Aldrich could have simply deleted the residuary clause thinking she didn’t need it, but it is very unlikely that a competent lawyer drafting a will would make that mistake.  If the lawyer had made the mistake, there would potentially have been recourse through the lawyer’s malpractice insurance. It seems that the ease of which will and trust forms are now available on the internet and the fact that many people don’t need a lawyer’s expertise for tax planning under current law will combine to create many more of these problems.  Such problems lead to costly litigation with really no recourse for the families of those “do-it-yourselfers.”

Several states have looked at the issue of whether or not legal form providers are violating unauthorized practice of law statutes, but the cases are by no means consistently decided.  While such issues are being sorted out, the old adage “buyer beware” certainly applies with regard to do-it-yourself wills and trusts. 

A concurring opinion in the Florida case summed it up as follows:

Obviously, the cost of drafting a will through the use of a pre-printed form is likely substantially lower than the cost of hiring a knowledgeable lawyer.  However, as illustrated by this case, the ultimate cost of utilizing such a form to draft one’s will has the potential to far surpass the cost of hiring a lawyer at the outset.  In a case such as this, which involved a substantial sum of money, the time, effort, and expense of extensive litigation undertaken in order to prove a testator’s true intent after the testator’s death can necessitate the expenditure of much more substantial amounts in attorney’s fees than was avoided during the testator’s life by the use of a pre-printed form1.

 1Aldrich v. Basile, 136 So. 3rd 530, 538 (Fla. 2014). 

January 5, 2015

New Year Resolution: More Transparency About Estate Plans

by Elizabeth Meck

The holidays are a time when families come together to celebrate and to share in the warmth of the season.  It is a time to spend with multiple generations and to toast to another year of health and happiness.  While the holidays may not feel like the perfect time to bring up heavy topics such as planning for disability or death, this is the perfect time to do so because of the multiple generations of family members gathered together.

As fiduciary litigators, we are frequently asked about the trends we see or what types of issues drive probate disputes among family members.  While our answers to these types of questions do frequently include complex tax calculations or the interpretation of an ambiguous trust or will provision, we can consistently attribute a significant portion of disputes to a general lack of communication.

This lack of communication does occur in the form of beneficiaries who feel that a trustee is not providing adequate information or accountings (more on that later).  However, it also occurs when family members feel left in the dark regarding their loved one’s intentions in making certain estate planning decisions.  Expanding the conversation about estate planning from spouses to siblings and younger generations early on in the process, therefore, may help to alleviate some of the confusion that frequently leads to disputes once a testator or settlor is gone. 

Maintaining good communication will become increasingly important as we embark on an unprecedented transfer of wealth  in the coming decades.  As baby boomers prepare to transfer their own accumulated assets, they may be seeing significant inheritances themselves.  The result, according to experts, is that anywhere from $27 to $40 trillion will change hands between now and 2050. 

This is not a problem reserved solely for the wealthy, however.  Discussing the succession plan for a small family business or a modest vacation home can help to avoid strain, confusion and tension among surviving family members.  Furthermore, an issue that regularly arises in probate litigation is the division of personal property.  Because items of personal property carry significant sentimental value, they can become the center of intense and protracted litigation.  Conversations about these sentimental items ahead of time can greatly reduce the chances of disputes surrounding the ultimate distribution of such items later on.

Finally, the more a family member knows about an individual’s estate planning intentions, the more astute the family member will be to spot and respond to potential undue influence by a third party or risky changes in the testator’s or settlor’s capacity should these issues arise in the future.

So raise a glass this New Year’s to another year of health and happiness, and then gently let your family members know that you also want to chat about their estate plan and yours.  You can let them know that it is for their own good.

… And just in case you are the trustee of a trust, it is equally important that you are providing sufficient information to any beneficiaries.  The New Year can be a good time to conduct a simple annual assessment of the trust and to provide any necessary updates or reports to beneficiaries.