Category Archives: Testamentary Capacity

July 5, 2017

Electronic Wills

by Morgan Wiener

As regular readers of this blog know, one of our favorite topics is digital assets, including estate planning for digital assets.  Today, we’re taking a slightly different focus and discussing developments in digital estate planning, more commonly known as electronic wills.

One of the more recent developments in estate planning is the concept of electronic wills. In general, an electronic will is one that is signed and stored electronically. Instead of signing a hard copy document in ink, the testator electronically signs the will, and it is also signed by witnesses and notarized electronically.  Not surprisingly, companies like LegalZoom are very interested in this topic.

Read more >>

May 8, 2017

Recent Appellate Opinion Regarding Probate Court Jurisdiction

by Rebecca Klock Schroer

The Colorado Court of Appeals recently issued an opinion reinforcing the breadth of the probate court’s jurisdiction.  In re Estate of Arlen E. Owens, 2017COA53.

In Owens, the decedent’s brother filed a petition to set aside nonprobate payable-on-death (“POD”) transfers, alleging that at the time the decedent executed certain beneficiary designations, he lacked testamentary capacity and was unduly influenced by his caretaker.  The caretaker filed an objection based on jurisdiction, which the court denied.  After an evidentiary hearing on the petition, the trial court set aside the beneficiary designations and imposed a constructive trust over the transferred assets held by the caretaker.  Read more >>

March 1, 2017

Digital Evidence and Privacy: Can you ask Alexa if mom’s incapacitated?

by Morgan Wiener

Much has been written on this blog about digital assets, and you have likely given some thought to the impact that this relatively new category of assets has on estate planning and administration.  But have you considered the other ways in which new digital devices and technologies might impact your practice and your clients’ lives?  If not, a murder case in Bentonville, Arkansas, home of Walmart, will give you something to think about.

James Bates is accused of murdering his coworker Victor Collins (yes, they both worked at Walmart) in a hot tub in November 2015.  On the night of the alleged murder, Bates’s Amazon Echo was streaming music through its speaker, and Bentonville police have issued a search warrant for the Echo’s recording from that night hoping it will shed light on what happened.

The Amazon Echo is a speaker and virtual assistant that works by constantly listening to background noise and conversation.  The virtual assistant, Alexa, is activated when the Echo hears someone say “Alexa.”  The background conversations are not recorded by the Echo, but anything said after Alexa is activated is recorded.  Because Bates’s Echo was streaming music on the night of the alleged murder, the police believe that it may have been activated and recording conversations. Read more >>

December 19, 2016

Claims Challenging Estate Plans

by Rebecca Klock Schroer

We are seeing an increase in the number of lawsuits in which people are challenging or trying to circumvent estate plans.  The claims traditionally include lack of testamentary capacity and those involving improper actions by family members, agents under powers of attorney or conservators.

Testamentary Capacity

A challenge to an estate plan often involves a claim that the testator was not of sound mind. Under Colorado law, a sound mind includes the presence of the Cunningham factors and absence of an insane delusion that materially affected the testamentary instrument.  The Cunningham factors are as follows: the testator must (1) understand the nature of the act, (2) know the extent of his property, (3) understand the proposed testamentary disposition, (4) know the natural objects of his bounty, and (5) that the testamentary instrument represented his wishes.  Cunningham v. Stender, 255 P.2d 977 (Colo. 1953).

In addition to these factors, the testator cannot be suffering from an insane delusion.  An insane delusion exists if a person has a persistent belief, resulting from illness or disorder, in the existence or non-existence of something contrary to all evidence, which materially affects the disposition in the testamentary instrument.  Breeden v. Stone, 992 P.2d 1167 (Colo. 2000).  For example, failure to include a child in the will because the testator believes that child has been abducted by aliens and will never return to earth. Read more >>

April 25, 2016

Is Any Family at Risk for Competency Disputes?

by Matthew Skotak

Casey Kasem (famed American Top 40 DJ), Tom Benson (owner of the NBA’s Pelicans and NFL’s Saints), and Sumner Redstone (controlling shareholder of Viacom and CBS) have much in common: wealth, prestige, and status. Though many may envy their fortune and fame, they may not envy their other common thread; competency disputes.

When Casey Kasem’s health deteriorated from Parkinson’s disease, an ugly court battle ensued between his children and his wife, which did not end until he died. A challenge to Tom Benson’s competency arose after he decided to vest controlling interest in the Saints and Pelicans with his wife, and lock-out his other heirs from those teams. Similarly, Sumner Redstone’s competency was challenged by his longtime companion, Manuela Herzer, after she was removed as his health care agent and was kicked out of his California mansion. These conflicts are public and recognizable, however, thousands of similar anonymous disputes occur every day across the country involving ordinary families.

Read more >>

August 4, 2014

The Donald Sterling Scandal and High Stakes Probate Litigation

by Morgan Wiener

Perhaps lost in the scandal and drama surrounding Donald Sterling’s offensive comments earlier this year and the now impending sale of the Los Angeles Clippers is the fact many of the issues in this saga turn on questions of trust law and the terms of a family trust.

The Clippers are owned by the Sterling Family Trust, of which Donald and his estranged wife, Shelly Sterling, served as co-trustees.  However, following Donald’s offensive comments and rambling interviews given in the wake of the scandal, he was diagnosed with Alzheimer’s disease and declared mentally incapacitated.  The determination of incapacity allowed Shelly to remove him as co-trustee and assume control over the trust.  As the sole trustee, Shelly then negotiated the sale of the Clippers to former Microsoft CEO Steve Ballmer for $2 billion.  Prior to the trial in this matter and Shelly’s assuming control as sole trustee, and perhaps in an attempt to avoid the current result, Donald had dissolved the trust.  Also at stake are certain debts owed by the trust – if the sale to the Clippers does not go through, the trust could be in default on up to $500 million in loans.

At issue in the weeks-long probate trial about the proposed sale of the Clippers was whether Shelly was able to, and properly did, remove Donald as co-trustee of the trust.  Los Angeles County Superior Court Judge Michael Levanas ruled that Shelly did have authority to enter into the sale, that the trust was unambiguous, and that the proposed sale of the team could go through.  A written ruling has not yet been issued.

While the specifics of this case are unusual and headline grabbing, the underlying issues are quite common.  Questions involving capacity, removal of trustees, division of duties among co-trustees, and termination of trusts are pervasive both in the drafting of trusts and in litigation involving trusts and trustees.  While most practitioners will probably not encounter a trust that owns an NBA franchise and billions of dollars in assets, this case highlights the importance of considering these issues, making sure that clients understand the ramifications and impacts of including certain provisions in their trust documents, and the options available to trustees in a situation where a dispute has arisen or a trustee may be incapacitated.

December 9, 2013

Probate and Trust Issues in Colorado’s Upcoming Legislative Session

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.

September 24, 2013

Fiduciary Solutions Symposium Recap

by Kelly Cooper

Last week, we held our first Fiduciary Solutions Symposium.  We want to thank each of you that came and participated.  We enjoyed seeing all of you and getting a chance to catch up with you over breakfast.

For those of you that couldn’t attend, here is a brief recap.  When we discussed topics that we wanted to present at the Symposium, we kept coming back to the constantly evolving and changing nature of our practices.  Whether it is taxes, ADR or changes in state laws, things never stay the same.  As a result, we decided to discuss a variety of topics and the trends we are seeing each day in our practices.  It was difficult to narrow down the topics to two hours of content, but we ended up discussing the following issues:

  • Digital Assets
  • Social Media and Use in Litigation
  • Gun trusts
  • Civil Unions/Same Sex Marriage and related tax issues
  • Reformation and modification of trusts and decanting
  • Apportionment and allocation of taxes and expenses in administration
  • Baby boomers and the “Silver Tsunami”
  • Migratory Clients and Differing State Laws
  • Trends in Alternative Dispute Resolution
  • Assisted Reproductive Technology

 We had so much fun that we are taking the show on the road and will be in Salt Lake City on November 12th.  We hope to see you there.

April 1, 2013

No Contest Clauses in Trusts and Powers of Appointment: Is Colorado’s Silence an Oversight or an Opportunity?

by Kelly Cooper

With the increasing diversity in the make up of today’s families, many estate plans now treat family members differently or disinherit certain family members completely.  When there is unequal treatment or a disinheritance, estate planners often include no contest clauses in their documents to try to avoid costly disputes and litigation after a client’s death.  Under Colorado law, a no contest clause is only enforceable against a beneficiary if the beneficiary lacked probable cause to bring a contest.  An in-depth discussion of these clauses and the probable cause exception to enforceability was posted to our blog last week, to read it, click here.  We expect the use of these clauses to increase and for clients to request these clauses as they become more familiar with them through media reports about the use of them in celebrities’ estate plans (e.g. Michael Jackson, Brooke Astor).

The topic for today is whether a contest clause in a trust agreement is subject to the same probable cause exception as a contest clause contained in a decedent’s will.  Since a revocable trust is considered a will substitute, some will argue that there is no compelling reason to treat a contest clause in a revocable trust any differently than one in a will.  While Colorado’s probate statutes are clear that a probable cause exception exists for contest clauses in wills, Colorado’s trust statutes do not contain any similar provision.  Is this silence an oversight or an opportunity for planners?  

Colorado’s silence on the question of contest clauses in trusts made me wonder how many states had statutes addressing contest clauses in trusts (enforceability and/or exceptions to enforceability).  The answer is thirteen (and is found in a great 2012 State Laws Survey cited at the end of this post) – Alaska, California, Delaware, Florida, Hawaii, Indiana, Michigan, Nevada, New Hampshire, Oregon, Pennsylvania, South Dakota and Texas.  According to the survey, another nine states have case law addressing the question of the enforceability of contest clauses in trusts, but Colorado and twenty-five states have no statute or case law on this issue.  The Uniform Trust Code is also silent on whether contest clauses in trusts are enforceable.  In light of the fact that numerous states have already addressed the issue of contest clauses in trusts, it can be argued that Colorado’s silence is purposeful.

Colorado law is also silent on the issue of a decedent can place a condition on the exercise a power of appointment.  For example, a decedent’s will may state that he exercises a power of appointment to give assets equally to A and B if no contest is filed, but that he exercises the power to give all of the assets to A if B files a contest.  While this is a conditional exercise of the power of appointment, it reads very similarly to a contest clause.  Unlike revocable trusts, which are often will substitutes, a power of appointment is not a will substitute and the argument that a power of appointment should be treated like a will may well fall short.  In addition, powers of appointment are generally exercisable in regard to trust assets, not probate assets.  Here, Colorado’s law silence on the enforceability of contest clauses in trusts may provide a real opportunity to avoid the probable cause exception, but also causes uncertainty for fiduciaries and administrators of trust assets subject to powers of appointment.

In light of the uncertainty in this area, planners may want to consider drafting trusts instead of wills for those clients who wish to include contest clauses.  When possible, planners may also want to include powers of appointment to allow for greater flexibility and to assist their clients in exercising powers of appointment to implement any plan of unequal treatment among beneficiaries.

For more information about the differing state laws in regard to contest clauses, see a great survey “State Laws: No-Contest Clauses,” T. Jack Challis and Howard M. Zaritsky, March 24, 2012.

March 25, 2013

No Contest Clauses – Boilerplate or Bombshell

by Morgan Wiener

While fiduciary litigation often arises due to family conflicts and changes in family circumstances, another frequent source of litigation is the decedent’s estate planning documents themselves.  Estate planners often include a no contest clause in a will in the hopes of preventing a fight over the validity of the instrument; however, it is often these no contest clauses themselves that are the source of the very litigation they seek to prevent.

A no contest, or in terrorem, clause is a provision found most frequently in a will, although it can also be included in trusts, designed to discourage litigation over the testator’s estate plan by disinheriting a person who unsuccessfully contests the will.  A will contest can encompass a variety of different challenges to a will and is broadly defined by Black’s Law Dictionary as “[a]ny kind of litigated controversy concerning the eligibility of an instrument to probate.”

Planners (and potential will contestants) may believe that these clauses are generally not enforced and, consequently, include them in estate planning documents as boilerplate.  This belief is not unfounded, as one of Colorado’s leading cases on the subject, In re Estate of Peppler, states that “[w]hile no-contest clauses in wills are generally held to be valid and not violative of public policy, such clauses are to be strictly construed, and forfeiture is to be avoided if possible.”  Even the Colorado Probate Code sections on no contest clauses seem to reinforce this belief, stating that “[a] provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable if probable cause exists for instituting proceedings.”  C.R.S. §§ 15-11-517, 15-12-905.

The reality, however, is that no contest clauses are enforceable when there is no probable cause for bringing the will contest; this office, for example, recently litigated a case in which we had a no contest clause enforced against beneficiaries of an estate and trust. 

Under Peppler, probable cause is defined as “the existence, at the time of the initiation of the proceeding, of evidence which would lead a reasonable person, properly informed and advised, to conclude that there is a substantial likelihood that the contest or attack will be successful.”  Colorado commentators have noted that whether the contesting party had a “substantial likelihood of success” is to be considered in light of the burden of proof and the elements of the claim.  David M. Swank, No-Contest Clauses:  Issues for Drafting and Litigating, 29 Colo. Law. 57.  This means that in a challenge to the validity of a will, the contesting party has the ultimate burden to prove by a preponderance of the evidence that the challenged will is invalid because of lack of testamentary capacity, undue influence, fraud, duress, mistake, or revocation.  In determining whether the contesting party was “properly informed and advised”, one factor for the court to consider is whether “the beneficiary relied upon the advice of disinterested counsel sought in good faith after full disclosure of the facts.”  Although “disinterested counsel” is not defined, Colorado commentators have also suggested that “disinterested counsel” does not include the contesting party’s counsel for the will contest because, if the advice of such counsel were sufficient, this factor would be essentially meaningless as nearly every person bringing a contest would be able to meet it.  Id.

As you can see, this probable cause standard has some teeth to it, and complex, fact intensive litigation can arise not only about the challenge to the will itself, but also about whether the no contest clause should be enforced to disinherit the unsuccessful will contestant.  Potential will contestants should, therefore, consider all of the facts, think carefully, and obtain legal advice before bringing a will contest.  Planners should also discuss the issue with their clients before adding a no contest clause to a will, consider whether a challenge to the will is likely and what types of challenges may arise, and make sure that the testator understands that the very tool designed to prevent litigation may itself be the cause of a lawsuit.