Category Archives: Testamentary Intent

November 10, 2014

Help Avoid Litigation with an Ethical Will

by Morgan Wiener

Although many people may not have heard of it before (it was news to this author!), the ethical will has been around since ancient times and is an important tool for estate planners, clients, and litigators to be aware of.

Ethical wills began as an oral tradition and as a way to share and pass on a person’s values, life lessons, traditions, morals, ethics, and philosophy.  Ethical wills are a means to pass on words of love and wisdom to future generations and are not designed to air grievances and complaints.

While ethical wills began as an oral tradition, they have also been memorialized in writing for quite some time.  Not surprisingly, people today are using technology to record their ethical wills in new ways.  Modern ethical wills may frequently be recorded in video or other digital format, for example, a slide show that includes photos and audio clips or a Facebook post.

An ethical will is also a mechanism by which testators can provide additional guidance to their loved ones about the intent behind some of their estate planning decisions.  As such, they are akin to letters of wishes and can provide the stories and reasons behind, for example, a particular distribution provision in a trust that is written in impersonal legalese. 

By providing this background and guidance, an ethical will can be used as a tool to help avoid litigation and diffuse tensions when a testator or settlor includes a provision in his or her documents that is subject to interpretation or that may cause conflict, tension, or unhappiness with the beneficiaries.  By understanding the values and reasons behind a testator or settlor’s decisions, a fiduciary may be able to better interpret and administer the estate, and beneficiaries may be more at peace with provisions that would otherwise cause consternation.

For more on modern ethical wills, see this article recently published in the New York Times.

For an example of a modern ethical will, watch Randy Pausch’s Last Lecture on You Tube.

July 28, 2014

Philip Seymour Hoffman’s Will Released

by Rebecca Klock Schroer

Philip Seymour Hoffman, famous actor and director, died in February 2014 at the age of 46.  A copy of his will was recently released.

There are a few interesting aspects of Hoffman’s will. 

Hoffman was survived by three children under the age of 12.  His will gives everything to his partner/long-time girlfriend, Marianne O’Donnell, who is also the mother of his three children.  The media seems to be suggesting that he slighted his kids by doing so.  However, Hoffman has been quoted as saying that he did not want his children to become trust fund kids.  Also, the media has glossed over the fact that the will directs that anything O’Donnell disclaims passes to a trust for their son.  Accordingly, there is a chance that the trust for their son would be funded, although it is entirely up to O’Donnell whether she disclaims.

Hoffman’s will was executed in 2004 before his youngest two children were born.  The will refers to Hoffman’s oldest child by name and does not have any language regarding after-born children.  If the will was governed by Colorado law (instead of New York law), the after-born children would be included and would receive a share equal to that of Hoffman’s oldest child under Colo. Rev. Stat. § 15-11-302.  This issue may not come up since there is no indication that O’Donnell plans to disclaim any of the property, which is the only circumstance under which the children would receive something.

Hoffman’s estate is estimated to be worth $35 million and a large portion of that will be paid to the IRS for federal estate tax (an estimated $15 million). If Hoffman and O’Donnell had been married, the entire amount would have passed to her free of estate tax under the unlimited marital deduction.  While some couples choose not to get married for various reasons, marriage would have provided a significant tax advantage in an estate of this size. 

Finally, the will states that it is Hoffman’s strong desire, and not direction, that his son be raised and reside in or near Manhattan, Chicago or San Francisco.  The will goes on to state that if his son cannot reside in any of these cities, he requests that his son visit these cities at least twice a year.  The purpose of this request is so that his son would be exposed to culture, arts and architecture.  While clauses like this may not be legally enforceable, they do provide insight into the testator’s intent. 

March 31, 2014

From Wags to Riches: Estate Planning for Your Pets

by Morgan Wiener

DogWhile Trouble, Leona Helmsley’s dog who was left a $12 million trust fund in the late hotelier’s will, may be the most famous four-legged multi-millionaire, Colorado canines can also benefit from trusts created by their owners.  An owner concerned about what will happen to his pets after his death or incapacity may, under Colorado law, provide for his pets by trust or will.

Historically, trusts for the benefit of animals were deemed invalid; however, they are now valid in a majority of states.  Section 15-11-901 of the Colorado Probate Code specifically recognizes the validity of a trust created for the benefit of the settlor’s pets.  This section states that “a trust for the care of designated domestic or pet animals and the animals’ offspring in gestation [at the time the animal becomes a present beneficiary of the trust] is valid.”  Consistent with other sections of the Colorado Probate Code, this section places primary importance on the settlor’s intent and provides that “[a] governing instrument shall be liberally construed to bring the transfer within this subsection…, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor.  Extrinsic evidence is admissible in determining the transferor’s intent.”

One of the issues that used to militate against the validity of pet trusts (other than the fact that the beneficiaries were not human) was the rule against perpetuities.  The concepts of lives in being and measuring lives were difficult to apply to a trust whose main focus was animal lives.  For example, should a dog who outlived the settlor by a number of years count as a measuring life for determining the trust termination date?  Section 15-11-901 addresses this problem by providing both that pet trusts are an exception to statutory and common law rules against perpetuities and that, unless the trust provides for an earlier termination, the trust shall terminate when there is no living animal covered by the trust.

The statue also provides guidance on the administration of the trust.  For example, § 15-11-901(3)(b) provides for distribution of the trust upon termination, and § 15-11-901(3)(a) cautions that except for (1) reasonable trustee fees, (2) expenses of administration, or (3) as expressly provided in the trust, no portion of principal or income may be used for anything other than the benefit of the animal.  Section 15-11-901(3) also addresses the designation of trustees and other persons to enforce the trust.  In these ways, the Colorado Probate Code treats pet trusts very similarly to more traditional trusts and suggests that, if a dispute were to arise regarding a pet trust, standard principles and rules governing trusts would apply.

In addition to using trusts, a pet owner may also provide for the care of his pets in a will.  Although there is no section similar to 15-11-901 addressing bequests to and of pets in a will, there is also no provision of the Colorado Probate Code that suggests such bequests would be invalid.

In addition to being part of the estate planning process, pets can also have a part in estate litigation.  For example, in connection with a will contest, our office has used the inclusion of provisions for the care of the decedent’s pets as evidence that the decedent intended a holographic will to be his will.  We have also litigated issues about the ownership of animals in formal estate proceedings. 

Although there are no reported decisions on § 15-11-901, pet trusts have been the subject of estate proceedings in other jurisdictions.  The executors of Leona Helmsley’s estate, for instance, petitioned the court to reduce the size of Trouble’s trust fund.  New York law governing pet trusts allows the court to reduce the amount of principal in a pet trust if it is determined that the amount substantially exceeds what is required for the care of the pet.  What is considered excessive can certainly vary, as Trouble’s annual expenses were estimated to be around $200,000.  Not to worry though, the New York court left $2 million in Trouble’s trust, ensuring that he could continue to live in luxury and would not spend the rest of his days as a paw-per.

February 17, 2014

Letters of Wishes: Helpful or Hurtful?

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.

October 7, 2013

A Will Contest on a National Stage

by Rebecca Klock Schroer

A recent national news story involving a family dispute over an estate illustrates a common theme.  Heiress Huguette Clark died in 2011 at the age of 104 leaving an estate in excess of $300 million.  Ms. Clark was the daughter of William A. Clark, a former U.S. Senator from Montana and business man involved in railroads and mining.  Ms. Clark executed two wills in 2005, only six weeks apart.  In the first will, Ms. Clark directed that her residuary estate pass to her family pursuant to the intestacy laws of New York.  In her second will, Ms. Clark specifically disinherited her family, “having had minimal contacts with them over the years.”  She directed that her assets pass to a foundation and her caretakers, including but not limited to, her doctor, accountant, lawyer, nurse and hospital.  Ms. Clark lived in Beth Israel Medical Center in Manhattan for the last 20 years of her life. 

The underlying theme in this case commonly appears in our cases.  Most of Ms. Clark’s family members had never met her and others had very little contact with her.  Once she died, her family members were upset to find out they were not included in her will.  It is not unusual for elderly people to feel grateful to those who care for them and want to provide for them instead of providing for estranged family members.  We see this not only in disputes involving estates, but also in pre-death disputes involving conservatorships.

The Clark case recently settled and the family received approximately $34 million.  Ms. Clark’s nurse received nothing and had to pay back $5 million of the $31 million that she previously received during Ms. Clark’s lifetime.  Obviously, the media cannot provide us with all of the facts, but it is interesting that the family prevailed and the nurse, who spent decades taking care of Ms. Clark and was given 60% of her residuary estate in the second will, received nothing at her death.  Also, I was fascinated to see that the attorney fees in the Clark case added up to more than $20 million! 

There are dozens of interesting articles about this case.  Below are links to two articles and the two wills that were at issue in the case. 

NY Times article

NBC article

First will

Second will

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.

August 5, 2013

Real Lessons From the Gandolfini Will?

by 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:

  1. Death can be unexpected and untimely; take steps to prepare.  Rather than join the so-called “experts” who declared the Gandolfini will a calamity of epic proportion, I prefer to think that a busy father, who had substantial wealth and a promising future, the parent of two young children with different mothers, and a penchant for rich food and Italian wine, both engaged an attorney to prepare trusts and a will for his signature and then signed them.  Too much of the estate and trust litigation we see these days arises from the sheer neglect of those important issues in our clients’ lives.
  2. Identify a Client’s Intent and Express it Properly. One of the most common errors estate planners make is failing to learn enough about their clients’ lives, interests, assets, concerns and purposes in undertaking estate planning.  This is abundantly evident in the commentary expressing how calamitous the Gandolfini plan is or will be by people who have no apparent knowledge of his assets, his goals or his intent.  When we purport to be “experts in the abstract” we are doing a disservice to potential clients who come to believe they do not need to give actual or factual information to buy an estate plan—after all it can be done over the internet!  One commentator, after roundly criticizing Mr. Gandolfini’s attorney, suggested that a better plan than Gandolfini’s could have been accomplished by a Do-It-Yourself kit obtained online.
  3. Buy Life Insurance When You Can Get It. While we should all be skeptical about what we read in the popular press, there are reports that Mr. Gandolfini had set up a life insurance trust and funded it with a policy in excess of $7.5 million for his young son.  Depending on a lot of circumstances, this may have both avoided some estate taxes and provided a source of liquidity, and may serve as a long term vehicle for support and protection of the young man.  In any event, the purchase of life insurance while it’s available and affordable is a lesson in estate planning that is wise to note, even for clients whose wealth does not justify use of a trust to own it. 
  4. Don’t Over Sell Privacy. It’s been interesting to read criticism about the public aspects of part of the Gandolfini estate plan—the will—from people who make their living inquiring into and publicly criticizing the behavior of others.  Could Mr. Gandolfini have executed this part of his plan in a more private way? Probably yes.  Do trusts ever become public and subject to review and criticism?  Again, yes.  Just a few months ago, I blogged about another famous entertainer’s estate in that is in litigation and the public scrutiny his will and trust had suffered:  
  5. Keeping Taxes in Perspective. We don’t know and we may never know what motivated James Gandolfini and his legal advisor to make these choices.  It is possible that some of the federal, New York and Italian taxes that may ultimately be paid could have been avoided but it will always be an abstract issue of discussion.  Sophisticated and experienced estate and trust lawyers would be wise to use this sad circumstance as an opportunity to counsel with individual living clients who are still able to engage in thoughtful and informed discussions leading to appropriate decisions and implementation of plans that meet their needs and address their concerns.

July 22, 2013

Reproductive Sciences Fertile Area for Estate and Trust Litigation

by Morgan Wiener

“Delivery Man”, a new movie starring Vince Vaughn slated for release later this year, is based on the seemingly ridiculous premise that a man has fathered 533 children through donations to a sperm bank.  The children file a lawsuit to discover his identity, and hilarity ensues.

While it is unlikely that any of us will ever have a client with quite that many children (imagine the personal property disputes in that family!), assisted reproductive technology is a subject that is likely to come up with increasing frequency in the areas of estate planning and fiduciary litigation.  For example, as people continue to have children later in life, and as civil unions and same-sex marriage become legal in more jurisdictions, it is likely that more children will be born from assisted reproduction.

The Colorado Probate Code currently contains certain provisions concerning assisted reproductive technology.  For example, §§ 15-11-115 – 15-11-122 address and define the parent-child relationship in the context of intestate succession and include numerous provisions about assisted reproduction.  Section 15-11-120, for example, addresses posthumously conceived children and the effect of divorce on the status of children conceived through assisted reproduction.

Many wills also address the issue of children born after the death of a parent; however, these provisions may not be drafted with an eye towards children who are both conceived and born after the death of a parent.  As assisted reproductive technology becomes more common, these provisions may take on more importance in the planning process and become more than mere boilerplate.

Depending on the laws of the jurisdiction and how the parent-child relationship is defined, issues may also arise after death, and a decedent may have more heirs than he anticipated and there may be more interested persons than assumed in an estate proceeding.  While the logistics of administering an estate or litigating a will contest with 533 potential beneficiaries are best left for the movie theatre, assisted reproduction and the potential complications stemming from it are issues that all practitioners in this area should be aware of and prepared to discuss with their clients.

Click this link to watch a trailer for “Delivery Man.”

The film is a remake of a 2011 Canadian film titled “Starbuck” slated for release on DVD tomorrow. 

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.