Category Archives: Testamentary Intent

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. 

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.