msfiduciary

A Discussion Forum for the Mississippi Estate Planning Community

Category Archives: Contests & Disputes

Estate Planning Lessons from Tragedy

twintowerscrash On Sunday we will remember the horrific events of September 11, 2001. We will each pause and think about where we were that awful day at that terrible hour; and appropriately we will each in our own way offer prayers for the victims’ families and for the protection of our country.

This being an estate planning blog however, there are also lessons to be learned from the stories that emerged in the years following the tragedy that we as estate planners should pay attention to and share with clients who may be reluctant to do any estate planning.

In a January 19, 2004 article by Martin Kasindorf in USA TODAY titled Compensation battles inflict new wounds on 9/11 families, Kasindorf profiles several stories that validate an axiom I have adopted: money changes people. Below are excerpts from the article. To read the full article, click here.

At least 22 same-sex partners, often opposed by their deceased loved ones’ relatives, are seeking compensation. They’re having mixed success. Other battles pit one generation against another: a victim’s parents against a domestic partner, fiance or spouse.

In some of the most unusual cases, several all-but-forgotten women who want compensation for the deaths of immigrant men have traveled to the USA from their native countries — Trinidad, Bolivia, Colombia and Brazil. Saying they are the victims’ widows, they are blindsiding new wives and kids with inheritance lawsuits.

Three weeks before New York Police Department sharpshooter Santos Valentin died in the attacks, he and his wife, Selena, signed a separation agreement. She waived the rights to his death benefits, but she has filed a claim with Feinberg. In Queens and Manhattan courts, she’s battling Valentin’s sister, New York police investigator Denise Valentin, over rights to police pensions and the federal cash.

At the root of most of the family disputes: Only about 25% of those who died left a will, which generally controls distribution of an estate’s funds. Without a will, only Vermont, Hawaii and California gave inheritance rights to same-sex partners at the time of the attacks. Heterosexual domestic partners could inherit the property of a will-less decedent in Hawaii and Massachusetts, and in California with some limits.

“Personal situations today are so complex,” says Alice Rice, chief clerk of Queens County Surrogate’s Court in New York City. “Old marriages or relationships that might never have surfaced suddenly are revealed after a disaster. When money is involved, there’s even more incentive to come forward.” [emphasis added]

The Cat’s Meow. California no contest ruling overturned on appeal.

In Lange v. Nusser, 2011 Cal. App. Unpub. A California Court of Appeals reversed a Probate Court’s ruling that imposed the application of a trust’s no-contest provision. Certain trust beneficiaries filed a petition for interpretation of the trust and relief against the trustee for breach of fiduciary duties. Specifically, the trust’s beneficiaries sought to determine whether the cats owned by the grantor at the time of her death and which were being cared for by the successor trustee, were still alive, and to force the trustee to relocate the cats in order to distribute the remainder trust estate. Ruling in favor of the trustee, the probate court also concluded the beneficiaries violated the trust’s no contest clause, forfeiting their interests under the trust.

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Attorneys share secrets for a “Happy” Trustee

Attorneys Mark S. Furman and Emily C. Shanahan with Tarlow, Breed, Hart & Rodgers, P.C. in Boston, MA have written an excellent article for Private Wealth titled “The Happy Trustee.” Say the authors,

While serving as a professional trustee can be a rewarding experience, it is not without risks. Trustees, for example, often find themselves in conflict with unhappy beneficiaries. Sometimes such situations are unavoidable. But trustees can take actions to minimize the likelihood of being in the hot seat.

The article discusses three scenarios in which the astute trustee can exercise some effort in order to head off potential conflicts with trust beneficiaries.

  1. Determining the lifestyle needs of beneficiaries
  2. Communicating with trust beneficiaries
  3. Acting as a successor trustee

For the complete article, click here.

In Terrorem clause upheld: may cost beneficiary $17 Million

In Shelton, Tamposi v. Tamposi, Jr. & Tamposi, a New Hampshire judge enforced the in terrorem clause of the decedent’s trust, which could result in the beneficiary being forced to disgorge nearly $17 Million in trust benefits received. In terrorem clauses are typically found in wills and are more commonly known as no-contest clauses. Such clauses seek to discourage legal challenges to the provisions of a decedent’s will, often leaving no share to the individual who challenges the will’s provisions.

Elizabeth Tamposi, one of twelve beneficiaries of the Sam A. Tamposi, Sr. trusts, had a history of bringing actions against her brothers, Sam, Jr. and Steven Tamposi, for allegedly breaching their fiduciary duties as investment directors of the trusts, but avoided the application of the in terrorem clause until her last unsuccessful attempt which began in 2007. Apparently this judge had seen enough, and ruled that the in terrorem clause had been violated.

In addition to the in terrorem clause, this case is fascinating not just for its notoriety but for the number of fiduciary issues it examines.

First, a little background: Samuel A. Tamposi, Sr. (Sam, Sr.) was a hugely successful real estate developer from New Hampshire. Sam, Sr. had six children including Sam, Jr., Betty and Steve. In his plans for his million dollar estate, Sam, Sr. established the SAT, Sr. Trust (trust) in 1992. The trust was amended multiple times after its creation—the pertinent provisions of which affirmed that the trustee may retain “real estate interests” as a substantial part or all of the trust property and named Sam, Jr. and Steve as investment directors. The trust was to be divided into 12 separate trusts for Sam, Sr.’s children and their children. Perhaps most importantly, the trust contained an in terrorem clause specifying that should any person challenge the trust’s validity and attempt to have it set aside or contest any part of it, that person would forfeit his right in the trust, with his or her share distributed “in the same manner as would have occurred had such person died prior to the date of execution of this trust.”

Upon Sam, Sr.’s death in 1995, his estate was valued at $20.5 million, consisting of various real estate holdings, limited partnerships and corporations (one of which was an interest in the Boston Red Sox). Sam, Jr. and Steve assumed responsibility as investment directors for the 12 subtrusts. Elizabeth was not pleased with her father’s selection of Sam Jr. and Steven, however and sought to have them removed or their actions curtailed. It’s a sad story of family discord, but one that has many lessons for practitioners which I shall examine in subsequent posts.

See “The Cementing of Family Bonds” Trusts & Estates.

Hat tip: Wills, Trusts, & Estates Prof Blog

Blanket assignment of assets to revocable trust held valid in Kentucky case.

In its opinion in Ladd v. Ladd, 323 S.W.3d 772 (Ky. Ct. App. 2010), the Kentucky intermediate appellate upheld the use of so-called blanket assignments to transfer property to a revocable trust, sustaining the traditional rule governing funding of lifetime trusts which states that a declaration of trust by the settlor is sufficient and that conveyance of property to the trustee by separate instrument is not required. The court further stated that after-acquired property becomes property of the trust, only if the settlor confirms the intent to make it trust property. The case involves a dispute over whether the Settlor intended to transfer all current and subsequently acquired assets to his Revocable Trust which did not include his future spouse as a beneficiary. Click here for a full transcript of the case.

Litigation Bootcamp for Financial Experts Offered by NACVA and IBA

The truth, the whole truth, and nothing but persuasion.™

 

 

Litigation Bootcamp for Financial Experts: Live Jury Trial and Deliberations
Saturday — June 11, 2011 / 8:00 a.m. – 1:30 p.m.

Simulating the courtroom experience, this session will feature a live jury trial in which financial professionals—who are attending the Litigation Bootcamp for Financial Experts—will serve as expert witnesses and present expert testimony before a jury. The witnesses will be examined and cross-examined by very skilled and experienced trial attorneys. Upon completion of the expert testimony and closing arguments, the case will be given to the jury for deliberation and verdict, which attendees will view via closed circuit video. Attendees will observe jury dynamics, juror personalities, and conflict resolution as the jurors consider the evidence, interject their life experiences, and formulate their verdict. This session will be educational and enlightening for seasoned experts as well as professionals who have limited or no prior trial experience.

Litigation and the Consulting Expert: Town Hall and Panel Discussion
Saturday — June 11, 2011 / 1:30 – 3:15 p.m.

Conclude the conference by attending this town hall/panel discussion which will follow the jury trial and deliberations. This interactive session will allow attendees to discuss with experts from various consulting specialties how to excel in the litigation arena, how to deliver effective testimony, how to withstand grueling cross-examination, important elements to consider when dissecting and critiquing reports, how to prepare counsel for the expert segments of trial, how to communicate with judges and jurors, how to respond to the opinions of opposing expert, and how to survive Daubert challenges and other motions in limine to exclude expert testimony.

Sponsored by The National Association of Certified Valuation Analysts (NACVA) and the Institute of Business Appraisers.

For more information or to register, click here.

Could Mediation Clauses in Estate Documents Reduce Contest Litigation?

Lela P. Love, Professor of Law and Director of the Kukin Program for Conflict Resolution and Stewart E. Sterk, Mack Professor of Real Property Law at the Benjamin N. Cardozo School of Law, explore the use of mediation clauses in estate planning documents as a method for reducing the emotional and financial costs of litigating a will contest. In Their paper, “Leaving More than Money: Mediation Clauses in Estate Planning Documents” opens with these remarks,

The family that built the Dodge company, the Johnson family of Johnson & Johnson fame and fortune, and the legendary Jarndyce family in Charles Dickens’ Bleak House, have several things in common—protracted litigation over an estate that involved generations of a family in a bitter dispute, wasting of estate assets, embitterment of family members towards each other, and the absence of a mediation clause in the disputed wills. In those and other family disputes over estates, the presence of such a clause might have influenced the other unfortunate events favorably.
At its best, mediation avoids the zero-sum, winner-loser aspects of litigation as a mechanism for dispute resolution and also avoids the havoc that an adversarial process can wreak on relationships. Those features, when combined with mediation’s potential cost advantages, explain much of the explosion in the use of mediation to resolve a wide variety of disputes, including emotionally charged controversies among family members. In recent years, a number of states have developed mediation programs for resolution of probate disputes. Measured by surveys of participant satisfaction, these programs have been successful.

To access the complete paper, click here.

Discretionary Support Trust is Not an Asset of the Beneficiary on Divorce

In its opinion in Tannen v. Tannen, 3 A.3d 1229 (2010), the New Jersey Superior court reversed in part the lower court’s order regarding equitable distribution, alimony, and child support. The wife is the beneficiary of an irrevocable trust created by her parents. The trustees have sole discretion to make distributions for the beneficiary’s “health, support, maintenance, education, and general welfare.” The trust states that under no circumstances may the beneficiary compel a distribution and the trust includes a spendthrift provision.

Relying on Restatement (Third) of Trusts § 50, the divorce court had taken the wife’s interest in the trust into account in determining the amount of alimony awarded. The appellate court reversed, holding that the established law of New Jersey was stated by Restatement (Second) of Trusts §§ 128 and 155 which state that the beneficiary of a discretionary or support trust cannot compel the trustee to make distributions. The court stated that only the New Jersey Supreme Court could adopt the different rule of Restatement (Third) § 50.

For more on the case, click here.

Trustee gets off on a technicality

In Bowen v. State, 322 S.W.3d 435 (Tex. App.—Eastland 2010, pet. filed), a Texas jury convicted Deborah Bowen of misapplication of fiduciary property valued at over $200,000 under Penal Code § 32.45.  She was then sentenced to eight years in prison, fined $10,000, and ordered to pay $350,000 in restitution.  Deborah Bowen appealed the decision and was eventually acquitted of the charges on a technicality. Because only about $100,000 was held in trust for the named beneficiary (it did not list all of the beneficiaries) and because the jury charge did not include a lesser included offense, Trustee’s conviction was reversed. Moral: Selecting an institutional trustee whose impartiality is held accountable and who is required to abide by the letter and spirit of the Creator’s intentions, can help prevent these kinds of family battles.

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Testator’s Wishes for Granddaughter Determined Precatory

Very often, estate disputes arise due to ambiguous language inside of a will. Even when the language is clear, heirs will assert that the person intended something contrary to the wording of their will. When disagreements between heirs do arise, it’s usually left to the courts to decide just what the person meant. Such was the case in Williams vs Williams. This case highlights why wills should be written by an experienced estate attorney, and why the writer of the will should ensure that his or her intentions are clearly spelled out. And, while naming a corporate executor might not have avoided dispute, perhaps it could have avoided pitting one sibling against the other.

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