A woman fighting for her multi-million dollar inheritance might have to forfeit the entire fortune to charity thanks to a poorly-written will — a case that has raised questions about the rights of unmarried gay couples and their children.
Jill Morris, died of breast cancer in 2016 at age 84 and left a multi-million dollar estate to her long-time partner, Joan Anderson, with whom she had an 18 year relationship. Anderson died of a stroke just 12 days after Morris, and, according to Morris’ last will and testament, her estate was to be divided among three charities if Anderson did not survive her by thirty days.
A Manhattan Surrogate Court Judge has ruled that the estate belongs to the charities. Emlie Anderson, Joan Anderson’s daughter claims the judge should have known that Morris would not have included such “harsh wording in her will.”
It’s upsetting to me. It’s like they’re trying to negate my mother and her relationship with Jill, she told the Daily News. That’s what they’re saying, that their relationship wasn’t important.
An increasing number of Americans ages 50 and older are in cohabiting relationships, according to a new Pew Research Center analysis of the Current Population Survey. In fact, cohabiters ages 50 and older represented about a quarter (23%) of all cohabiting adults in 2016. One reason could be the adult children’s rejection to their older parent’s marriage, especially if the relationship formed soon after the death of the other parent. Approximately 23% of cohabiters over age 65 are widowed.
However, as with many things in life, what seems simple — living together — is often quite complex. Unmarried couples, of all sexual orientations, can face a variety of problematic and emotionally difficult issues because estate planning laws are written to favor married couples.
Unmarried partners need to consider the following issues related to estate planning and living together:
Medical incapacity: In the absence of a durable power of attorney for healthcare, non-married individuals may be treated as “legal strangers” and unable to make healthcare decisions on behalf of their partner.
Living arrangements: If the wealthier partner dies or becomes incapacitated with no provision for the other partner to remain in the home (by a will or title) the other partner can be forced from the home by blood kin.
Dying without a will: Intestacy laws (state laws that determine where a deceased’s property goes when there is no will) are not favorable to unmarried partners.
Employer Retirement Plans: Plans like 401k’s, profit sharing, and pension plans, as well as group life insurance plans are governed by a federal law known as ERISA. This law requires that a spouse be the beneficiary of these plans in the event of the employee’s death unless waived by the spouse. No such protection is afforded unmarried partners unless the partner is listed on the Plan’s beneficiary form.
So, your parents have a trust, and you’ve just found out that you are the trustee. Do you thank them or did they reward you with the booby prize? A trustee is held to a high standard of accountability and must act in accordance with an established standard of care as outlined below. To fail in one or more of these – called a breach of fiduciary duty – is to invite litigation and sometimes results in broken family relationships where a family member is also the trustee. Professional trustees, like banks with trust departments, or corporate trustees will be given very little leeway if they fail in any of these duties, but untrained family members or individuals who find themselves in this unenviable position are often not excused for lack of knowledge either.
Duty of loyalty. A trustee has a fundamental duty to administer a trust solely in the interests of the beneficiaries. A trustee must not engage in acts of self‐dealing.
Duty of administration. The trustee must administer the trust in accordance with its terms, purposes, and the interests of the beneficiaries. A trustee must act prudently in the administration of a trust and exercise reasonable care, skill, and caution, as well as properly account for receipts and disbursements between principal and income.
Duty to control and protect trust property. The trustee must take reasonable steps to take control of and protect the trust property.
Duty to keep property separate and maintain adequate records. A trustee must keep trust property separate from the trustee’s property and keep and render clear and accurate records with respect to the administration of the trust.
Duty of impartiality. If a trust has two or more beneficiaries, the trustee must act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests.
Duty to enforce and defend claims. A trustee must take reasonable steps to enforce claims of the trust and to defend claims against the trust.
Duly to inform and report. A trustee must keep qualified trust beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.
Duty of prudent investment. A trustee who invests and manages trust property has a duty to “invest and manage trust property as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.
Much like the position of Executor, the role of Trustee is not to be accepted lightly and can often be a lifetime of responsibility. If you are not comfortable serving in this capacity, discuss this with your parents now so that alternate plans can be made.
Trusts are excellent vehicles for protecting an estate from creditors, transfer taxes, or misbehaving heirs. Their operation may be simple or complex, but it is incumbent upon you to talk to your parents about their trusts, and especially who the parties are if you are in the role of financial caregiver.
It is a well established principle of trust law that trustees are fiduciaries who owe specific duties to the beneficiaries of a trust. These duties can be grouped into duties of loyalty and duties of care.
But what if a trust has beneficiaries with adverse interests to one another? It is not uncommon for a trust to have two kinds of beneficiaries – a current beneficiary as well as a remainder beneficiary. That is, the current beneficiary may have rights to the income from the trust, and perhaps even discretionary rights to the trust’s assets (also known as the trust principal or corpus); whereas the remainder beneficiary may have rights or equitable interest in what is left in the trust (the remainder) after a period of years or upon the death of the current beneficiary. These adverse interests can test the mettle of most individual or family trustees as both beneficiaries are owed duties of loyalty and care.
The Brady Bunch
Suppose Mike Brady created a trust to take effect at his death. His trust includes the following (summarized) instructions:
At my death, my trustee shall pay to my surviving spouse the net income from my trust for as long as my spouse shall live.
In addition to the net income, my trustee may also pay to my surviving spouse from the trust’s principal, as much as my trustee shall deem necessary to maintain my spouse in [her] accustomed standard of living.
Upon my spouse’s death, my trustee shall distribute my trust to my surviving children (Greg Brady, Peter Brady, and Bobby Brady) in equal shares.
Now supposed that when Mike Brady dies, Carol Brady is appointed to serve as trustee of Mike’s trust. Or, perhaps Mike’s oldest son, Greg, is appointed as trustee. This is not only permitted but done frequently, presumably to avoid paying a professional trustee. The conflicts to the Duty of Loyalty are obvious.
For example, if Carol Brady is trustee, it stands to reason that she would want to maximize current income from the trust while minimizing principal growth. Likewise, if Greg is trustee, he would want to maximize his ultimate share of the trust by investing for growth rather than income. In addition, asking either party to objectively define “accustomed standard of living” puts them both in awkward, if not conflicting positions. Should Alice’s services as a live-in housekeeper continue to be paid after everyone has moved on? Carol could certainly argue that the expense met the accustomed standard of living test, but would Greg require Carol to pay for it herself, or would he deny it saying it wasn’t necessary any longer?
Perhaps when Mike and Carol were in the attorney’s office, their response to these hypothetical situations was typical. “Oh our kids would never argue over this.”
It is possible to be loyal to both beneficiaries even if there are adverse interests. However, doing so requires a great deal of objectivity, scrutiny, and immunity to emotional persuasion. A wise trustee will establish clear expectations and open communication early in the relationship to avoid favoring one beneficiary over the other and risk breaching the duty of loyalty.
Once a legal document is completed and signed, it is often carefully laid to rest in a safe deposit box or file drawer and comes out again only when a party dies or a conflict arises.
Prudent persons periodically review and update their legal documents. Just how often depends, of course, on the document and which circumstances have changed. The following list sets forth some events that may require the updating of a legal document.
Life Events
● Marriage. ● Dissolution of a marriage (divorce). ● Death of a spouse. ● Disability of a spouse or child. ● A substantial change in estate size. ● A move to another state. ● Death of executor, trustee or guardian. ● Birth or adoption. ● Serious illness of family member. ● Change in business interest. ● Retirement. ● Change in health. ● Change in insurability for life insurance. ● Acquisition of property in another state. ● Changes in tax, property or probate and trust law. ● A change in beneficiary attitudes. ● Financial responsibility of a child.
If there is any question as to the effect of a change in circumstances on your will, trust, buy-sell agreement, asset titles and beneficiary designations, etc., contact the appropriate member of your team and have it reviewed before a crisis arises.
Standing as a health surrogate doesn’t allow appointees to enter into nursing home arbitration agreements or other business agreements with providers, a Florida appeals court has ruled.
At issue was a nursing home attempting to force claims by a deceased resident’s estate into arbitration since one of the healthcare surrogates had signed an arbitration agreement during admission of the resident.
In making it’s ruling, the court stated:
“The heart of this case is whether a document that designates a healthcare surrogate is broad enough to allow that surrogate to consent to an arbitration provision in a nursing home admission form,” wrote Judge Robert Gross. “We hold that the narrow focus of the document is on the surrogates’ power to make healthcare decisions, not business choices concerning dispute resolution.”
In the Matter of DREXEL ANDREW BRADSHAW, Attorney Drexel Andrew Bradshaw was charged with five counts of misconduct related to his position as the successor trustee of a client’s trust and his involvement with a construction company that repaired the client’s home. The case demonstrates the liability exposure that fiduciaries have and the extent to which they have to defend their actions, even if those actions were appropriate and in good faith.
To summarize, Bradshaw became the court-appointed conservator and trustee of a trust for an elderly client ruled incapable of managing her financial affairs. The client lived in an older home in San Francisco that needed significant repairs for the client’s living ability and care. Bradshaw hired a construction company that he had helped the owner of the company start by providing legal services and initial funding loans. To pay for the repairs, Bradshaw petitioned the court to allow him to obtain a reverse mortgage (followed by a 2nd one two years later).
The [California] Office of Chief Trial Counsel of the State Bar (OCTC) charged Bradshaw with four counts related to his handling of the trust:
engaging in a scheme to defraud the trust,
breaching his fiduciary duties to his client and the trust beneficiaries,
misappropriation of trust funds, and
making several misrepresentations to the probate court and other government agencies.
The hearing judge found Bradshaw culpable of three of the charges (with the exception of misappropriation) and recommended that he be disbarred. Both Bradshaw and the OCTC appealed.
The appeals court found in Bradshaw’s favor and dismissed the case for “lack of clear and convincing proof.” In its ruling the appeals court stated:
Upon our independent review of the record (Cal. Rules of Court, rule 9.12), we do not find clear and convincing evidence to support culpability as to the charged misconduct. We reject OCTC’s premise that Bradshaw wanted to start a construction company and used his position as trustee to start his “corrupt” enterprise. Bradshaw served as the successor trustee for a client years after his firm drafted the client’s trust and estate plan, and only after the first two successor trustees were unable to serve. He managed the trust according to its stated purposes and terms in a reasonable and proper manner, including engaging a certified specialist in probate and trust law to assist him in his duties. Further, he adhered to his client’s clearly expressed desires to be cared for in her San Francisco home, and that the equity in the home be used to accomplish that goal. To that end, Bradshaw used the trust assets, which consisted mostly of the home’s $1.6 million equity, to provide his client with quality nursing care and for necessary repairs to ensure her safety in the home…
Wealth and Honor is a website dedicated to helping families navigate the financial challenges of age transitions. The site now has a YouTube Channel to host “edutainment” videos featuring non-legal commentary on actual court cases involving will disputes, elder financial abuse, estate litigation, fiduciary liability, and other issues of aging, death, and wealth.
Court transcripts are condensed into a factual summary with popular sitcom characters providing faces to the actual characters of the case, followed by a non-legal commentary of lessons to learn and missteps to avoid.
https://youtu.be/6gBLpiWQX9c
The Case Files Trailer
The first episode covers the case of Lintz vs Lintz, a 2014 case decided in the California Appeals Court, that includes claims of breach of fiduciary duty, elder financial abuse, undue influence, among other claims. Viewers are encouraged to first watch a presentation of commonly used terms before watching the case episodes.
For a full text of the court transcript, click here.
A New Jersey appeals court ruled that a nursing home has no standing to lodge a conversion claim or infringement of fiduciary duty against the daughter of a resident who transferred the resident’s cash to herself, resulting in a Medicaid penalty period.
M.D. is the daughter of B.S. In 2010, She started helping her mom financially. When she suspected that her mom’s husband had dementia and was spending her mom’s money “recklessly” she transferred money from a joint account into M.D.’s personal account. Over the next three years, she used some of the money transferred to provide care for her mom.
There are an estimated 25 million safe deposit boxes in America, and they operate in a legal gray zone within the highly regulated banking industry. There are no federal laws governing the boxes; no rules require banks to compensate customers if their property is stolen or destroyed.
