Court Rules Handwritten Note Found By Deceased's Mother Did Not Result In Change Of IRA Beneficiary

As previously discussed on this Blog, a common fact scenario in estate, trust and probate lawsuits involves an eleventh-hour change in a dying person's final wishes regarding their property.  Quite often the last-minute decision appears legitimate, although occasionally there is an aura of suspicious facts and circumstances surrounding the event which arises to the level of an "inheritance theft."  Frequently the change in question is expressed in the form of a handwritten note, and courts are commonly called upon to rule whether or not such "wishes" will actually be  enforced.

On January 27, 2010, the Arkansas Court of Appeals addressed a somewhat similar situation in the case of Nunneman v. Estate of Donald T. Grubbs, et al, Case No. 2010 Ark.App. 75.  Specifically, Mr. Grubbs had named Ms. Nunnenman as beneficiary of his IRA, and a few days before his death evidently called a lawyer to his hospital bed and executed a will, leaving all of his property to his mother, Ms. Grubbs.  She then asked the Court to freeze certain IRA monies contending that she had discovered a 2005 note in Mr. Grubbs' bible which stated:  "My Will.  I Donnie Grubbs want all of my estate All IRA and any SBC Telco and all other assets and worldly goods to go to my Mother Shervena Grubbs.  Being of sound mind.  Donnie Grubbs."  Ms. Grubbs alleged that she had found the note in the presence of a coworker, but that witness claimed that she had not known of the note's existence before the trial. 

After considering the evidence, the trial court ruled that the handwritten note should have the effect of changing the IRA beneficiary.  Ms. Nunnenman appealed and the Arkansas Court of Appeals reversed the trial court, ruling that it was clear error to find an effective change of the IRA beneficiary.  Specifically, the Court pointed to the conflicts in the testimony regarding the discovery of the note and also focused upon the fact that the very person who discovered the note was the same person who would end up benefitting from its discovery.  The Court also opined that it was significant that while Mr. Grubbs had undertaken steps to call a lawyer to come to his bedside, he had not taken similar measures to change his IRA beneficiary. 

In sum, this case is a good example of the heavy burden that a party has when attempting to prove a change in property disposition by means of a handwritten document.  As a general matter the Court will need to be presented with a strong showing of evidence before favorably considering such a request. 

UPDATED: Dispute Erupts Over Wealth Of Deceased Billionaire Shopping Mall Developer

Pretty much anyone who has lived in Central Arkansas over the last few decades has been aware of if not actually visited University Mall in Little Rock's midtown area.  While it used to be the hot spot for shopping many moons ago, in more recent years it became better known for its empty stores and the litigation that resulted from disputes over the mall's management.  The mall closed in 2007, demolition began in 2008, and a brand new mixed-use development appears imminent for the property in the next year or two.  

Anyone familiar with University Mall is also undoubtedly aware of its close proximity to Park Plaza Mall.  Ever since moving to Arkansas back in 1992, I never understood why University was built almost literally next door to Park Plaza (built a few years earlier in 1959), yet another enclosed shopping mall.  But I guess that's why I'm a mere lawyer and the folks who make the big bucks are mall magnates like Melvin Simon

Specifically, University Mall was developed by Melvin Simon & Associates, an Indianapolis-based real estate development and management company which later became known as Simon Property Group.  I mention this because Simon Property Group is evidently the largest public U.S. real estate company, and shopping mall development made the company's namesake---Mr. Simon---a very wealthy man.  He and his brother, who also co-founded the company, eventually purchased the Indiana Pacers franchise of the National Basketball Association. 

According to a recent post on the Florida Probate & Trust Litigation Blog,  the Wall Street Journal writes that a wealth war has begun over the terms of Mr. Simon's will.  Apparently, Mr. Simon's wife was only supposed to receive approximately one-third of his fortune and, after some changes were evidently made to his will a few months before his death, she now stands to receive about one-half.  Considering that his wealth has been estimated at $1-2 billion depending upon the fluctuating stock price of his company, even minor changes in his will could amount to a major redistribution of wealth.  Notably, the changes cut out Mr. Simon's three children from his first marriage.  

At least one of those children is now suing Mrs. Simon, their stepmother, contending that she unduly influenced Mr. Simon and persuaded him to change his will to reduce the children's inheritances.  The lawsuit also alleges that Mr. Simon had dementia and needed assistance signing the document, to which Mrs. Simon has now apparently responded that while he did in fact have Parkinson's Disease and needed help with his signature, he voluntarily signed a new will and trust of his own free will.  This will be a wealth war worth watching in the next few months. 

Seemingly sudden changes to wills and trusts shortly before someone dies are one of the most common disputes arising in estate, trust and probate litigation.  As the Baby Boomer generation begins to retire and ultimately pass away, there will no doubt be millions more similar disputes in the decades to come. 

UPDATE:  The following link contains the latest update (as of 2/11/10) from the Wall Street Journal.

Removal Of An Executor (Personal Representative) From An Estate Under Arkansas Law

As previously discussed on this Blog, an executor, also known as a personal representative, is a person who is charged with the responsibility of administering an estate after another person has passed away.  They will typically do things like collect and inventory the deceased's assets, manage the property, pay the debts, and distribute property according to any will or the intestacy laws (setting forth distribution priorities for those dying without a will).

However, conflicts will sometimes arise between the executor of the estate and the beneficiaries of that estate, the latter of whom are generally supposed to receive bequests or property from the estate.  Perhaps the executor is alleged to be operating under a conflict of interest, is improperly personally benefitting from the property of the estate, or is simply not carrying out their duties.  In Arkansas, there is a specific statute that governs these conflicts and sets forth the grounds for when an executor can be removed from his or her office.  For anyone who currently is or ever anticipates administering an estate in Arkansas, or who is or ever will be the beneficiary of an estate,  it is worth getting familiar with the removal statute.

Specifically, under the Arkansas Probate Code of 1949, Ark. Code Ann. § 28-1-101 et seq., the Court appoints and issues letters testamentary to a personal representative to manage and preserve the property and rights of the decedent until distribution according to the testamentary document or appropriate intestate statute. Ark. Code Ann. § 28-48-102. It is well-established that "[t]he personal representative occupies a fiduciary position toward the heirs, and it is his duty to act toward them, as the beneficiaries of the trust administered by him, with the utmost good faith." Price v. Price, 253 Ark. 1124, 1137, 491 S.W2d 793, 801 (1973). The personal representative generally continues in that office unless removed due to one or more of the grounds set forth in Ark. Code Ann. § 28-48-105.

Ark. Code Ann. §28-48-105(a) (emphasis added) provides that:

(a)(1) When the personal representative becomes mentally incompetent, disqualified, unsuitable, or incapable of discharging his or her trust, has mismanaged the estate, has failed to perform any duty imposed by law or by any lawful order of the court, or has ceased to be a resident of the state without filing the authorization of an agent to accept service as provided in § 28-48-101(b)(6), then the court may remove him or her.

(2) The court on its own motion may, or on the petition of an interested person shall, order the personal representative to appear and show cause why he or she should not be removed.

With this in mind, Ark. Code Ann. §28-48-107(a) (emphasis added) provides that "[w]hen a personal representative dies, is removed by the court, or resigns and the resignation is accepted by the court, the court may, and, if he or she was the sole or last surviving personal representative and the administration is not completed, the court shall, appoint another personal representative in his place upon the motion or petition of an interested person."

Separate and distinct from the statutory grounds for removal of a personal representative, multiple Arkansas cases also shed light on this issue. For example, in Robinson v. Winston, 64 Ark.App. 170, 175-76, 984 S.W.2d 38, 40-41 (1998), the evidence was deemed sufficient to warrant removal of the personal representative due to her attitude toward a person interested in the estate that created a reasonable doubt as to whether she would act honorably, fairly, and dispassionately in her trust, and because the tension and her continuance in the office would likely render administration of the estate difficult, inefficient, or unduly protracted. See also Matter of Guardianship of Vesa, 319 Ark. 574, 579-82, 892 S.W2d 491, 494-95 (1995) ("unsuitability" of ward’s sibling to serve as guardian of the estate, justifying removal on probate court’s own motion and appointment of neutral successor, was established by evidence of family friction among ward’s siblings which adversely affected administration of estate).

Likewise, in Guess v. Going, 62 Ark. App. 19, 23-25, 966 S.W2d 930, 932-33 (1998), testimony of the personal representative that "mother’s love" precluded her from challenging a land sale agreement that was extremely favorable to her daughter, even though the terms of the agreement made it unlikely that the heirs of the estate could ever benefit from what would have been the estate’s largest asset, established a conflict of interest making the executrix unsuitable and warranting her removal. See also Price v. Price, 258 Ark. 363, 378, 527 S.W.2d 322, 332-33 (1975) (wherein a personal representative who had persistently acted in furtherance of her own interests in a manner to deprive her step-children of any benefits from their rights of the father’s property, and who had been recalcitrant about compliance with her fiduciary responsibilities and directions of the court, was deemed unsuitable for discharge of the trust involved in acting as personal representative of the estate such that removal was appropriate).

In sum, those administering estates in the State of Arkansas must take their duties seriously so as to avoid placing themselves in a situation in which their actions and inactions could be questioned.  Similarly, beneficiaries of an estate should be vigilant in monitoring the conduct of the executor to ensure that they are properly doing their job.  In the appropriate case, Arkansas courts have not hesitated to remove executors where the facts and circumstances warrant it.

UPDATED: Practical Help For Estate Administrators (Executors) & Trust Administrators (Trustees)

One of my very first posts on this blog generally discussed the legal duties of trustees under Arkansas law.  While that post summarized some of the more abstact legal principles at issue, a much more common question posed to me and other attorneys at dinner parties and elsewhere is what are the practical duties of trustees (and, similarly, the practical duties of estate executors, a.k.a. personal representatives). 

With this in mind, a couple of days before Christmas while doing some last-minute book shopping at Barnes & Noble for some friends, I happened to come across one of the best little books that I have seen on the subject.   Specifically, I was somewhat surprised to discover that "Estate & Trust Administration For Dummies" is a great resource for lay persons charged with the responsibility of serving as trustee for a trust or executor for an estate.  Even though I am historically the not-so-proud purchaser of multiple "Dummies" books on various mundane topics which I am too embarrassed to detail here, I must admit that I did not expect much substance when I first cracked open this text on the sparsely-populated "Law" aisle at B&N.  However, much to my surprise there was a tremendous amount of solid, easily understandable information there that---if utilized---should help any trustee or executor more ably and easily perform their duties and reduce the likelihood of future estate, trust or probate litigation. 

So, if you're a current or future fiduciary and have a bookstore gift card that you need to burn through, consider heading over to the probably-vacant leather chairs next to the Law section at B&N and checking out this book.  Considering the expense of this type of litigation, it might be the best 15 bucks that you'll ever spend. 

In closing, thanks for checking out the "Wealth Wars" blog over the first 3-4 months of its existence.  I wish you a happy and prosperous 2010.     

UPDATE:  The Arkansas Bar Association's website also has a free publication that may come in handy as well:  Handbook For Personal Representatives In Arkansas.  It is more of a very broad overview than anything else, but is still helpful since it is Arkansas-specific. 

New Book And Television Series Coming Out About Estate, Trust & Probate Battles

The estate, trust, and probate disputes and lawsuits that one reads about in the newspapers and which we commonly see in our law practice can seem like a television or movie drama.  Common threads running through these battles frequently include prominent characters in the community, tales of large sums of money flying around, allegations of complex conspiracies, questions regarding how a person died, disputes about the execution of certain documents, and claims of fraud and other wrongdoing.  In fact, these are probably the same human elements and reasons why I tend to find this area of law so interesting.  Perhaps it is also the reason why a new book and television series are coming out relating to these estate, trust and probate battles. 

Specifically, two Michigan lawyers, Andrew and Danielle Mayoras (who also author the Probate Lawyer Blog) have written Trial & Heirs:  Famous Fortune Fights which is described as a book containing "juicy details on famous cases."  While giving the reader "a front row seat in the courtroom," the authors also seek to "replay the scenarios and point out what went wrong, the winners and losers, and what you can learn from it."  The book is available for purchase at the above link.   

Also, the December 2, 2009 entry on the Wills, Trusts & Estates Prof Blog reports that a Canadian-based TV production company is shooting a new documentary series entitled "The Will," which will apparently reveal "the true life stories of complex and surprising disputes that have arisen surrounding a will, estate or trust."  The link summarizes how to participate in the series or submit a case that you think they should profile, and states that "they are looking for dramatic, unusual stories with numerous twists and turns, secrets and real emotion."  Most estate, trust and probate battles that we have handled seem to meet that criteria, but apparently one condition for being profiled in the TV series is that the cases must have reached a final decision or settlement in order to be considered.

Avoiding Estate, Trust & Probate Litigation

Since one of my areas of practice is estate, trust & probate litigation, it is obviously not in my economic self-interest to counsel against getting involved in this type of litigation in the first place.  However, first and foremost is a lawyer's duty to his or her client, which while sometimes involves filing or defending a lawsuit can also mean trying to avoid that lawsuit altogether.  After all, Abraham Lincoln once advised:  "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses and waste of time."  That is still generally solid advice, although sometimes the fight just cannot be avoided.

That said, U.S. News published a good little article over the Thanksgiving holiday entitled "8 Tips To Avoid Nasty Estate Surprises" which provides some good pointers for avoiding estate, trust & probate litigation.  In summary:

1.  Pick aa reputable, experienced lawyer who has not performed any work for any of the other beneficiaries.  Basically, you want an attorney who knows what they are doing in this area, who does not have a conflict of interest, and who will be representing your interests (only). 

2.  Pick an administrator who can get along with the family, maybe even a professional fiduciary (like a bank trust department) if no one else could practically fill this role.  This is a biggie---oftentimes when one beneficiary is chosen to act as executor or trustee it can cause consternation with respect to the other beneficiaries. 

3.  Talk about your intentions with family members before any will or trust is drafted, in order to preclude surprises and fights after death and making everyone aware of your plans and desires.  Open, honest communication can go a long way toward heading off battles over the family fortune. 

4.  Consider your state's laws and create trusts if necessary to bypass probate if it is particularly burdensome under applicable state law.  Again, our law firm engages in estate, trust & probate litigation---not estate planning---however we can refer you to some reputable attorneys in this area if needed.

5.  Update the will or trust often so that challenges are less likely.  One of the best ways to avoid litigation is to occasionally update your documents---under facts and circumstances (lots of objective, detached witnesses, etc.) demonstrating the absence of fraud and undue influence from others---so that it can be demonstrated you were polishing your estate and trust objectives up until the end your life.

6.  Be sure to title your assets properly so that the assets pass through or outside of probate as you originally intended.  Too many folks spend a lot of money creating fancy trusts and then never do the relatively simple work of actually transferring assets into the trust. 

7.  Think about including a no-contest clause tied to testamentary gifts of a degree sufficient to discourage legal disputes.  To help avoid post-death disputes it is worth possibly including a penalty clause that essentially poses a risk of losing their piece of the pie for any beneficiary who challenges the instrument  in question after your death. 

8.  Consider allowing some discretion with respect to distribution of assets so that beneficiaries can agree to a distribution that best meets their own needs and desires.  There is no one-size-fits-all strategy and of course none of us have a crystal ball, so sometimes providing for some flexibility is often a good practical solution. 

While not a fool-proof plan to avoid estate, trust & probate litigation, the foregoing reflects some good first steps to staying out of the courts with respect to the family fortune.  As we are in the heart of the Thanksgiving and Christmas seasons, I extend my best wishes to you with hopes for a fuss-free next few weeks.

Michael Jackson's Father Making Push For Allowance And Say-So In Deceased Son's Estate

At my house we just started giving allowances to our kids so long as they do certain chores around the house, and hopefully the experiment will teach them a number of lessons including personal responsibility, teamwork, the value of hard work, budgeting, saving, etc.  Each of our children will receive one dollar (per year of their age) per week, i.e., our 7 year old will receive $7 per week so long as he does his chores every day (and is docked a buck if he doesn't get them done).  I am hopeful that this will work, but the jury is still out as they have not yet caught on, for example, to the requisite bedmaking every morning.

That allowance, of course, is a mere pittance to the allowance that Michael Jackson's father is claiming from his son's estate.  I wrote about Michael's death a few weeks ago, and sure enough it appears that there are some post-funeral disputes with respect to who will benefit from the assets in his estate.  Specifically, an article today reveals that the gloved one's controversial father, Joe Jackson, recently filed a 60-page motion seeking a $15,000 monthly allowance to help cover his expenses.  Apparently Mr. Jackson's only income other than his son's assistance has been a $1,700 monthly Social Security check.  His alleged monthly expenses evidently include $1,200 for rent for his Las Vegas home (his wife of 50 years lives north of Los Angeles), $2,500 for eating out, $1,000 for entertainment, gifts and vacations; $2,000 for air travel; and $3,000 on hotels.  That actually does not sound too unreasonable considering Vegas prices, separate and distinct from the issue of whether Mr. Jackson should receive a dime to begin with . . .  

Anyway, a judge has ruled that Mr. Jackson can pursue his motion to receive a family allowance from the estate because he claimed his son had long been supporting him, but simultaneously ruled that he will not inherit any of his famous son's assets because he was not named in the will.  Mr. Jackson was deemed not to have standing to pursue his litigation, and therefore also will not be able to challenge the appointment of the executors chosen by the singer to handle the administration of his estate.  There is some indication from the article that an appeal may be forthcoming, but given the well-publicized strained relationship that Michael and Joe Jackson have had in the past it seems unlikely that an appellate court would overrule the trial judge's factual findings as to Michael's intent in drafting his will.

Legendary College Football Coach's Son Sues Stepmom Over Trust Obligations

We're in the heart of the 2009 college football season and the Arkansas Razorbacks are having a better year than last year under second-year Coach Bobby Petrino (thank goodness), although losing against the Florida Gators a couple of weeks ago still stings.  Transfer Ryan Mallett had a fantastic game yesterday against the South Carolina Gamecocks, and it is interesting that his former coach at Michigan, Rich Rodriguez, is having a fairly mediocre year in his second year leading the Wolverines. 

This serves as a nice little segue into my latest blog post about a story involving legendary Michigan Coach Bo Schembechler.  Before passing away in 2006, according to the university's website he coached the Wolverines for 21 seasons and had a winning percentage of .796 overall and .850 in the Big Ten Conference.  Although he was never able to win a national championship while at Michigan, he took the Wolverines to 17 bowl games and won 13 conference titles. 

Given his success as a college football coach, and given the money that head football coaches make at major Division I universities, there is no doubt that Coach Schembechler accumulated some substantial assets over the years.  It appears that there is now a family dispute with respect to those assets, as a recent article discusses how Schembechler's son has sued his stepmother (his father's third wife) in Ohio federal court over her alleged failure to provide quarterly statements about the trust under which he is evidently a beneficiary. 

This is one of the most common types of disputes in trust litigation, because one of the very reasons that people form trusts is because of confidentiality concerns, and yet at the same time the beneficiaries of that trust desire and to some extent are entitled to certain information about the trust (depending upon each state's laws).  It will be interesting to see whether this particular conflict evolves into a larger dispute over trust administration and assets or is resolved quickly once the accounting issue is straightened out.

Modern Recordkeeping Fraught With Potential For Abuse When Individuals Die

An interesting article on msnbc.com from a few days ago sheds light on how modern day estate planning probably needs to catch up with the practicalities of modern day life.  Specifically, the article's author discusses how, years ago, when an individual died the survivors typically conducted a search of the house, papers, safety deposit box, etc. in order to determine and collect information and records regarding the assets and liabilities of the estate.  However, these days much of that type of information is not stored in "hard copy" form but rather on a computer, typically protected by a password and known only to the person who just passed away.  One never knows when they will breathe their last breath, of course, and often the decedent never shares their password with another family member, friend, or trusted legal or financial advisor.

As a lawyer who does not engage in estate planning but instead represents clients in estate, trust and probate litigation matters, I believe that the increasing use of digital record keeping is fraught with potential abuse.  Specifically, while most fiduciaries are honest and trustworthy, I have worked on many lawsuits in which shady estate and trust administrators are alleged to have destroyed, concealed, or otherwise failed to produce documents to beneficiaries.  When such records are never even printed out but rather are kept only in digital form, the beneficiaries' discovery of such matters can seemingly be made even more difficult if not impossible.  After all, in some ways it can be easier to manipulate digital data than a hard copy.  So, while computers can no doubt increase the efficiency and accuracy of diligent decedents and honest estate and trust administrators, it basically comes down (as it always does) to a universal truth---people who are inclined to cheat can probably find a way to do it.   

Questions About Notarized Document Result In Reversal Of Trial Court's Ruling

More times than I can count since I started practicing law, I have been involved in lawsuits in which the authenticity of a signature on a document was a primary disputed issue in the case.  Whether our law firm was representing the plaintiff who was suspicious of a signed document, or instead representing the defendant who was insisting upon the validity of a signed document, many of these situations entailed questions over how and/or when a notary public witnessed a person's signature.  The types of documents involved (e.g., wills, trusts, deeds, contracts, etc.) is as varied as the types of alleged misconduct (e.g., never actually witnessing the signature, backdating a document, failing to properly identify a signer, willfully stating as true a material fact known to be false, etc.).  Make no mistake---there are laws governing notaries and their actions, but for some reason often many notaries can get somewhat loosey-goosey regarding their obligation to strictly follow the letter of the law.

In any event, on October 22, 2009, the Arkansas Supreme Court intervened in such a dispute and reversed a trial court's ruling that a power of attorney transferring real property was valid.  In Jones v. Owen, 2009 Ark. 505, an appeal from Sebastian County Circuit Court, the Court considered a case involving disputed land, a father's will, and that father's power of attorney.  You can guess what happened, of course . . . the will said that the land went to X while the power of attorney ultimately resulted in the land being  conveyed to Y.  Litigation ensued and the trial court ruled that the power of attorney was valid.

In overturning that decision, the Arkansas Supreme Court concluded that the power of attorney was not valid and did not authorize the property to be transferred.  Specifically, in this instance the power of attorney was apparently acknowledged by a notary public prior to the decedent ever signing it.  That is, the notary public had signed the acknowledgment and left the date blank, which was later filled in by the attorney handling the transaction.  The Court ruled that in some circumstances a signature could be notarized without the notary public physically being there to witness the signature (e.g., after signing a grantor can appear before a notary and acknowledge his signature, a grantor can acknowledge his signature via a telephone call with the notary, etc.).  However, if the grantor never appears to acknowledge his signature, but the notary falsely certifies that the grantor did appear, then the acknowledgement will be deemed void. 

Moral of the story:  Notaries have a tremendous amount of power, as they add a significant measure of validity to the execution of documents which record major financial transactions and carry out a person's final wishes regarding their property.  Those powers should not be exercised carelessly, much less fraudulently.  Jones v. Owen appears to be a clear message from the Court that it will require notaries to strictly comply with their  legal duties, and that the Court will not hesitate to set aside transactions when warranted under the facts and circumstances.