Avoiding Estate, Trust, Probate & Inheritance Litigation?

As one who largely makes his living assisting fiduciaries and beneficiaries in disputes arising out of the contested disposition of a deceased person's money and property, it is probably not in my personal economic interest to dispense advice on how to avoid estate, trust, probate & inheritance litigation.  After all, such litigation is how I pay the bills and put food on the table.

However, first and foremost as an attorney I am in the business of trying to help people with their legal problems.  I am therefore reminded of what President Abraham Lincoln, a former lawyer himself, once said:  "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.  As a peacemaker the lawyer has a superior opportunity of being a good man.  There will still be business enough."

With that admonition in mind, in researching an issue lately I came across the following linked article written by a Texas lawyer and published a few years ago by the American Bar Association:  "A Message To Clients:  Avoiding Probate Court Litigation."   It contains a good summary of situations which are susceptible to these types of disputes (dysfunctional families, subsequent marriages, sloppy or stale estate planning,  etc.).  It also includes solid suggestions for proactively preventing such disputes from arising in the first place.  

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Demographic Trends Suggest More Estate, Trust And Probate Litigation In The Decades To Come

I have long been interested in demographic trends, emerging technologies, cultural changes, and shifting societal patterns.  For example, 20+ years ago when I was in college I read Alvin and Heidi Toffler's  "War And Anti-War," which while a bit dated now predicts how future wars will be fought (but with an eye toward peace and avoiding such conflicts).   Similarly, about 5 years ago I read George Friedman's "The Next 100 Years:  A Forecast For The 21st Century,"  which was an eye-opening look at how our  nation and world may likely look in the years and decades to come.  I highly recommend either book for some fascinating reading, and it will be interesting to someday see how accurate or inaccurate their predictions were.

 Then,  a couple weeks ago I came across a very interesting article by a Georgia attorney named John J. Scroggin, in Wealth Strategies Journal,  which focused in particular upon 30 positive and negative trends that will impact estate planning over the next several decades:  "Where Is The Estate Planning Profession Going?"    While I focus much of my law practice upon estate, trust and probate litigation---as opposed to estate planning and drafting of wills, trusts, and the like---the article still addressed my areas of interest and I thought I would share a couple excerpts here.  Better yet, lawyers and laypersons   should take the time to read the entire article  which not only encompasses great analysis but also contains good references to other articles, checklists, outlines, etc.

               For example, with regard to estate and trust litigation in general Mr. Scroggin opines that:

               "(9) Estate and Trust Litigation. As a result of the combination of poorly drafted  documents, dysfunctional families, incompetent fiduciaries, greedy heirs, inadequate  planning and poorly prepared fiduciaries, estate litigation has been booming in the last  few decades. This growth will continue.

               One consequence of the increased litigation will be an increased effort by both individual and institutional fiduciaries to make sure estate and trust instruments provide for strong  fiduciary protection. We should anticipate more protective provisions in fiduciary  instruments, including broader indemnity provisions for fiduciaries, modifications of the  normal fiduciary standards and investment polices, broader use of no contest clauses,  limited liability for delegated powers and limits (or increases) on disclosures to  beneficiaries. These changes will increase the need to create counter-balancing powers  designed to protect beneficiaries (e.g., a wider use of Trust Protectors and fiduciary  removal powers). As a result, there will be longer discussions with clients and the  complexity of the documents will increase."

               Related to the foregoing are Mr. Scroggin's thoughts on avoiding estate and trust litigation altogether, through conflict minimization:

               "(10) Conflict Minimization. The corollary to estate and trust litigation is planning  designed to mitigate the potential sources of intra-family estate conflicts. According to  the Wealth Counsel 6th Annual Industry Trends Survey, the top motivation for doing  estate planning was to avoid the chaos and conflict among the client’s heirs. Many clients  have an abiding desire to establish structures which minimize the potential points of  conflict and provide a mechanism to resolve future family conflicts. Clients want to  dispose of assets in a manner designed to minimize family conflict - leaving a legacy of  relationships rather than a legacy of conflict. This is a growing part of the discussion with  clients and a part of their planning documents. Solutions include using personal property  disposition lists, looking at real or perceived conflicts of interest when appointing  fiduciaries, or passing the family business only to the children running the business. As  noted above, attorneys will need to spend more time talking with clients about providing  greater protections to fiduciaries and creating counterbalancing protections for heirs.

 Many individual fiduciaries agree to serve without fully understanding the potential  liabilities and conflict they may be inserting themselves into. Should attorneys provide written materials (perhaps signed by the client and the fiduciary) detailing the  responsibility of the fiduciary, the risk of conflict and the means by which the drafter has  tried to minimize those exposures? Should attorneys more thoroughly advise their clients  on the necessary skill   sets needed by their fiduciaries - instead of just accepting the  client's choices at face value?"

  In sum, as I have written before on this blog, American society is rapidly changing.  The Baby Boomers have begun retiring over the last many years and will continue to do so over the next 2-3 decades.  Large sums of wealth have been acquired and will be transferred to younger generations.  People are living longer, and the aging population will be less competent due to Alzheimer's Disease and other forms of dementia which will lead to conflicts over whether a deceased person had the requisite capacity to execute a will or trust.  These and other trends strongly support the notion that there will be increasingly more estate, trust and probate litigation in the decades to come.

               Matt House can be contacted by telephone at 501-372-6555, by e-mail at  mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Apparent End To The Huguette Clark $300 Million Estate Battle

In a middle-of-the-night deal during jury selection of a New York trial, it appears that a settlement has been reached in the infamous Huguette Clark estate dispute.  You can read all about it at this link.  I had written about this over 3 years ago back in August 2010 at this link.  This litigation serves as a very interesting case study in undue influence allegations and other issues commonly associated with estate and trust disputes.  A more comprehensive overview of the stories, videos, and other coverage of this saga can be found at this link.          

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Arkansas Court Of Appeals Affirms Agreement To Split Joint Accounts Despite Beneficiary Designations

 There is often confusion regarding what property falls within an estate, or trust, and what property falls outside of either.  For example, commonly bank accounts, IRA’s, etc., are titled in such a way that upon one person’s death, the remaining monies are left to the other person or person(s) identified on the account paperwork such that this property passes outside the estate or trust.  It can often be a difficult task to demonstrate that this money should be divided in a different manner.

 However, the Arkansas Court of Appeals recently affirmed a trial court’s ruling that this was what was supposed to occur, in the case of Richardson v. Brown, 2012 Ark. App. 535 (September 26, 2012) stemming from Faulkner County Circuit Court.  This was actually a case that I handled on behalf of a client, and the Judge ruled in his favor.  The ruling was left wholly intact by the appellate court.

Without going into too much detail, the parties' mother passed away leaving three children as her heirs.  Certain property passed to the children pursuant to a will, but the mother had other property (a car, bank accounts, IRA, etc.) that were titled in various ways as between her and her individual children.  Our client argued that despite the titling on the various property, the three children had in fact an oral agreement, as demonstrated by the later actions and conduct of the children, to split all of the properties evenly.  He had received the “short end of the stick” and, basically, believed that his sisters had intentionally deprived him of his equal one-third share.

 In a hard fought battle, our client ultimately prevailed at trial and proved that, notwithstanding the titling on the various properties, there was an express agreement among the siblings to equally divide the various accounts.  The trial court imposed a judgment and a substantial attorneys’ fee award, both of which were affirmed by the Court of Appeals.

 In doing so, among other things the Court ruled that ordinarily ownership of a joint bank account with a right of survivorship is conclusive proof of the parties’ intent for the property to pass to the survivor.  However, this general rule does not prevent the survivor from making a different disposition by agreement, and in this case the trial court determined that such an agreement had in fact been made among the siblings.  This is a difficult argument to make, because courts presume that the titling on an account is strong evidence of how that property is to be distributed.  But, if the facts and evidence warrant it, this case demonstrates that a court will sometimes hold that an agreement to divide the property otherwise will prevail over the titling of an account.

 Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Recent Articles On Alzheimer's Disease, And Trustee/Beneficiary Relationships

There is not much to this post, primarily because the articles referenced below already thoroughly discuss the issues.  Specifically, both articles shed light upon two common problem areas which can often eventually erupt into estate, trust and probate disputes. 

The first article is from the New York Times and addresses the effect of Alzheimer's Disease and dementia upon an individual's ability to control and account for their finances.  Given our aging population and ever-increasing life expectancy, it's recommended reading for everyone as this concern affects innumerable families in this country. 

The second article is from the Wall Street Journal and touches upon the often-tense relationship between trustees and beneficiaries.   It may especially be interesting and insightful for anyone who already acts as trustee or who may eventually act as a trustee in the future.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Mediation As An Alternative To Inheritance Litigation

Lawsuits are not the only way to resolve disputes, and arguably are not even the best way.  Litigation can be financially expensive, time-consuming, and emotionally tolling.  Especially in the context of estate, trust and probate litigation, the disputes often involve persons who know each other, including relatives, friends, and business associates.  Accordingly, in addition to the expenditure of money, time and emotions, litigation can sometimes involve harm to the relationships between the litigants. 

Because of the foregoing concerns, different types of alternative dispute resolution have been developed over the years.  One of these methods, in particular, is conducive to the issues arising in inheritance-related disputes.  Specifically, mediation generally involves a third party called a "mediator" who is specially trained to attempt to bring the adverse parties to a compromise and settle their differences.  Unlike the judge or jury, or an arbitrator, a mediator does not resolve the dispute for the parties but instead aims to facilitate a final resolution that the parties reach on their own.  There are many such mediators in Arkansas (e.g., Hamlin Dispute Resolution, ADR, Inc., etc.), and we have successfully used them in the past on behalf of our own clients.  A good article in the New York Times this weekend also discusses mediation in the elder law context. 

A simple fact is that the death of a loved one is already a stressful experience.  If, for example, that person's estate is perceived to not have been distributed in the manner in which that decedent intended (or perhaps in a way in which a would-be recipient originally anticipated it), long-simmering feuds can rise to the surface and minor misunderstandings can erupt into major conflicts.  Occasionally it's too late, but the relationships of the persons involved can frequently be maintained, and their disputes ultimately resolved,  by mediation.  Drawn-out court battles can be avoided or at least minimized, and the money and property in dispute can be preserved instead of exhausted on the litigation process.  Mediation is confidential as opposed to occurring in the public eye, can be scheduled by the parties at their convenience rather than subject to the limited openings in a Court's docket, and takes place in a neutral conference room rather than in an often-intimidating courtroom. 

Not every dispute is ideal or appropriate for mediation, but it can and should be considered as an alternative method of dispute resolution.  

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Frank Talk On Attorney's Fees

One of the first questions that a potential inheritance litigation client quite reasonably asks is some form of the following question: “How much is this ultimately going to cost me?”  While there is unfortunately little or no way of determining on the front end how much a legal matter might cost, how that cost will be calculated generally is capable of early determination.  There are typically three primary ways in which an attorney charges for his or her services, and of course occasionally a couple of these methods can be combined together to create a “mixed” fee arrangement.

1.  HOURLY FEE

As Abraham Lincoln famously said, "A lawyer's time and advice are his stock in trade."  Accordingly, the most common fee arrangement is based upon an hourly fee, i.e., the lawyer charges an hourly rate for their time and the ultimate fee is determined upon how much time the lawyer has to spend on the representation.  For example, if I was retained by the trustee of a trust to defend against claims brought by a beneficiary of the trust, I would charge the trustee an hourly fee and the ultimate bill would be determined upon how much time I had to spend working on the trustee’s case.  The same goes for a beneficiary pursuing claims against the trustee.

Obviously, the more time-consuming the case the more expensive the representation (and vice versa).  Hourly rates in Arkansas are by and large considerably lower than in other, more populated and wealthier areas of the country, especially the East and West Coasts.  There are a number of factors which determine the hourly rate, including but not limited to the complexity of the area of law, the attorney’s experience and reputation, the attorney's location, etc.

2.  CONTINGENCY FEE

A second, but less common, fee arrangement in inheritance disputes (and other litigation for that matter) is a “contingency fee.”  This is an arrangement which is necessarily only used by the person bringing the lawsuit, as opposed to the person defending the action.  Specifically, the lawyer and the client agree that the lawyer will accept a percentage of whatever amount is recovered (if anything) as the lawyer’s fee for the representation.  A common percentage is anywhere from 25-50%, and rarely will the percentage stray outside of that range.  Usually the lawyer and the client will come to an agreement on the front end regarding who will pay for the various costs (filing fees, deposition expenses, copies, postage, etc.) and sometimes the lawyer will advance those expenses and then take them “off the top” in the event of any recovery.

As one can tell, under this arrangement the more favorable the recovery, the higher the lawyer’s fee.  However, there is also added risk for the attorney because if there is little or no recovery, or if the client prevails but the judgment is uncollectible as a practical matter (the defendant has no money, etc.), then the lawyer loses just like the client.  Given the fact that litigation can often take years, essentially the attorney is working for free for a long period of time before recouping out-of-pocket expenses much less any fee for the work performed.

This type of arrangement can be beneficial in situations wherein an individual might not be able to afford an hourly arrangement.  Again, the potential downside is that, unlike a rear-end collision wherein liability in a personal injury case might be very clear, liability in estate, trust, or probate litigation can often be quite unclear and unpredictable.  Therefore, in cases where liability is unclear or in cases in which the defendant could potentially have counterclaims against the plaintiff, contingency fee arrangements will probably not be the ideal arrangement.  Occasionally, a lawyer will be willing to combine a lower hourly fee (perhaps charging 2/3 of their regular hourly rate) with a lower-than-usual contingency percentage (perhaps 25% instead of 33% or more), therefore creating a mixed hourly/contingency fee arrangement.

 3.  FLAT FEE

Finally, the third and least common type of fee arrangement is simply a “flat fee” paid for a certain amount of services.  In other words, the lawyer and the client agree that a certain type of service or a certain number of actions will be taken by the lawyer to represent the client (drafting a certain amount of letters, preparing an agreement, etc.).  For that finite amount of services the lawyer and client agree on a specific fee.  This gives both the lawyer and the client a greater degree of predictability, but it is an often impractical arrangement in estate, trust and probate disputes because litigation is unpredictable and can rarely be reduced to only a certain number of actions.  However, in certain situations it can be used effectively and should not automatically be discarded.

In conclusion, the best fee arrangement in a particular situation will necessarily depend upon the facts and circumstances.  While the free market has resulted in lawyers no doubt being expensive, when it comes to the amounts of money and high stakes involved in inheritance litigation, many times the lawyer’s fee can be a mere drop in the bucket.  For example, if a plaintiff potentially goes without recovering some or all of a large inheritance that they were otherwise supposed to receive, then hiring an attorney can even be construed as a wise investment.  Likewise, if a trustee could potentially be removed from her office or is wrongfully accused of harming the trust and causing substantial damages, hiring representation is a necessity rather than a luxury (incidentally, sometimes trustees' attorney fees can be paid out a trust or reimbursed by a trust).  In certain situations (breach of contract, breach of trust, etc.) the prevailing party also may be able to recover some or all of their attorney’s fees expended.  In essence, every situation is different and unfortunately there are simply no guarantees when it comes to the outcome of a legal matter nor the attorney fees necessary to handle that legal matter.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

American Bar Association Releases "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order"

Estate, trust and probate litigation often involves allegations that elderly adults' estate planning desires were not carried out after their deaths (either by someone's intentional acts or negligence), or that those elderly adults were taken advantage of and their estate planning desires were thwarted while they were still living (albeit without their knowledge or consent).  With respect to the latter scenario, sometimes the claims are true, and sometimes they aren't.  Issues of (in)competency, illness, undue influence, and fraud are often raised in these types of proceedings.   Each case is different and we have certainly represented those doing the accusing as well as those being accused. 

But one common theme that I have noticed in virtually all of these cases is that no matter how much estate planning that the elderly person actually did, in virtually every situation they probably could have done a bit more.  It might not have ultimately made a difference with respect to whether or not litigation would have resulted, but where more planning is undertaken that can frequently result in a lesser likelihood of later conflict. 

With this in mind, thanks to a tip on the Wills, Trusts & Estates Blog, the American Bar Association has apparently just released the "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order."  I've given the document an overview and  would heartily recommend it to anyone dealing with such circumstances (or anyone with a loved one who is dealing with this situation).

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.