Brief Thoughts On Claims Of Undue Influence

As stated in my previous post regarding the capacity of a testator to execute a will or trust, the two concepts are closely related.  For example, incapacity relates to invalidation of a will, trust, deed, etc. because of the testator’s own deficiencies (typically mental impairment).  Undue influence, however, is when the will, trust, deed, etc. may be invalidated by the actions of others because they allegedly exercised such a degree of influence and power over the testator thatthey were induced to act by something other than free will.

As a general matter, the less testamentary capacity that one possesses, the less proof of undue influence will be necessary.  A presumption of undue influence may be triggered by a confidential relationship between the testator and someone who is receiving a benefit from the document, such that the burden of proof can shift to the proponent of the document to prove that there has in fact been no undue influence.  Unless there is “procurement” involved, in Arkansas the proponent merely has the burden of proving no undue influence by a preponderance of the evidence (more likely than not, as opposed to a higher standard such as beyond a reasonable doubt).

Obviously influence is ever-present and we are constantly influencing others to take certain actions.  This is especially true in the context of family and other close relationships.  However, mere influence doesn’t necessarily equate to taking advantage of someone.

Accordingly, while a testator may be legitimately influenced by his children, for example, the influence may go too far if the kids dictate or control the testator.  Likewise, the mere existence of a confidential relationship between the testator and the beneficiary, or a close and affectionate relationship, may not in and of itself constitute undue influence although it can in some instances have the effect of shifting the burden of proof.

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.

Brief Thoughts On Claims Of Incapacity

People often question whether a deceased person was mentally capable of executing or changing a will or trust.  Perhaps the person was suffering from dementia at the time.  The legal question involved in these situations is typically whether the decedent had the requisite “testamentary capacity.”  Testamentary capacity has generally been deemed to mean sufficient mental ability to (1) understand and remember, without prompting, the extent and condition of the testator’s property; (2) understand the “natural objects of their bounty;” and (3) understand to whom the property is being given and on what terms. 

Testamentary capacity is not a particularly high state of mental capacity, but it can be rebutted in some instances by evidence of Alzheimer’s Disease, severe forms of dementia, severe illness, intoxication, etc.  These conditions need to have actually existed at the time of execution of the instrument in question.  For example, the mere fact that mild dementia is diagnosed years before the execution of the instrument does not necessarily mean that the testator lacked capacity when they executed their will or trust, because even a lucid interval of capacity (and people suffering from dementia often have “good days” and “bad days”) can be deemed sufficient.    

Capacity issues are very fact-intensive determinations, and lack of capacity is often pretty difficult to prove.  This is why capacity claims are often coupled with “undue influence” claims, which are often related, frequently alleged in the addition or in the alternative, and sometimes easier to prove.  Undue influence will be discussed in my next post. 

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.

Amendments To Wills And Trusts Can Result In As Many Or More Disputes As The Original Documents Themselves

Often estate and trust litigation revolves not around the will or trust itself, but rather changes to those instruments (a codicil to the will, an amendment to the trust, etc.).  That was the case in the recent appeal of Harbur v. O’Neal, et al., 2014 Ark. App. 119 (February 19, 2014).   The matter involved numerous issues, but one of them entailed the question of whether or not certain amendments to a trust were valid.  

Frequently the settlor of a trust has a legitimate reason for wanting to amend their trust.  Perhaps they want to change a successor trustee, remove or add a beneficiary, alter the trust’s assets, or there could be any number of other reasons why the trust may need to be amended.  However, it is important that the settlor of the trust amend their instrument with the competence to do so, of their own free will and volition, without being coerced, and without undue influence by someone else.  That was one of the disputes in the Harbur case.

Specifically, like so many cases that I handle and so many estate and trust litigation matters in general, this lawsuit involved battling siblings and children of the trust settlor.  One of the litigants, Jeanne, was found to have performed every step of obtaining information regarding a first trust amendment, she actually prepared the amendment, she produced and finalized the document, and she also benefitted from the amendment. 

The trial court held that because these facts supported a conclusion that Jeanne procured the trust amendment, a rebuttable presumption of undue influence arose and the burden of proof shifted to Jeanne to prove beyond a reasonable doubt that her mother had both the mental capacity and freedom of will at the time she executed the trust amendment.

Likewise, Jeanne also testified that she prepared a second trust amendment for her mother’s signature as well.  This amendment made Jeanne the sole beneficiary of the trust upon her mother’s death, and made Jeanne’s children sole beneficiaries of the trust if Jeanne did not survive her mother. 

Similar to the reasons stated for finding procurement with regard to the first trust amendment, the trial court also found that Jeanne had procured the second amendment.  The appellate court affirmed these rulings holding that there was overwhelming evidence of procurement, including but not limited to Jeanne’s own testimony.

A number of lessons can be learned from this case.  For example, this appeal demonstrates that the settlor’s intent should control and they should be able to dispose of their property as they wish, without coercion or undue influence from anyone.  If and when they do want to amend the trust, they either need to do it by themselves or preferably with the assistance of a trusted attorney who is acting solely in their interest and whom is independent from the beneficiaries. 

Further, a beneficiary should consider not preparing the trust amendment, even at the request of a settlor, because that beneficiary may be risking the validity of the very amendment from which they would benefit if someone attempts to set aside the trust amendment based upon procurement, undue influence, coercion, and the like.

In sum, amendments to wills and trusts are fertile ground for estate and trust litigation because frequently the changes are executed many years after the original documents are signed.  Amendments can, in a very short and sweeping document, fundamentally change the intent of the original estate planning documents and the assets disposed of by those documents.  Such amendments are sometimes signed in haste or at a point in the deceased person’s life when they may not fully understand or appreciate the nature of what they are doing (assuming the settlor signed the amendment(s) at all). 

With the stroke of a pen, millions of dollars and valuable real or personal property can be inherited by or administered by persons other than those initially envisioned by the original instruments.  For these reasons, as much or even more care should go into the preparation and execution of the amendments as go into the original versions.  Similarly, as much or more scrutiny should be paid to the preparation and execution of these amendments as was paid to the initial documents.

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.

Managing Someone Else's Money

 Estate, trust, power of attorney and probate disputes often develop due to disagreements over the manner in which someone managed another person's money. For example, the beneficiaries of a will might disagree with the executor's claim for fees related to administration of an estate.  Co-trustees might differ as to the best investments for maximizing the income and assets of a trust.  Two children might question the propriety of their third sibling's withdrawals of money from their mother's bank account, pursuant to a financial power of attorney that the mother apparently executed at some point in the past.

 To provide guidance in these situations, the Consumer Financial Protection Bureau has recently released 4 booklets entitled "Managing Someone Else's Money" which are intended for such persons as trustees, agents under powers of attorney, court-appointed guardians, and government fiduciaries.  Not only do they assist those who are honestly and legitimately attempting to assist in the management of money or property for a loved one, they also provide information on warning signs and things to look for when someone else is doing the managing of that person's finances.

 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.

"Murder, Fraud, $2.2 Million Somewhere"

This week's issue of the Arkansas Times  contains a sad but fascinating story written by Mara Leveritt, who is well-known for her writing about so-called "true crime," including but not limited to her book about the West Memphis Three, Devil's Knot.  Specifically, Ms. Leveritt tells the tale of an older gentleman living in Washington state whose trust assets were swindled by a love interest with Arkansas ties, and how the gentleman's son has relentlessly pursued bringing the woman to justice and recovering the monies in question.  The story also contains a link to the family's own website detailing the ordeal, the criminal case, and the civil lawsuits stemming from the fraud.  Interesting reading. 

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.

Common Mistakes When Serving As Trustee

My last post discussed the pros and cons of institutional trustees vs. family member trustees.  Regardless of whom is serving as trustee, in the course of my law practice there are common themes which repeatedly arise in the area of trust disputes and litigation.  Specifically, it is easy for trustees---especially inexperienced family member trustees---to make mistakes when administering a trust.  Some of these were nicely summarized in a recent article, published in Barron's Penta, entitled "The Five Biggest Ways To Bungle A Trust." 

(1) Not Keeping Good Trust Records---The Arkansas Trust Code, and presumably trust laws in most if not all other states, contain requirements mandating that trustees provide beneficiaries with accountings of trust assets, income, expenditures, etc.  The timing and extent of those accountings can vary based upon certain factors, including whether one is an income beneficiary or a remainder beneficiary.  However, at all times the trustee is to act in the interest of the beneficiaries, which includes maintaining comprehensive and accurate records.  Trustees who do not keep such records act at their own peril, as gaps and inaccuracies in documentation (even if purely innocent) can create an aura of suspicion and sometimes later liability for breach of trust, breach of fiduciary duty, etc. 

(2) Not Diversifying Trust Investments---Another duty which too often goes unfulfilled is the trustee's obligation to properly diversify trust investments.  Just because the trustee might handle their own investment portfolio in a certain manner does not mean that the investments are being properly handled with regard to the beneficiaries of the trust.  For example, if the beneficiary is an elderly person in need of income, having the trust's assets invested in 100% tech stocks is not likely to be deemed a wise investment strategy.  Arkansas has a Prudent Investor Act which must be reviewed and followed, and it is based upon a well-recognized uniform act that is utilized in many other jurisdictions as well. 

(3) Not Distributing Trust Assets Fairly---A trustee owes a fiduciary duty to current beneficiaries, as well as to remainder beneficiaries.  Sometimes this can create problems when a duty to one conflicts with a duty to another.  Also, sometimes in the case of family member trustees, the trustee is herself a beneficiary (e.g., perhaps the father named his daughter as trustee of his trust after his death, but also named her as a beneficiary like his two sons/her two brothers).  Especially when no trustee fee is involved (see below), we have seen cases in which the trustee is tempted to take extra distributions, etc. as purported justification for being saddled with the extra time and work associated with acting as trustee.  This can be dangerous as it can constitute an actual impropriety, or at least suggest an appearance of impropriety.  It is therefore wise to maintain clear and well-documented records of all distribution decisions.

(4) Not Properly Handling The Trustee Fee---The fact is that administering a trust can involve a lot of work.  It can be very profitable, which is precisely why institutional trustees exist.  Families often do not want to see their assets being consumed in part by the fees of an institutional trustee (notwithstanding some of the advantages to using one), and so often a family member is named as trustee.  The family member, however, might have a time-consuming occupation and/or an active family life.  Adding the trustee duties on top of an already-busy schedule can naturally trigger a desire for some sort of compensation associated with the extra work.  Whatever the trustee fee arrangement is (assuming trustee fees are paid at all), similar to asset distributions discussed above it is wise for there to be a well-documented record of how trustee fees will be paid, when they will be paid, and how they will be calculated.

(5) Not Watching Your Back---A trusteeship has been viewed as involving the highest duty owed another under the law.  It entails a tremendous amount of responsibility, and should not be lightly regarded.  Individuals named as trustee in a trust instrument often view it as an honor, which is fine so long as the trustee treats it as such.  However, money has an uncanny way of sometimes causing people---including trustees and beneficiaries---to engage in actions and behavior which they (and others) perhaps never previously conceived.  Occasionally this will result in nasty disputes between trustees and beneficiaries which can ultimately erupt into actual litigation.  A trustee might innocently take on that "oath of office," so to speak, never imagining that they might someday be mired in stressful, expensive disagreements with once-close friends or family members.  On that note, typically the trustee's dispute is not with the person who named them as trustee (i.e., in a revocable trust situation the grantor of the trust can simply remove or change the trustee)---instead, the fight will frequently be with the children or grandchildren of the grantor. 

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.

Family Member Trustees vs. Institutional Trustees

When a trust is formed, one of the many decisions that must be made by the "settlor" (the one who forms the trust) is who will serve as trustee.  The settlor may also select multiple trustees ("co-trustees," who serve with each other) and later ("successor") trustees (who may serve after the original trustee can no longer serve [death, disability, etc.] or for some other reason [resignation, removal, etc. of the original trustee]. 

The selection of trustee is an important one because they have a fiduciary obligation to carry out the terms of the trust and the desires of the settlor.  Because the trustee exercises great power and discretion over money and property, the pros and cons of family member trustees vs institutional trustees should be considered.  Trust disputes often relate back to whom, and how, was selected to serve as trustee.  

FAMILY MEMBER TRUSTEES
Family members such as spouses and children are frequently named as trustees, but this selection occasionally results in trouble down the road due to sibling rivalries and the trustee's lack of knowledge and experience.

Advantages of family member trustees include a familiarity with the beneficiaries, and possibly the trust property as well; and a common willingness to serve with little or no compensation.

Disadvantages of family member trustees include an inability or disinclination to carry out the duties of a trustee; favoritism or unfairness toward certain beneficiaries; the need for a successor trustee at the resignation, incapacity, or death of the trustee; the lack of insurance coverage in case of liability; and tax consequences if the trustee is also a beneficiary.

INSTITUTIONAL TRUSTEES
Institutional trustees include such entities as banks and trust companies, which have their pros and cons as well.

Advantages of institutional trustees include expertise and competence at carrying out trustee duties, such as adherence to the prudent investor rule; impartiality with regard to trust property and beneficiaries; avoidance of the problem of successor trustees; the possibility of additional services such as tax reporting or money management; and sufficient insurance coverage in case of liability.

Disadvantages of institutional trustees include greater administrative costs; a lack of familiarity with the beneficiaries ; and an inability to administer certain types of trust property, such as real estate. 

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.

Random Odds And Ends

A couple of quick things before I head off to celebrate the end of 2010 and the beginning of 2011:

(1) The Wills, Trusts & Estates Prof Blog contained an interesting quote today from the French Enlightenment writer, historian, and philosopher Voltaire, who lived about 300 years ago, which goes to show that the subject matter discussed in my own Blog is hardly new or novel:

"Animals have these advantages over man: they never hear the clock strike, they die without any idea of death, they have no theologians to instruct them, their last moments are not disturbed by unwelcome and unpleasant ceremonies, their funerals cost them nothing, and no one starts lawsuits over their wills."

---Voltaire, French author (1694 - 1778)

(2) A recent article cites a study by the Center For Retirement Research at Boston College for the proposition that Baby Boomers, who apparently have already inherited $2.4 trillion from older generations, are in line to inherit at least $8.4 trillion more.  In fact, according to a December 27, 2010 Associated Press article, starting in January more than 10,000 Baby Boomers a day will turn 65,  a trend that will continue for the next 19 years.  Given those numbers, one can only assume that the number of inheritance-related disputes will continue to rise as well.  

Best wishes for a Happy New Year!

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.

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.

Stealing From Grandma And Grandpa---Inheritance Theft

A recent lengthy but interesting series of stories (Part I and Part II) on the odd heiress, Huguette Clark, appeared to prompt a good article yesterday from Bob Sullivan, who covers Internet scams and consumer fraud for msnbc.com.  Mr. Sullivan's posting focuses upon allegations and situations involving elder financial abuse, which is a significant portion of my own law practice.  I suggest that you read the article when you have a free moment, as it extensively summarizes a growing issue in this country and is obviously one in which you may very well have an interest if you regularly read or have merely stumbled upon my Blog.  

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.

Inheritance Hijackers: Who Wants To Steal Your Inheritance And How To Protect It

At the recommendation of a client, I have recently started reading a fascinating book entitled Inheritance Hijackers:  Who Wants To Steal Your Inheritance And How To Protect It (Ovation Books 2009) written by a Florida attorney named Robert C. Adamski.  The book is primarily written for beneficiaries and potential beneficiaries of an inheritance.  Mr. Adamski's book sets forth an extensive discussion of the growing phenomenon which he calls "inheritance theft," and which of course is a primary component of what I do in my own law practice as well (representation of beneficiaries, but also fiduciaries such as trustees andexecutors, in estate, trust and probate litigation).  "Inheritance theft" is defined on page 2 of the book as "the act of diverting assets from the intended recipient to another person[.]" 

While the book is available for sale at Mr. Adamski's own website, Amazon.com, and I'm sure other places, a good overview of the phenomenon can be found below which is directly from a prior post by Mr. Adamski: 

1.  Who steals inheritances?

Inheritance theft is a crime of opportunity committed by those we place our trust in. These are family members, close associates, care givers and others we depend on as we grow older. Inheritance hijacking is always a surprise to the victim, who never expected a trusted family member or friend to betray their trust.

2.  Who are the victims of inheritance hijacking?

There are always two classes of victims. The first is the person who intended to give the inheritance. The second is the person or persons who were the intended recipient of the inheritance. As we age we are all potential victims because we become weaker in our physical and mental ability. We then are forced to rely upon and put our trust in others. This gives the trusted persons the opportunity to hijack our inheritance.

3.  How are inheritances hijacked?

The hijacker's bag of tricks includes undue influence, duress, forgery, theft by an administrator, marriage, and more. Administrators of probate estates and trusts are common hijackers. They have the opportunity and ability to take advantage. Marriage is the 'Silver Bullet" in the world of inheritance theft because it is all but impossible to overturn a marriage which hijacks an estate. Care givers earn the trust of their victims and as a result are often inheritance hijackers. An important element of inheritance theft is the trust which is gained by the hijacker and later betrayed. Without that element of trust it would be very difficult to hijack an inheritance.

4.  How can I determine if my inheritance is at risk?

Take the Inheritance Risk Quiz at www.ProtectYourEstate.Net to determine the risk to the inheritance you intend to give or the inheritance you expect to receive.

5.  How do I protect the inheritance I intend to give or the inheritance I expect to receive?

Self education and proper estate planning are the first steps. But it does not end there. It is vital to understand how inheritances are hijacked and how to guard against inheritance hijacking. The book, INHERITANCE HIJACKERS: Who Wants to Steal Your Inheritance and How to Protect It, was written to help people protect their families from inheritance theft. Learn more about the book at www.ProtectYourEstate.Net

**********

I have not yet finished Mr. Adamski's book, but can already tell that I will be recommending it to beneficiary-clients, and potential clients, who anticipate possibly receiving inheritances.  The book contains an immense amount of valuable information for a very reasonable price. 

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.

Update On Gary Coleman Estate Dispute

As a child of the 1980's, I grew up watching Diff'rent Strokes like most people my age.  A white, middle-class kid growing up in Oklahoma, I did not have much in common with two African-American orphaned children from Harlem taken in by a rich Park Avenue businessman, but the show constantly had me laughing, especially when Gary Coleman ("Arnold") would throw out his catchphrase "What'choo talkin' bout, Willis?"   So it was disappointing to hear about the recent death of Coleman, whose post-Diff'rent Strokes life was seemingly as scandal-ridden as the lives of his child co-stars on the show, Todd Bridges ("Willis") and Dana Plato ("Kimberly"). 

Coleman was apparently taken advantage of in life (in the early 1990's he successfully sued his parents and business advisor for almost $1.3 million over misappropriation of his $3.8 million trust fund), and now that he has passed away it looks like there may be additional controversy as well.  Specifically, another blogger who writes on similar topics has provided a good update on the documents and characters who are coming out of the woodwork following his death.  Wikipedia of course also has a good summary of his life and recent events. 

Gary Coleman did not have "Michael Jackson money" but it appears that there is still enough to fight over.  Notwithstanding that Coleman filed bankruptcy in 1999, it is possible that the potential heirs fussing over the leftovers havea special interest in the intellectual property and other rights which could conceivably have value in the years to come as the people in my generation watch reruns and relive the glorious(?) early 1980's.

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.

Arkansas Court Of Appeals Rules Dying Woman Not Competent To Execute Deed

Sorry for no posts as of late---I've been tied up preparing for, and then engaged in, a lengthy trust litigation case in which the jury, after a 6 day trial in Pulaski County Circuit Court, returned a significant verdict for our clients.  I'm just now trying to catch up on other work, but hope to resume regularly updating this blog again soon. 

One case that I read about since my last blog post demonstrates that although it is difficult to prove the invalidity of a deed, will, trust, etc. by proving that the person signed the will was not competent (whether due to mental illness, undue influence, duress, etc.), occasionally such claims are successful.  For example, in Munzner v. Kushner, 2010 Ark. App. 196 (an appeal from Washington County Circuit Court), the Arkansas Court of Appeals affirmed the trial court's ruling that a deed transferring property was invalid due to the incapacity of the grantor.

Specifically, a mere 36 hours before her death, Mrs. Kehoe executed a deed conveying her home to her brother, Mr. Munzner.  Mrs. Kehoe apparently had to sign the deed with an "X" as she was too weak to finish the signature of her name when she lost her place.  Her daughter, Ms. Kushner, sued asserting the invalidity of the deed.

At trial, Mrs. Kehoe's doctor testified that just prior to her death she had been administered morphine (utilized for severe pain and suffering), a medication that fights anxiety and sedation, a medication which causes confusion, and a powerful narcotic.  The doctor testified that it would be ill-advised to make any life decision while taking any of the medicines and that they would have impaired her ability to make decisions related to her property. 

On the other hand, friends and relatives who spoke to Mrs. Kehoe that day testified that she was competent.  Moreover, Mrs. Kehoe's attorney, who spoke to her about the deed on that day, also stated that she was competent. 

After considering all of the evidence, the trial court ruled that because Mr. Munzner was Mrs. Kehoe's brother and she had a close confidential relationship with him, he had the burden of proving that his sister was competent to make the deed.  This was especially the case in light of the lack of any consideration (exchange of money or property) for the deed.  The trial court then found that Mrs. Kehoe had been too mentally impaired to execute the deed and ordered it set aside.

Mr. Munzner appealed but the Court of Appeals affirmed.  Specifically, the Court held that Mrs. Kehoe's mental impairment was debilitating to the point that she could not function appropriately to execute the deed regardless of whether she may have been exposed or susceptible to any undue influence.

Under Arkansas law, the determination of whether a deed is void because of the mental incapacity of the grantor is generally measured by her mental ability at the time of execution of the deed.  Andres v. Andres, 1 Ark. App. 75, 83, 613 S.W.2d 404, 409 (1981).  If the grantor is mentally competent at the time that the deed at issue is executed, the deed will be deemed valid.  Id.  In this case the Court held that Mrs. Kehoe's mental impairment was so debilitating that she was unable to function in a capacity to execute the deed, due to her medication and due to her medical condition.  Because the trial court placed great weight upon the physician's opinion, and because a trial court generally has great discretion with respect to considering the credibility of the various witnesses who testify at trial, the Court of Appeals did not find that there was sufficient reason to reverse the trial court's ruling.   

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.

Federal Appeals Court Rules Against Estate Of Pinup Anna Nicole Smith, "Widow" Of Elderly Texas Billionaire

One of the longest-running estate and trust battles on record added another chapter with the Ninth Circuit Court of Appeals' recent ruling in the saga involving Anna Nicole Smith, now deceased, and her estate's attempt to claim a chunk of her former husband's billion-dollar fortune.  Specifically,  Anna Nicole, stripper-turned-Playboy model-turned-pop-celebrity, married elderly oil magnate J. Howard Marshall in the last year of his life.  She later claimed that Marshall promised her over $300 million although there was apparently no written documentation supporting the gift. 

A msnbc.com article from a couple of days ago summarizes the 15-year legal battle and also contains a link to the 68-page ruling: 

"The convoluted dispute over J. Howard Marshall's money has its roots in a Houston strip club where he met Smith. The two were wed in 1994 when he was 89 and she 26. Marshall died the next year and his will left his estate to his son.

Smith challenged the will in a Houston probate court, alleging the billionaire's son illegally coerced his father to exclude the former Playboy model from sharing the estate. She alleged that her husband promised to leave her more than $300 million above the $7 million in cash and gifts showered on her during their 14-month marriage.

While the probate case was pending in Houston, Smith filed for bankruptcy in Los Angeles, alleging in federal court filings that her husband promised her a large share of the estate.

In late 2000, the bankruptcy court awarded Smith $474.75 million, which a federal district judge reduced to $89.5 million in 2002.

Between those two decisions, a jury in the Houston probate court ruled in March 2001 against Smith. The jury found the billionaire was mentally fit and under no duress when he wrote out a will that left everything to his son.

Since then, the two sides have been fighting over which court to obey.

Smith argued that the federal courts were in charge because the bankruptcy court was the first to rule.

Pierce Marshall countered the decision was the jurisdiction of the probate court, because that's where the first legal action was filed and the site of the only full-blown trial."

Ultimately the Ninth Circuit Court of Appeals agreed with the estate of Marshall's son (who died in 2006) and against the estate of Anna Nicole (you will recall that she died of an apparent drug overdose at age 39 in 2007).  Specifically, the Court held that the bankruptcy court did not have authority to decide a probate dispute such that its $475.75 million award was a mere advisory opinion.  The Court also concluded that the lower court should have relied upon the probate jury's verdict against Anna Nicole and dismissed the entire case rather than merely reducing the award to almost $90 million. 

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.

Arkansas Court Of Appeals Rejects Cousin's Attempt To Set Aside Gifts To The Decedent's "Yardman"

One common thread running throughout this blog since its inception has been the issue of competency, i.e., the ability of a person to make informed decisions.  Conflicts often arise when ill or elderly people are claimed to have made signficant decisions regarding disposition of their property shortly before they died---sometimes the decision will be legitimate, the culmination of some long, thought-out plan that just never was memorialized on paper until shortly before their death---whereas sometimes the "decision" will be illegitimate, the product of undue influence or overreaching by a dishonest relative, family friend, or advisor.  Whatever the facts and circumstances, it can be difficult to prove that the person did not have competency to make the decision that they purportedly made.  A recent Arkansas Court of Appeals decision demonstrates that the outcome of these disputes usually boils down to the specific evidence that was presented to the trial court, and ultimately what evidence that the trial court found to be the most credible. 

For example, on March 3, 2010, the Court of Appeals ruled in the case of Deslauriers v. Marilyn Irene Deslauriers Revocable Trust, 2010 Ark.App. 211.  An appeal from Lonoke County Circuit Court, the appellant (Killeen) attempted to invalidate certain documents (quitclaim deed, revocable trust, will, etc.) executed by her cousin, the deceased, during and after her 2005 stay in a hospital due to a stroke.  As a result of those documents, the appellee (Richard, the deceased's "yardman") received the bulk of the cousin's estate.  Killeen filed suit after the cousin's death to contest the validity of the documents in question, contending that the cousin was not competent to execute them due to her medical condition. 

Under Arkansas law, the party contesting the validity of a will generally has the burden of proving, by a preponderance of the evidence ("more likely than not"), (1) that the decedent lacked mental capacity at the time the will was executed or (2) that the decedent was acting under undue influence.  The Deslauriers Court affirmed the trial court's ruling that the cousin attempting to set aside the documents did not satisfy that burden. 

Killeen presented the testimony of multiple doctors who had treated the deceased around the time of her execution of the documents, and they all testified  that she suffered from dementia and would purportedly be incompetent to sign the documents (though they were admittedly not in attendance at the signing).  Medical records also demonstrated a range of impairment (from mild to severe) at different times during the relevant time period.  Killeen likewise presented the testimony of two non-medical witnesses, one of whom contended that  the deceased was mentally incompetent (in their experience) and both of whom testified that the deceased intended to keep her property "in the family."

Richard presented the testimony of the lawyer whom the cousin used to prepare the documents in question, and he testified that he was very careful to determine whether his client was legally competent to execute the documents.  The attorney also testified that he had been hired to prepare a power of attorney so that Killeen and Richard could be placed in charge of the deceased's business affairs, and that Killeen herself believed the deceased to be an odd person but very competent.  Two other witnesses also testified, in a manner favoring Richard's position, to the extent that they were disinterested employees working at the hospital where the deceased was treated and they observed her as competent when they witnessed her signing of the will.   Richard also offered other evidence in the form of the attorney testifying that he met with the deceased several times after her initial execution of the documents, and in the  form of a doctor who treated the deceased remarking that he was impressed how mentally capable (though not physically capable) she remained after her stroke.

In sum, the trial court concluded that the cousin did not prove incompetency and that the deceased was sufficiently competent at the time that she executed the documents.  The Court of Appeals affirmed, holding that while proof of medical condition around the time of the execution of the documents is relevant and important, ultimately the medical condition at the time of execution is paramount.  The Court seemed to attach particular significance to the testimony of the witnesses who were actually in the room when the decedent signed the documents in question.  Observing that it is possible for a testator to execute a document during a "lucid interval" in a period where they may otherwise be incompetent as a general matter, the case generally demonstrates the difficulty that a party can have in attempting to prove a testator's   incompetency.