The Perils of Probate, Part Two
November 25, 2009
In my last blog post I described the emotional and practical reasons why there is so much probate litigation and how to hire an experienced probate litigator; in this post I’ll mention some common contested probate allegations and measures that can be taken to avoid them or to keep them from spiraling out of control.
The Will is invalid because the testator was incompetent. Competency is a complicated issue. My friend Jay Polk has written a treatise that is more than 100 pages long describing the different tests for competency in different probate settings. For a will to be valid, the maker of the Will called the “testator” must meet 3 tests:
- The ability to know the nature and extent of his property;
- The ability to know his relation to the persons who are the natural objects of his bounty and whose interests are affected by the terms of the instrument; and
- The ability to understand the nature of the testamentary act.
This is fertile ground for disputes and must be determined on a case by case basis which is what makes such contests expensive. Often a forensic geriatric psychologist testifies after reviewing the medical records, and treating physicians may be called to testify with varying degrees of success depending on the nature of their specialty and the degree of contact. Lay witnesses and the nature of the Will itself may be important elements of proving a testator’s competence. In the end it is a facts-and-circumstances decision for which very little assurance can be given at the beginning of the case; even in some of the more outrageous cases.
Undue influence was exerted on the testator. The second most popular reason for litigation is an allegation that someone exerted undue influence on the testator so that the Will does not represent the testator’s true intentions. Any time property is not left strictly to bloodline descendants in equal shares, this issue may arise. Expensive battles ensue over whom Mom loved best or who took care of Mom. Just about any fact pattern can support a good faith belief of undue influence, but changes to an estate plan on a death bed or after entry into a care facility are particularly fertile fields for such claims.
The original Will cannot be found. This is not often asserted in Arizona because a copy of the Will can be admitted to probate if certain conditions proving its authenticity exist. But it can lead to a full contested matter as to whether those conditions exist.
The Personal Representative is not fairly liquidating or distributing the assets of the testator. An increasingly common concern is that the person selected to administer and distribute the estate does not do so either in a timely or equitable manner. Unlike the issues described above, this is an issue that arises only after the probate has been opened and the administration has not proceeded the way a distributee expected or desired. Although efforts to remove the Personal Representative are common, those actions seldom end well for anybody and it is more common to get a court order compelling the Personal Representative to complete the work.
All of these issues could be avoided or minimized if the testator began early enough to make and update a plan, and kept all the distributees informed along the way. Because disaffected relations are so common, the best prevention is to have a clear Will or trust that leaves little room for dispute, and name a Personal Representative whose loyalty and understanding of the complex family relationships is unquestioned.
Even in the best of circumstances, probate contests are inevitable and the best results are often obtained when the parties are reasonable, think about the result before engaging, and pursue a course that is likely in the end to be the most palatable to all litigants. Otherwise, a full blown Will contest will be expensive and protracted.
The Perils of Probate, Part One
November 18, 2009
Probate litigation is a burgeoning and fertile practice area for lawyers. There are many reasons why probate cases spawn litigation, but most grow from inadequate or defective estate plans nurtured by emotional dissatisfaction or greed.
As an estate planner since 1979, I encourage my clients to create an estate plan that takes into consideration not only the nature and size of their estate, but the hopes, dreams, aspirations and the character of their heirs and others interested in their estate.
If all goes as intended, everyone is either satisfied or at least left without reasonable grounds to become embroiled in an expensive controversy. However, all too often, estate plans are not properly implemented–with costly and often destructive results.
Leo Tolstoy opens Anna Karenina (1961) with the now famous saying “All happy families are like one another, each unhappy family is unhappy in its own way.” That sums up probate and probate litigation. Well adjusted families come together after the death of a patriarch or a matriarch to console one another and then transition the wealth remaining after paying the bills in accordance with the decedent’s intentions expressed by a Last Will and Testament, a trust, or variety of other devices using beneficiary designations.
On the other hand, in contested probate matters, the litigants are often distantly related or not related and often don’t even know one another. They seldom share a functional emotional bond and they have no familial reason to reach a reasonable solution.
As a result, other feelings become paramount, usually greed, but sometimes hurt emotional feelings that remain unresolved interfere in rational thinking. The process frequently snowballs out of anxiety and lack of good information. Usually the emotions, greed or otherwise, escalate before the litigants seek legal counsel and the litigants become emotionally entrenched in their positions, however unreasonable. This phenomena was recently explored in an Augusta Chronicle article that described why a current estate plan was crucial to avoiding probate contests.
Lawyers are served up on the horns of a dilemma. Their new client is entitled to competent legal representation and such representation may cost more than the amount in controversy. Litigation is expensive with probate litigation fees for experienced counsel often between $300 and $400 an hour. Additional experts are usually required. If the competency of the decedent or the due execution of the Last Will and Testament is involved, there will be doctors and other experts involved, as well as fact witnesses to be deposed. Litigants need to be aware of the potential costs before proceeding; and rational solutions–however unfair–suggest themselves when a small amount of money or property is in question.
Mediation is often a good solution, and most efficient if conducted early in the litigation before legal fees and costs run amuck.
A litigant’s best friend is an experienced lawyer who understands the probate process and the probate law, who can reasonably forecast the likely results, and who works toward that result in as uncomplicated a manner as possible. In addition to the usual questions about how the lawyer charges, how long he has practiced law, and what qualifies him or her to represent you in this matter, good questions to ask before hiring a lawyer for a contested probate matter include:
- Describe your specific recent experience in probate matters.
- How much of your practice is devoted to probate litigation?
- What do you do the rest of the time?
- After hearing my side of the story, what else do you want to know before forming an opinion of likely outcomes?
- Based only on my story, what do you perceive to be the most likely outcome and what other outcomes are reasonably possible?
- What factors determine my total overall cost and what do you reasonably expect the cost to be if the case follows the path you anticipate?
- If more than 1 lawyer is to work on my case, how will those lawyers bill for their time?
- What additional facts would change your mind about the outcome or the cost?
- Do you carry malpractice insurance and if so in what limits?
- Have you ever been subject to professional discipline? And if so, explain.
In my next post, I will explain some of the common types of contested probate litigation and how to avoid them.
Forever to Never Retirement Accounts
November 11, 2009
Does never paying income tax on your retirement income sound too good to be true? Well believe it, because on or after January 4, 2010, anyone can convert their traditional IRA to a Roth IRA, pay the taxes in 2 installments in October 2011 and October 2012 and never again pay income tax on any amount ever withdrawn from the account.
Should you do it? Kiplinger’s explains the benefits of the Roth IRA. With stocks down from historical highs and tax rates at all time historical lows, now is the best time to convert to this long term investment strategy. Read Kiplinger’s explanation of when to switch.
Before 2010, high earners were prohibited from establishing or converting to a Roth account, but no more. And for 1 year only, the tax can be paid in 2 installments, stretching the due date on half of the taxes due until the extended due date of their 2011 tax return!
But wait, there’s more information that hasn’t been widely disseminated! If the value of the account goes down before the extended due date on the 2010 return, you can reconvert back to a traditional IRA, pay no tax until the money is withdrawn and then convert the lower amount back to a Roth account the following year.
If you believe the value of the stretch out over your lifetime outweighs the benefit of paying the tax over 2 years, 22 and 34 months after you’ve converted, think about this – If your tax and financial advisors haven’t told you (1) about this opportunity and that (2) income taxes are at an all time historically low rate and headed nowhere but up, you should ask.
Because of the unique features of Roth IRAs, no minimum required distributions during your lifetime, MRD for your beneficiary, no taxes on any of the money withdrawn from the account, you have a once in a lifetime opportunity to make a tax decision that will benefit you, your spouse, and your descendants by protecting your nest egg from ever being subject to income tax again. And by paying the tax in advance at the lowest historical rates, you are also reducing potential estate taxes.
With all of these benefits, shouldn’t you at least be considering a Roth IRA?
You Think It’s Your Time To Go? “Not So Fast,” Says the State of Arizona
November 4, 2009
Pablo Picasso's "Death of Casagemas"
On July 13, 2009 Arizona governor Janet Brewer signed HB 2616 into law. The law, hailed by the right to life movement as a great victory, intrudes on your right to privacy and injects the state into the midst of the dying decision of every Arizonan without a living will that expresses the intention to die with dignity.
The law requires every petition for the appointment of a guardian for an incapacitated person to contain a statement that the authority may include the authority to withhold or withdraw life sustaining treatment, including artificial food and fluid.
The law forbids any surrogate without written authority from the patient or a court order from consenting to or approving the permanent withdrawal of artificial administration of food and fluid.
The law provides an automatic stay of not less than 5 days to allow the entry of any order allowing food and fluid to be withheld or withdrawn to be appealed
The law creates a presumption that the absence of a living will means the patient in an irreversible coma or persistent vegetative state did not intend to have food and fluids withheld or withdrawn and the patient intended that all procedures, including medically invasive procedures, be administered in an attempt to prolong the patient’s life. The law provides stringent guidelines for rebutting the presumption.
Personally, I do not believe the state or any strangers should be involved in any medical decisions, including the most difficult and emotional decisions facing loved ones when the patient is dying. I believe in the right to privacy, including the right to exercise life and death decisions for your spouse, parent, or child, when that decision is supported by overwhelming medical evidence. I think your doctors are a better source of information than your government.
However, I respect your right to disagree, and now the state of Arizona gives you a clear choice: If you do not want food and fluid to be artificially administered once you are in an irreversible coma or persistent vegetative state, you should be certain you have a living will that clearly announces your intentions and a valid health care power of attorney appointing the people you want to direct your medical care if you are unable to do so.
If you fail to create a living will, you and your loved ones may endure the pain and suffering of the full weight of the judicial system oppressing you at your most vulnerable moment.
Protection or meddling? You decide.
Living Wills, health care powers of attorney, and HIPAA declarations are part of every estate plan prepared by our firm. We will explain to you the effect of each document and assure that your choice will be plainly heard when needed.