Saturday, February 28, 2009

Undue Influence: The Latest From The Virginia Supreme Court

The Virginia Supreme Court handed down a new decision on Friday dealing with several aspects of estate litigation in Virginia, including joint bank accounts, confidential relationships and the law of undue influence. People keep getting themselves in trouble over joint bank accounts.

Will contest cases and lawsuits to set aside deeds conveying real estate often are based on undue influence (meaning that the person was unduly influenced or coerced into making the will or deed). In this new case, Parfitt v. Parfitt, the Administrator of an estate challenged the dealings of a son regarding a joint bank account held by the son and his mother.

The son had been added to his mother's account to help with her financial affairs (like writing checks for her) after she became ill with cancer. But according to the court opinion, as so often happens, son (and his wife) apparently used a good bit of the money for themselves.

The Court noted (expanding on some recent cases dealing with the same subject) that a presumption of undue influence can arise merely when a "confidential relationship" exists between the parties. Though the Court discussed in some detail what constitutes a confidential relationship in these situations, the important aspect of this case is that being a joint account holder with someone constitutes a confidential relationship for purposes of the law of undue influence in Virginia.

So, if you are named on a joint account with a family member (other than a spouse) or a friend, you must be extremely careful in using funds out of that account that were deposited by the other party. Any personal benefit you get from being on that account could be subject to attack down the road.

The Parfitt case has more interesting aspects to it that I will try to discuss in a later post.

Saturday, February 14, 2009

Who Gets Grandma's "Stuff"?: Battles Over Tangible Personal Property

Here is a link to a news item from Kansas City about families in estate disputes over sentimental heirlooms, a punch bowl in one case. These disputes over a loved one's "stuff" (the legal term is tangible personal property) highlight the often emotional nature of estate and probate litigation, and perhaps more importantly, how the economics of such disputes most of the time just don't make sense.

The writer of the article makes the point: "It’s not about the financial worth of the item. The families are wealthy. They’ve spent more on legal fees than the bowl is worth."

I have seen exactly the same thing in several cases I have been involved in. Some high value items such jewelry or rare antiques are one thing, but with emotions running high because of long family histories that have little to do with the stuff, families spend crazy amounts of money fighting over what many may call junk.

How can you guard against this? Well, there is no fool proof way to make sure all hell doesn't break loose after you're gone, but there are a few ways to deal with the "stuff." One is to spell out exactly who gets what in your will. But that's often not practical. Many wills empower the executor to dole out the tangible personal property as he or she sees fit. But this can put the executor in a very uncomfortable position (i.e., one sibling deciding what his brothers and sisters get). Some wills create a selection order and then each family member picks an item until everything is gone. And some people draft their wills with certain sentimental or high dollar items going to specific people and then a direction that everything else be sold, with the proceeds split among family members. My opinion is that in most cases, the last method works best, assuming there is enough stuff to warrant a sale.

How you decide to handle it is a personal choice depending on you and your family's situation. The point is, don't assume that it will all work out fine after your gone: Do your best to make your wishes clear, and set out in such a way that they will be carried out.

Tuesday, February 10, 2009

Estate Distributions: No Rush, It's Just My Inheritance

Lately, I have been involved in several estate disputes where the biggest problem has been an unreasonable delay by the personal representative in distributing the assets of the estate to the beneficiaries. Often, there are good reasons for delay, including claims of creditors or the need to sell real estate. But in several instances, there has been no good reason other than spite (when the personal representative is at odds with the beneficiaries based on long standing personal issues) or the executor or administrator is just not tending to his or her job.

The bad news for beneficiaries is that there is only so much they can do to force a distribution. Under Virginia law, beneficiaries cannot demand a distribution during the first six months an estate is being administered. After that, according to the applicable statute, in order to force a distribution, the beneficiaries must file a petition with the court and may be required to post a bond (which has to be purchased through an insurance agency). So, beneficiaries are forced to incur litigation costs and insurance premiums, with no guarantee that they will be reimbursed for simply requiring that the executor or administrator do what he or she is supposed to do.

If there is a good reason to delay distributions, fine. But if not, the law should hold personal representatives more accountable for unreasonable or petty delay.

Thursday, February 5, 2009

Adoption and Inheritance in Virginia

Here's a link to a recent Virginia Circuit Court case involving whether a child adopted by a step-father is still an heir of her biological father. The answer is yes, because of a Virginia statute that directly addresses this situation. I recently handled a case with almost identical facts, and the result was the same. Remember, this is the result when there is no will - it can be changed by the right language in a will.

Estate Litigation: A Broad Term

When someone uses the term "estate litigation" in Virginia, or any other state, the term can refer to a number of issues: will contests; suits claiming that the personal representative, whether executor (with a will) or administrator (without a will), breached their fiduciary duties; disputes over the meaning of terms in a will or trust; or disputes over what are really "non-probate assets," meaning assets that pass outside of a person's will or estate, such as joint bank or stock accounts, or real estate held jointly.

These disputes therefore involve matters both within and outside of a person's estate, but generally refer to problems arising out of what happens to a person's property, or the duties relating to that property, after someone passes away.

Wednesday, February 4, 2009

Joint Bank Accounts: Be Careful

People often set up joint bank accounts with children or other family members for the specific (and only) purpose of getting that child's or family member's help in writing checks and paying bills. What they don't understand is that, in many cases, when they die the child or family member named on the account with them will become the owner of all of the money in that account, regardless of what their will says.

Here's what Virginia law says about a joint bank account with two (or more) names on it:

§ 6.1-125.5. Right of survivorship

A. Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.

In plain English, that means that unless your joint account specifically states that it does not go to the other person named on the account, that's who gets it (again, regardless of what your will says). To make matters worse, your child who wasn't on the account (the child who didn't get the money) has a higher burden of proof (clear and convincing evidence) than in most civil cases.

The bottom line: If you want to add someone to your account to be able to write checks for you, give them signature authority only rather than making them a joint account holder with you. If you ask, your bank can do that.


Thanks so much for taking the time to visit this site. My goal with this blog is to inform and help the public, other lawyers, law professors and especially those facing issues in probate, will, trust and estate litigation in Virginia. What you read here are my opinions and thoughts (and no one else's) regarding what is important and recent in this growing area of law and litigation. I welcome your feedback, the good, the bad and the ugly, and hope to learn much from your comments. Thanks again for the taking the time to read this site, and what may at times be my ramblings.