Another Oral Contract to Make A Will - You Better Do Your Part

A recent Virginia Circuit Court case from Norfolk (Browder-Martin v. Meneses) highlights one of the main elements of an oral contract to make a will case - performance. In the case, the plaintiff agreed with the decedent to care for the decedent for life in exchange for getting the decedent's home. The decedent actually signed a will in accordance with the agreement. But, after caring for the decedent for several years, the plaintiff moved away and had her son and daughter-in-law care for the decedent - for which the they were paid by the decedent. Decedent ultimately signed a new will - leaving her home to her granddaughter instead of the plaintiff. So, decedent dies and plaintiff files suit alleging a breach of the contract to make a will.

The Court said nope. The plaintiff agreed to provide care but then handed it off to her son and daughter-in-law, who were paid by the decedent. Keeping it simple (and getting it right, in my opinion), the Court said that the plaintiff had not fulfilled her promise - caring for the decedent for the rest of her life.

In Virginia (and most states), personal services contracts are not assignable, meaning you can't contract to provide services (as opposed to goods or merchandise) to someone and then have someone else provide them (this is a gross oversimplification, but you get the idea).

The bottom line is: If you are going to prove an oral contract to make a will in Virginia based on a promise to provide care or services to someone, then you have to provide the services.

No Contest Clauses in Virginia: The Latest

I've posted previously about Virginia law regarding no-contest clauses in wills and trusts. As I wrote before, the Virginia Supreme Court has held specifically that such clauses are valid in wills and trusts, and should be "strictly enforced."

A Virginia Circuit Court recently enforced a no-contest clause (formally called an in terrorem clause) in a will and held that a beneficiary (wife) who challenged the will of her late husband was entitled only to $100, rather than the significant amount she would have inherited under the will she challenged. Ouch. The dispute involved a stepmother and her stepsons in multiple lawsuits over the husband/father's estate that went on for several years and made a trip to the Virginia Supreme Court. The procedural history of the dispute is fairly complicated, and her attacks on the will were indirect, but the Court found that she nevertheless was trying to get more than (and therefore dispute) what she was entitled to under the will.

The point is that if you are going to challenge a will in Virginia that has a no-contest clause, you better have a good case, or you could go through a lot of effort and end up with little or nothing (and have spent a good amount in legal costs).

Oral Contracts To Make A Will: Possible, But Not Easy

A last will and testament is a written document, signed by the person who made it. Surprisingly, though, are situations where a person promises to "leave" something to someone after they die if the that person does something for them during their life. These are called "oral contracts to make a will" or "oral contracts to devise." A typical example: John the widower says to the neighbors, a young couple named Tom and Ann: "Take care of me and my house for the rest of my life, and I will leave you my house." Tom and Ann say okay, and spend several years doing just that. But John never makes a will leaving them the house, and ends up dying without a will. John's sole heir is his son, Luke, who lives three states away and didn't do much of anything to care for John during his later years.

Under the law of intestacy (i.e., dying without a will) in Virginia, everything John owned goes to Luke. But, Tom and Ann say, "Wait a minute, we made a deal with John, and we lived up to our end. We want the house." Luke says, "Sorry." Well, no so fast.

This is the typical situation where Tom and Ann may seek to enforce an oral contract to make a will. And what is surprising is...that Tom and Ann may win this one. Under Virginia law, an oral contract to make a will can be successfully proved. But, and it's a big BUT, you have to be able to prove the existence of the oral contract, and that you lived up to your end of the bargain, all by clear and convincing evidence (a higher burden of proof than the normal preponderance of the evidence).


AND, in order to prove the contract, you have to have a lot of evidence to prove this agreement other than your own testimony. If it's simply your word, even if it is uncontradicted, you'll lose the case.

The difference is highlighted by two cases, one a recent Virginia Supreme Court case, Virginia Home For Boys & Girls v. Phillips, and the other a circuit court case that I recently handled. In the Phillips case, Phillips had only his own testimony, all of which was essentially uncontradicted. But, under Virginia law, you have to have independent corroboration of your testimony from other witnesses or other documentary evidence. Your own testimony is not enough, no matter how credible you are or if your testimony is not in dispute.

In my case, my client testified about the agreement that his father and him reached (son would take care of father for the rest of his life, and in exchange son would get everything of his father's after he died). But we had several other witnesses who also testified that the father told them about the agreement and/or made statements that my client was to get everything after the father passed away. And we had a lot of evidence about the care that my client provided for his father.

In Virginia estate litigation, oral contracts to make a will are hard cases to win. You have to have a lot evidence - and the right kind of evidence.

No Contest Clauses In Wills and Trusts

No-contest clauses in wills are fairly common. A no-contest clause (the fancy legal term is in terrorem clause) in a will is a provision that states that any beneficiary named in the will who contests the will or any portion of it forfeits any property to be received by that beneficiary under the will (hence, they are also sometimes referred to as forfeiture clauses).

The obvious purpose of these clauses is to prevent family disputes and challenges to the will after the testator dies.

No-contest clauses are valid in Virginia. Some states (not Virginia, so far at least) recognize a "probable cause" exception to enforcement of no-contest clauses, meaning that if a challenge to the will was made in good faith and with reasonable grounds, the beneficiary does not forfeit property left to him in the will.

Keep in mind that the will itself has to be valid for the no-contest clause to be valid. If the whole will itself is ruled to be invalid, on the basis of the mental incompetency of the testator, for example, then the no-contest clause is no good.

In a 2009 Virginia Supreme Court case, the Court held for the first time that no-contest clauses in trusts are valid as well. No real surprise there. The case is nevertheless interesting. It involved a daughter who attempted to qualify as the personal representative of her father's estate based on the position that Dad died without a will. In fact, Dad did have a will that directed his property be transferred to a trust he had set up prior to his death. The distribution of his property under the trust was very different than under the law of intestacy. By qualifying as personal representative of her father's estate as if he had no will, daughter would significantly alter her father's estate plan by essentially ignoring the trust. But, the Court held that trying to qualify as administrator did not violate the no-contest clause in the trust. The will itself did not have a no-contest clause.

While this is probably a correct ruling from a technical legal standpoint, it highlights that it is very hard to foresee every possible circumstance that may arise after you pass away.

Think You Have a Claim? Don't Wait

Another typical situation I see quite a bit in estate litigation: After years of taking care of their own finances, a loved one asks you (a child or sibling) for help. Or you (the child or sibling) step in after realizing that the loved one can no longer manage his or her affairs. After digging through a mound of bills, bank and/or brokerage statements and other stuff, it appears there are some questionable transactions involving another family member or friend. Possibly a joint bank account was set up, or large sums of money were "given" to the family member or friend.

Was this all on the up-and-up, or has your loved one been taken to the cleaners? Often, it's hard to tell. But, my advice is to get to work trying to figure it out, assuming that is the role you are supposed to be playing.

If the questionable transactions are in fact the result of fraud or undue influence, then under Virginia law you (or your loved one) likely only have two years from when you (or your loved one) knew or reasonably should have known about the claim to file a lawsuit to try and do something about it.

I have people come to see me fairly often that have waited too long, and what was probably a claim is barred by the statute of limitations, meaning the claim simply cannot be now be brought.

A recent case from Fairfax Circuit Court highlights the risk. A suit was filed claiming that a change of beneficiary designation form was procured by fraud, namely forgery. The forgery allegedly occurred in May 2006, but suit was not brought until February 2009, almost three years later. The Court has ordered a hearing to determine when the forgery should have reasonably been discovered. We don't know the result yet, and there may indeed have been a good reason for not discovering the forgery for some time.

But if you find yourself in that situation, don't waste time; investigate what happened as quickly as you can.

Breach of Fiduciary Duty: Make Sure You Can Prove Damages

In a Virginia Supreme Court case from earlier this year, SunTrust Bank v. Farrar, the plaintiff beneficiaries did not establish sufficient proof of damages in a breach of fiduciary duty claim against a trustee, and ended up losing. They had sued claiming that the trustee should have sold a coal mine at some point during a ten year-plus period, but didn't, and therefore caused them damage. But they left Hamlet out of the play. Specifically, they failed to introduce evidence of a possible sale during the period they were complaining about.

This case highlights the mistake of overlooking what appears to be the obvious. I'm not casting stones here; in cases like this, it is easy to get so wrapped up in the more complex legal issues, that the basics can be overlooked.

If you're going to sue a trustee for failing to sell a trust asset at the right time, you need to show that the trustee could have sold the property. Apparently, the trustee had not done much to market the property, but the Court held that without proof that someone could or would have bought it, the trustee could not be held liable for breach of fiduciary duty for not selling it.

This case should also be a warning to beneficiaries of trusts and estates to hold the fiduciary's feet to the fire before bringing a claim (i.e., "What are you doing to market this property"?).

It seems simple with the benefit of hindsight, but this case should be a reminder to all that it is not that hard to miss the obvious.




(P.S. Sorry for the long absence. Between vacations, work and a host of other things, I have not had time to post for quite a while. Things seem to be settling down, so I should be posting more often.)

Another Undue Influence Case ... With Some Twists

I read about a recent trial involving a challenge to a will and transfers of property during the decedent's lifetime based on undue influence, and as to the will on the alternative basis that it was forged. The case, Leitner v. Shimanski was against the decedent's housekeeper, who moved in with the decedent for a period of time before the decedent died. The decedent transferred two BMWs and about $67,000 in cash to the housekeeper before he died, and before he died executed a new will leaving everything to his housekeeper, effectively disinheriting his three daughters. The jury invalidated the will (though did not indicate whether on the basis of undue influence or forgery) as well as the lifetime transfers.



The case was tried before a jury by Brian Brake, an attorney with the Lenhart Obenshain firm in Harrisonburg, who I talked to about the case. A couple of things about this case are interesting.



First, a Virginia will contest is normally brought under a specific statute that calls for a jury to determine if the will (or one of several wills) is the true last will and testament of the decedent. Virginia courts have generally held that a will contest brought under that statute is limited to determining if a will or one of several wills is valid. So normally, claims related to non-probate assets cannot be heard in the will contest. In this case, the plaintiff initially brought two suits, the will contest and a separate suit challenging the lifetime transfers. Ultimately, the defendant agreed to have all of the claims heard in one trial by the jury. My guess is this was a cost-saving move (one trial instead of two), but doing it that way allowed the jury to hear a lot more evidence of undue influence since all of the evidence related to the lifetime transfers was introduced in the case as well.



The other interesting aspect of this case is the court allowed the jury to award attorneys fees to the plaintiff (the amount will be set by the court at a later hearing). As I discussed in my March 14, 2009 post, it can be difficult to recover attorneys fees in civil litigation generally. One exception is if the plaintiff can prove actual fraud. Undue influence is considered a type of fraud by Virginia courts, so it is possible to get an award of attorneys fees in an undue influence case. But in my experience, this is the exception rather than the rule.

Virginia Adopts Uniform Power of Attorney Act...Almost

The Uniform Power of Attorney Act (the "Act") was passed by the Virginia General Assembly in the past session - sort of. It's confusing when you look at the actual Acts of Assembly that sets out the bill as passed, but the bottom line is the Act will not go into effect on July 1, 2009, as it states in the actual text of the Act. Rather, the very last line of the bill as passed states:

That the provisions of this Act shall not become effective unless reenacted by the 2010 Session of the General Assembly.

I spoke with Senator John Edwards, the sponsor of the bill, and he said that the reenactment provision was needed to get the bill passed. He expects the Act to be re-introduced next year and passed in a form close to what was passed this year. But he said that if anyone has comments or suggested changes to the Act as passed this year, they should feel free to send them to him.

The delay is in part designed to give interested parties like lawyers, banks and other businesses time to review and analyze the Act so that everyone understands how the Act will change the way that POAs are used in Virginia.

There has been some confusion among folks I have talked with about the effective date of the Act, so I thought I would post and try to clarify when and how the Act likely will become law in Virginia.

Will Formalities: Some Statutory Relief

Based on the documents I see that are pretty clearly intended to be a person's last will and testament, it is clear that many folks don't know what is required to validly execute a will under Virginia law. From online and office supply forms, to handwritten and typed wills, I often see documents people intend to be their will, or a change to their will, that don't comply with the legal requirements.

Though there are a few exceptions and some gray areas, generally a typed will must be signed by the person whose will it is (the testator), and signed by two witnesses present at the time the testator either signs the will or acknowledges to the witnesses that it is his or her will. Most often, people get tripped up by the requirements related to witnesses. (A will can also be handwritten, but only if it is signed and wholly in the testator's handwriting and two disinterested people can verify the person's handwriting after death).

These technical failures to comply with the statutory requirement have led to many Virginia will contests. But, the point of this post is not to cover all of the gray areas and potential pitfalls of complying with the requirements of a will. Rather, it is important to know about a Virginia statute that can save a will if the testator didn't comply with the statutory requirements.

Virginia Code Section 64.1-49.1 states:

Although a document, or a writing added upon a document, was not executed in compliance with §64.1-49 [the statute that sets out the requirements for executing a will] the document or writing shall be treated as if it had been executed in compliance with § 64.1-49 if the proponent of the document or writing establishes by clear and convincing evidence that the decedent intended the document or writing to constitute (i) the decedent's will, (ii) a partial or complete revocation of the will, (iii) an addition to or an alteration of the will, or (iv) a partial or complete revival of his formerly revoked will or of a formerly revoked portion of the will.

The remedy granted by this section (i) may not be used to excuse compliance with any requirement for a testator's signature, except in circumstances where two persons mistakenly sign each other's will, or a person signs the self-proving certificate to a will instead of signing the will itself and (ii) is available only in proceedings brought in a circuit court under the appropriate provisions of this title, filed within one year from the decedent's date of death and in which all interested persons are made parties.

The purpose of the statute is clear and well-intentioned: If someone doesn't comply with the witness requirements, it can still be a valid will if it is clear that's what the person intended, though a lawsuit will have to be filed to get the will declared valid. The goal is clearly to prevent some pretty silly lawsuits and to allow a person's clear wishes to be carried out despite a failure to comply with the statutory requirements.

This statute was enacted in 2007, and no reported cases have yet applied the statute (though the Virginia Supreme Court mentioned it in a footnote in a 2008 case). I have a case right now that will hinge in part on whether this statute will save a will that was not properly witnessed or otherwise executed in compliance with the statutory requirements. I'll let you know what happens.

Powers Of Attorney: Useful But Dangerous

Powers of attorney are great legal tools when used properly and with good intentions, as is most often the case. Recently, however, I have seen an increase in cases involving abuse and misuse of POAs.

A power of attorney (POA) is a legal document where you (the principal) give someone else (the attorney-in-fact or agent) the power to do one or any number of things on your behalf, from selling real estate to signing checks to entering into contracts. A "general" power of attorney grants the power to do most anything, in theory anyway. A "special" power of attorney grants the power to do one or a limited number of things (like sell a particular piece of real estate). A "durable" power of attorney means that the POA stays in effect even if the principal becomes mentally incapacitated. The most common POA is a durable general POA.

A power of attorney should be part of most people's estate planning (along with a will and an advanced medical directive or living will). If you are in a car accident, for example, and are seriously hurt, a POA allows the attorney-in-fact to handle your business affairs while you are unable to.

But giving someone the power to act on your behalf in legal or business matters is giving someone else a great deal of power. In the recent cases of misuse, we are seeing family members take control over the principal's finances, including taking over bank accounts and essentially taking the money.

Generally speaking, if you are acting as attorney-in-fact for someone else, you cannot do anything using the POA that benefits yourself. This is called "self-dealing" and is considered a breach of fiduciary duty. The courts consider such self-dealing as presumptively fraudulent. If you do it, you are inviting a lawsuit down the road, often even if the principal directs you to do it. (For example, a principal tells you to make a gift to yourself or your family, you do it, the principal dies, and the only evidence that the principal told you to do it is your own testimony. Not a good situation to be in.).

There are circumstances where such might not be the case, but if you use a POA to get money that belongs to the person that granted you the power, chances are it will not hold up in court.

I'll have more to say about ways to avoid POA problems in upcoming posts, both as the person granting the power and the person named as attorney-in-fact.

Attorneys Fees in Virginia Will Contests and Estate Litigation

Will contests and other forms of estate litigation can be lengthy and expensive. One of the biggest misconceptions about civil litigation generally relates to the recovery of attorneys fees by a successful litigant. While there are exceptions, many are surprised to learn that the general rule is that attorneys fees are not recoverable in civil litigation, including will, trust, estate and fiduciary litigation.

That means that, in most cases, if you file a suit to right a wrong, recover damages or money or property that rightfully belongs to you, and you win, the attorneys fees and other litigation costs you incurred likely will not be recovered as part of a verdict in your favor.

Under what is generally called the "American rule", attorneys fees are not recoverable in litigation absent a contractual provision allowing their recovery, or a statute or law that specifically authorizes an award of attorneys fees. Courts have carved out a few narrow exceptions to this rule, including cases where actual fraud has been proved.

In will, trust and estate litigation in Virginia, there are only a few statutes that authorize recovery of attorneys fees in litigation (such as under Virginia's version of the Uniform Trust Code), and there is almost never a contract in these types of disputes. In fact, in certain situations, the executor of an estate may be able to pay his attorneys fees out of estate funds (as opposed to his personal funds) in defending himself against charges of misconduct. That's right, as a beneficiary, you may help fund the alleged wrongdoer's defense!

In most situations, if you successfully challenge a will, your attorneys fees and other litigation costs likely will not be recoverable unless the will is declared invalid based on outright fraud by someone.

From a practical standpoint, the cost of litigating a claim must be compared to the ultimate recovery that could be obtained if you win. For example, even if it means a lot to you, would you spend $10,000 to recover the antique lamp valued at $1,000 that your aunt left to you in her will, but that your mean cousin said was given to him before your aunt died? Maybe so, for sentimental reasons, or even based on principle, but you get the point.

While a family member's behavior may have you quite upset in an estate, probate or trust dispute, consult an attorney to get an idea of what litigation costs are likely to be incurred, and whether they would recoverable as part of a successful claim, before you commit to fighting the fight.

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.

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.

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.

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.

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.

Welcome

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.