No Love for Contingency Contractor

In the combined cases of In Re Estate of Lujan and In Re Estate of Gulick (click on name to read opinion), the Court of Appeals upholds the trial court’s decision that a third-party contractor, Probate Asset Recovery LLC (“PAR”), is not entitled to a contingency fee for finding abandoned real properties (which have equity value) and for bringing that information to the attention of the Public Administrator. It’s a lengthy decision, and unpublished.

Essentially, PAR claims it is doing a public service by finding homes that need probate administration and notifying the PA before the property goes into foreclosure. PAR argues that a 1/3 contingency of the equity in such properties is fair compensation because their business model requires them to investigate many homes that turn out to be not worth pursuing for every home that they find which justifies opening an estate.  PAR says that if they can’t operate in this manner, they will go out of business and the solvent homes they now find will end up foreclosed, and Michigan families will lose out.

The COA counters that: Only lawyers are authorized to get paid contingency fees, and your business model isn’t our problem. Rather the trial court’s job is to look at what the reasonable value of your services were with respect to the property of this estate.  In these cases, the trial court determined that the reasonable value of your services was $45 per hour, and that decision is affirmed.

This Wayne County case comes in the context of significant bad publicity surrounding public administrators in the Metro Detroit area, and PAR’s role in particular. That context may have something – perhaps a lot – to do with the outcome and tone of this decision.  (To see one such report involving PAR and this issue, click here.)

For our purposes, the case would be helpful in situations in which a beneficiary is challenging the fees paid to a non-lawyer agent. In addition to affirming the rule that such arrangements need to be reasonable, this case provides support for the propositions that: (1) the trial court can directly reform contracts between the PR and the non-lawyer agent; and (2) in determining reasonableness of such arrangements, the trial court only concerns itself with the value provided to the estate and not the agent’s business model or public utility.

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Lost Wills – A Tough Row to Hoe

This juicy little soap opera out of Battle Creek starts where so many of such tales begin:  Dad is married but his children are from a prior relationship.  Then Dad dies.

Daughter Brooke actually goes through the pockets of the dead man looking for the keys to the gun safe where he kept his will – but too late!

The Court of Appeals describes the scene as follows:

Brooke Barksdale noted that when she arrived at the decedent’s home at approximately 11 a.m. on the day of the decedent’s death, petitioner’s son, Shawn, tried to stop her as Brooke Barksdale went to see the decedent’s body, and when she looked in the decedent’s pants pocket for his car keys, which also contained the keys to the gun safe, she could not find them.

And, upon further investigation, she sees that the door to the gun safe (which he always kept locked) stands open.  Before she can further investigate, Wife tells her to leave. Classic!

Wife petitions to open an estate intestate.  Kids counter with petition to admit a lost will.  Wife brings motion for summary disposition.  Kids submit affidavits of themselves and others that aver that Dad had a will he kept in the gun safe.  It named Brooke as Personal Representative.  The house went to Brian and the rest was distributed among his kids and grandkids in unknown proportions.  They aver that Dad discussed the will with them on numerous occasions, that he kept it locked in his gun safe, and that he had it out when he had Brooke sign various other legal documents related to his affairs.  They further aver that Wife was present during some of these conversations and that she verbally acknowledged the will’s existence on at least one occasion.

Trial Court grants summary disposition to Wife, saying that the proffered testimony is insufficient to withstand summary disposition because there is no evidence that the will was executed in conformity with the requirements of a valid will or holographic will under MCL 700.2502, or that it could be admitted as document intended to be a will under MCL 700.2503; and further that the terms remain too sketchy even with the recitations of the kids to meet their burden.  MCL 700.3402, MCL 700.3407.  Court of Appeals affirms.

The case is unpublished, so take it for what it’s worth.  And I think that what it is worth is that it sheds light on the challenges of probating a lost will when no copy can be found.

Takeaways from this case:

1.    Admitting a lost will when there is no draft or copy to be found is a tough row to hoe.

2.    It’s a good idea to keep your will someplace where people who might want to destroy it can’t do so after you die or become incompetent.

Read In Re Estate of Stuart Alister Warner by clicking on the name.  

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Lay Witness Testimony Regarding Cognitive Impairment

In the recently unpublished Court of Appeals case of Rebecca L. Clemence Revocable Trust (click on name to read the case), the trial judge essentially granted summary disposition in a trust contest case, without summary disposition even having been requested. In doing so, the trial judge expressed frustration that the matter had continued for so long and that, in the judge’s opinion, inadequate evidence of wrongdoing had been discovered.

The Court of Appeals reversed and remanded.

What I find helpful about the case is the COA’s discussion of lay witness testimony as evidence regarding incapacity. We have discussed before the growing inclination of court’s to look for medical evidence as the last word on incapacity and vulnerability.  One of the challenges of handling capacity and undue influence cases is that very few people happened to have medical evaluations done contemporaneously with the event in question.

The portion of this case which I will keep in my notes, provides authority for the proposition that the observations of lay witnesses are admissible evidence of incapacity and, if sufficient, can preclude summary disposition. Specifically, this portion of the opinion is on point:

Certainly it would be easier to prove whether Rebecca possessed testamentary capacity or was vulnerable to undue influence if the probate court could review medical records contemporaneous with her estate plan amendment. But such records are not the only method of proof. A lay witness may place his or her opinions into evidence as long as they “are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue.” MRE 701. And our Supreme Court has specifically found lay opinion testimony admissible to establish a decedent’s testamentary capacity. See In re Moxon’s Estate, 234 Mich 170, 173-173; 207 NW 924 (1926) (holding that a lay witness “who [has] had the opportunity to observe and talk to [the decedent]” may form “impressions” of the decedent’s testamentary capacity and may cite examples for the factfinder’s consideration);

Proving that an older person suffered from cognitive impairments at that time they executed a document being contested is central to nearly every will and trust contest or case of financial exploitation. Lack of Capacity and Undue Influence remain the most common theories of probate and elder law litigation.  These are often fact-rich cases and discovery is frequently extensive.  Trial judges may have limited patience and are under pressure to close cases expeditiously.  Many trial judges also have a strong inclination to require medical evidence in cases where cognitive impairment is a factor, but such evidence is not always available.  As a result, introducing lay testimony to establish cognitive decline is necessary, and often the best evidence available.  In those cases, it is not unusual when presenting such lay witnesses, for the opposing counsel to assert that the lay witness has no medical training and therefore their testimony should not be allowed.  This case supports the proposition that such objections should not prevail.  Lay people can observe behavior in older adults that suggests impairment, and those observations can be admitted and relied upon by a fact-finder.


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Share and Share Alike

This is an unpublished will construction case. To read In Re Estate of Eugenie Dietrich, click on the name.

In other posts (see for instance Who Gets the Grow Lamps?) we’ve seen the problems that arise when attorneys fail to use the precise legal terms of art. In this case, we see the problems that arise when lawyers toss in archaic legal language.

The will says: “To Peter Dietrich and Johann Dietrich, my sons, to be divided between them in equal shares, share and share alike.”

Turns out Johann predeceased Eugenie. So Peter says: “it’s all mine.”  Johann’s issue took exception.  The trial court agreed with Johann’s children, and ordered that they would take their deceased father’s share.  The Court of Appeals affirmed.

Michigan law strongly favors construction of estate planning instruments that vests the interests of predeceasing family members in their descendants. That’s what our “anti-lapse” rules are for.  See MCL 700.2603.  Those anti-lapse rules however can be rebutted with sufficient evidence of a contrary intent.  This case offers a discussion of class gifts versus individual gifts and the rules of construction that apply, with specific focus on the meaning of the term “share and share alike.”  A good read perhaps for younger lawyers developing their drafting style.

As for the phrase “share and share alike,” I think the lesson is: don’t use it. I’ve seen it many times but have never understood why it would be used when there are better ways of expressing a client’s intentions regarding what is to be done with property if a devisee predeceases.

Perhaps the attraction is that it sounds so fine – so high minded – “share and share alike.” Almost like a blessing- “go forth and prosper,” “live and let live,” “do unto others.” It has that kind of musical or poetic quality.  But our goal in drafting estate planning documents is not to be poetic, rather to be clear.

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Meritless is Good. Frivolous would have been Better.

This is a Chalgian and Tripp case just handed down from the Court of Appeals. Unpublished.  Click here to read In Re Conservatorship of Ueal E. Patrick.

Ueal is a prominent business man in Jackson. He was involved in litigation.  Ueal’s health was declining and the stress of the litigation was making it worse.  In the context of working with him on a separate trust matter, we suggested that it might be beneficial to have his child Mark act as his conservator so that he (Mark) could handle the litigation.  Mark was already deeply involved in the management of the business, and very sophisticated in business matters.  In addition, predating all this was a power of attorney created by Ueal, appointing Mark as his agent, and nominating Mark as conservator should that become necessary.

A hearing was held at which several attorneys were present. The opposing parties did not contest that the appointment of a conservator was appropriate.  They simply opposed the appointment of Mark.  They presented no evidence, called no witnesses, merely made legal arguments.

On appeal, the appellant argued that the trial court erred in finding Ueal to be a person in need of a conservator, even though they stipulated to it in their pleadings and in court. They argued that the trial court erred by not requiring an independent medical exam be conducted to determine the amount of weight that should be given to Ueal’s nomination of Mark.  And they argued that Mark should not have been appointed because he had a conflict of interest with respect to the other matters being separately litigated.

The COA goes through each of appellant’s arguments, systematically pointing out the deficits in their reasoning. At various points the COA labels their arguments “abandoned,” “without merit,” and “meritless.” I beat up on our COA enough in this forum.  They got this one right.  I appreciate it.

Thanks to our John Mabley for doing an excellent job briefing the case and helping the COA clearly see the deficiencies in appellant’s positions.

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Another Brody Bombshell

This is a published Court of Appeals opinion involving the appointment of a conservator over an adult under EPIC. Click here to read In Re Conservatorship of Rhea Brody.

This case comes out of same family that was involved in the In Re Rhea Brody Living Trust, which case is the topic of the post earlier this month. That prior case dealt with the Rhea Brody Trust, and offered the surprising revelation that a contingent beneficiary of a Trust could contest the actions of the Trustee even while the trust remained revocable.  Click here to read that post.  This second Brody case deals with the appointment of a conservator for Ms. Brody.

The litigants in the case are aligned similarly. In the Trust matter, husband and son were aligned in defending the removal of husband as Trustee, which arose as a result of favorable business dealings between the husband as trustee and the son; which dealings were perceived as being done to the detriment of the daughter, a contingent beneficiary.  In this case, husband and son oppose appointment of a conservator, which appointment is supported by daughter.  The court appointed an attorney who was also acting as Trustee of Rhea’s Trust to serve as her conservator.  The COA affirms.

The husband, as appellant, contests pretty much every aspect of the trial court’s decision, except the finding that Rhea was incompetent. The conclusions of the COA are intriguing.  Look for this case to be cited often by litigators seeking to impose conservators and desiring to by-pass priorities of appointment.  To some extent, perhaps a large extent, this case is the counter balance to In Re Bittner, a relatively recent published opinion addressed in the post “Bittner’s Bite” (click on name to read that post).  In Bittner, the COA chastised a trial judge for imposing a conservator where the requirements of EPIC were not met.  Here, the COA goes to great lengths to justify the appointment over seemingly problematic facts.

One issue relates to whether the evidence supported the finding that appointment of a conservator was necessary to provide for management of assets and avoid waste. In this case the evidence is that husband was agent under a valid POA for Rhea, and further, that all of her assets (except one IRA) were joint with husband.  Further, husband alleges that the IRA was set up to make minimum required distributions annually.  The basis for finding necessity appears to be the conclusion that husband wasn’t really managing these matters, but rather that he had “abdicated” his role to the son, and that son was a potentially devious manipulator of the situation.  The COA goes so far as to suggest that the appointment of a conservator was necessary so that someone independent could review the tax returns.

Which leads to another conclusion of law by the COA in this matter: that the appointment of a conservator does not require a finding that there has been waste of assets, only that such waste could occur in the future. So reasonably founded speculation is enough.

Additionally, and perhaps most concerning, are the findings of the COA with respect to the priority of appointment. The COA cites MCL 700.5409(1)(a)  for the proposition that an independent fiduciary has priority over a spouse and agent under a POA where the POA nominates the agent as conservator. MCL 700.5409(1)(a) says:

(1) The court may appoint an individual, a corporation authorized to exercise fiduciary powers, or a professional conservator described in section 5106 to serve as conservator of a protected individual’s estate. The following are entitled to consideration for appointment in the following order of priority:

(a) A conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides.

I have always understood this section to mean that a conservator previously appointed by another court would have priority. In this case, the COA seems to say that a professional fiduciary appointed as Trustee over the ward’s Trust by this same Court meets that definition.  The COA states:

Under MCL 700.5409, a protected individual’s spouse is entitled to consideration for appointment as conservator, and is granted priority over all other individuals except “[a] conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides,” MCL 700.5409(1)(a), and “[a]n individual or corporation nominated by the protected individual if he or she is 14 years of age or older and of sufficient mental capacity to make an intelligent choice, including a nomination made in a durable power of attorney,” MCL 700.5409(1)(b). As Rhea’s husband, Robert was an individual entitled to priority consideration. However, Robert was not entitled to consideration unless the probate court considered an independent fiduciary and found him or her unsuitable. Lyneis, as trustee and independent fiduciary, had statutory priority over Robert, despite Robert’s marriage to Rhea. MCL 700.5409(1).

Wait – WHAT? Where is the other jurisdiction?

Further, and maybe even more unsettling, the COA says:

The statute’s priority classifications are merely a guide for the probate court’s exercise of discretion.

Really?  This statement seems to fly in the face of a long line of cases that require a finding of unsuitability – including, perhaps ironically, the case of In re Guardianship of Dorothy Redd, which is the topic of the other post I wrote today, a case issued by a separate panel of the COA on the same date as this matter.

That said, the COA goes on to say that the husband is unsuitable, again, because the son is a manipulative fellow and may use his influence over husband to Rhea’s detriment in the future.

There are other issues addressed in this case, but I think I’ve hit the ones that seem most significant, and that are those most likely to be cited by litigators in the future.

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Seeing Redd

Here’s another important published opinion on the topic of adult guardianships. The case is about the removal of a guardian of an adult ward appointed under EPIC.

The case deals with the very common, and therefore very important, situation in which a guardian is using its position to undermine healthy family relations. In this case, the facts relied upon by the trial court and the COA are that the existing guardian was actively interfering with visitations, and taking steps to cause the ward to be distrustful of other family members.  These alienation cases go on all the time.  It is helpful to have an opinion that clarifies that such behavior is a basis for removal of a fiduciary.  It is likely that this case will be cited frequently where such facts arise, and I suspect that the finding that such behavior disqualifies a guardian will be offered by extension to cases involving conservators and other fiduciaries.  And that’s good.  We need this law.

So basically the trial court removed a guardian for the reason that he was undermining family relations, and the COA affirms. Click here to read In re Guardianship of Dorothy Redd.

In reaching its decision, the COA holds that the standard for removal is “suitable and willing to serve.” This finding is an important clarification of MCL 700.5310 which is silent on the requirement for removal.

The COA also finds that the standard of proof for removing a guardian for unsuitability is not clear and convincing evidence, but rather a preponderance. Interestingly, in reaching this conclusion the COA indicates that the standard for proving unsuitability in the initial appointment hearing is clear and convincing evidence.  This reading of the priorities in a guardianship proceedings seems inconsistent with the conclusions regarding priorities and unsuitability reached by a separate panel discussing these issues in the context of a conservatorship, as addressed in my other post of today’s date regarding In Re Conservatorship of Rhea Brody.

So, it’s a big day in the world of litigating guardianships and conservatorships. These two published cases (Brody II and Redd) will be cited in the future, each for their own important conclusions of law.  Probate litigation in the age of living to be 100, where the fun never ends.

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Remainder Beneficiary of Revocable Trust has Standing to Sue Trustee for Breach

Several issues are addressed in this published opinion regarding a family trust contest that occurs while Mom, settlor, is living. Mom’s trust is revocable and Dad is Trustee.  Mom may or may not be competent at the time of the litigation, hence the Trust may or may not have become irrevocable.

To read In Re Rhea Brody Living Trust click here.

The most interesting issue addressed in the opinion is whether Daughter, a residual beneficiary of a trust that remains revocable, has standing to contest the administrative actions of the Trustee. Mom’s Trust provides for both son and daughter to receive equal shares upon the death of survivor of herself and Dad.  Daughter says the sale, by Dad/Trustee, of certain business interests to Son and his children is a breach of his fiduciary duty to her and violates the requirement that he appoint an independent co-Trustee to engage in any action that alters the interests of beneficiaries.  The COA says Daughter, as reidual beneficiary, has standing as an “interested person” under EPIC pursuant to MCL 7.7201 to contest Trustee/Dad’s actions as Trustee which would ultimately affect her interest if the Trust if it is not subsequently amended to remove her.  It rejects the contention that standing is controlled by the “real party in interest” rule set forth in MCR 2.201(c). The COA holds that this would be true regardless of whether Mom is or isn’t competent (that is, regardless of whether trust has or has not become irrevocable).  This is an important clarification of the law, and would presumably mean that Daughter could have sued Mom/Settlor for doing the same thing if Mom were acting as her own Trustee.  (Of course, if that were the case, Mom could simply amend the Trust and make the issue moot.)

Further complicating the analysis is the fact that the Trust provides that if Dad survives Mom, Dad as Trustee may make unequal distributions to the two children. Accordingly Dad and Son argue that this means no harm was done to Daughter even if the sale reduced her expectancy interest in the Trust.  The COA however notes that Dad has not survived Mom and therefore those provisions are not in play.  The COA goes further (perhaps dicta), to conclude that notwithstanding the unequal distribution provisions, the overall intent of the Trust is equal division between children and therefore the actions of Trustee/Dad could be a breach.  The trial court in fact found his actions to be a breach and ruled in favor of daughter on summary disposition.

The COA also provides an interesting analysis of the remedies directed by the trial court regarding two sales that were the basis of the litigation. The trial court ordered reformation of the contract on one sale and rescinded the other.  The COA found that while rescission was an appropriate remedy, reformation was not.  In remanding the reformation portion of the trial court’s order, the COA offers an important explanation of the limitations of a court’s equitable powers.

Finally, and least importantly (although this is the first issue addressed in the opinion), this case looks at subject matter jurisdiction of business courts in relation to probate courts. Dad/Trustee argued that the litigation discussed above was improperly filed in probate court because all business litigation is required to be brought in the “business court.” The COA finds that there is a conflict between the statutes controlling business court and probate court subject matter jurisdiction, but concludes that the probate court does not lose subject matter jurisdiction over trust cases simply because the litigation involves issues related to business interests.  The COA notes that this confusion is temporary for the reason that the business court jurisdiction statute was recently amended to further limit the jurisdiction of business courts to cases in which a business entity is a party.  That change becomes effective October 11 2017.

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Prolonged Fees Fight Offers Lessons and Concerns

Cases about legal fees are always curious, and who pays whose legal fees is almost always an issue in probate litigation.  This new unpublished Court of Appeals opinion is the second appeal in the same matter.  The facts are complicated and somewhat hard to follow – but for those of us who handle these issues, I think the case is sufficiently interesting to make the exercise worthwhile.

Click here to read: In Re Estate of Charlotte Westman.

Basically it seems an attorney was appointed PR of his mother’s estate. He hired a large metro-Detroit firm to represent him as PR. In that capacity he was involved in extensive litigation.  As a result of the litigation the trial court found that over $100,000 of legal fees charged to the estate did not benefit the estate and that he was personally responsible for those fees.  The law firm he hired then brought an action against him to have their fees secured against his share of his mother’s trust.  He contested that action – but lost in the trial court. In the first appeal, the COA held that the law firm could not secure their fees against the trust because they only represented him in the estate, but that the client/son could potentially be sanctioned for the pleadings he filed without representation in which he opposed the law firm’s efforts to collect.  That issue was remanded. On remand, the trial court decided that he would be sanctioned and coincidentally that the amount of the sanction would be the same amount as the law firm’s claim – $20,000+.   So, to be clear, a law firm that represented a former PR was able to file an action in the estate proceeding to recover legal fees it incurred in its own efforts to secure fees from a former client, and even though the law firm was unsuccessful in its efforts to obtain that secured position, the probate court could nonetheless require the former client to pay the law firm for its costs based on sanctions imposed under MCR 2.114, leaving the former client still responsible for the $100,000+ obligation incurred by him while PR, and an additional $20,000+ imposed upon him as a sanction.  This sanction is the subject of this second COA decision.

The client makes a number of seemingly reasonable arguments as to why this process and outcome may not be appropriate under Michigan law. Among other things, the client argues that:

  • He engaged the firm as PR and did not contractually agree to be personally responsible for the disallowed fees.
  • This is basically an action in contract between himself and the law firm, which law firm is not an interested party or creditor in the estate proceeding, and therefore is using an improper forum.
  • That, even if this were a proper forum, the fact that he was not allowed to engage in discovery to defend himself would make the trial court’s decision void.

None of these arguments prevail and the COA affirms the decision of the trial court.

The legal analysis and conclusions of the COA are far more detailed than I have time or inclination to present.  Sure, the law firm is entitled to be paid.  And I understand (and often appreciate) that trial courts tend to do what they can to make sure that the lawyers who advocate in front of them get paid. But, I have to say that I am left with the feeling that if I wasn’t a lawyer, I might think the system was rigged.


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Civil Actions versus Proceedings in Probate Court

When starting a new litigation matter in probate court, a threshold issue is to determine whether the matter should be characterized as a probate “proceeding” or a “civil action.” There are significant differences between the two, including what court or courts it can be filed in; and what type of pleading, a petition or a summons and complaint, must be prepared.

Generally, a claim against a third party filed by a Trustee or Conservator would be a civil action; whereas things like surcharging a fiduciary, construing or modifying a trust, or seeking to invalidate a will or trust, would be a proceeding. The primary source distinguishing between the two is MCR 5.101.

This distinction is the issue in a newly released unpublished case from the Court of Appeals. In this case, a seasoned Oakland County public fiduciary, John Yun, was appointed conservator over the estate of a demented person who had apparently been exploited by a Mr. Hartman.  The conservator filed a petition for surcharge seeking recovery of assets that Hartman allegedly converted to himself before the conservatorship was created.  Mr. Yun followed the requirements of notice for a proceeding by mailing a copy of the petition and notice of hearing to Hartman.  Hartman did not show up for the hearing, and the trial court entered an order finding that he was liable for nearly $200,000.  Mr. Yun then brought a motion to have the order converted to a judgment.  Hartman objected, claiming that the process by which the order against him had been entered was defective as it should have been filed as a civil action and not a proceeding; and accordingly that he should have been served with a summons and complaint and not a petition.

Click here to read In Re Doreen Seklar.

In its opinion, the COA reviews the distinctions between a proceeding and civil action and concludes that the probate court was correct in allowing the order to enter through the proceedings process. In reaching this conclusion the COA relies on the proposition that Hartman was a “fiduciary.”  In fact, the protected person had created a power of attorney appointing Hartman as her agent, and a revocable trust nominating Hartman as successor Trustee.  These documents were all set aside by the probate court in its initial hearing.  But what troubles me about the case is that the COA holds that a person nominated as a successor trustee is a fiduciary for purposes of MCR 5.101.  It says:

Further, Hartman meets the definition of a fiduciary. First, the March 14, 2014, revocable trust named Hartman a successor trustee.

That seems like a stretch. And while I appreciate expediency, I worry that such rationale could be applied in similar and dissimilar situations with unanticipated outcomes.  While in this case, Hartman no doubt was aware of his nomination as a successor Trustee, apparently having had a large role in obtaining the estate planning documents, people are frequently nominated to such roles without ever being advised.  It seems potentially problematic to me to have a case that holds that a person who never accepted or acted in a nominated fiduciary role is a fiduciary for the purposes of being subject to a probate proceeding.

I am certainly not challenging Mr. Yun’s approach. He is highly experienced in this type of work, and he got the job done and did so very efficiently.  However, another approach to this case could have been to have the probate court order Hartman to account, and/or to simply have sued Hartman for conversion, fraud and other civil causes of action by filing a summons and complaint.

In any event this case highlights an issue that comes up regularly in probate litigation matters. For those interested in the topic, it’s worth a read.

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