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Great Facts and Experts Can’t Survive Summary

An unpublished opinion today that looks at the question of when expert opinions are sufficient to create a question of fact, versus when they remain mere speculation; in the context of a motion for summary disposition.

In In Re Jeannine A. Palazzo Irrevocable Trust (click on the name to read the case), the attorney/trustee failed to inform beneficiaries of his activities in relation to an irrevocable life insurance trust (an “ILIT”) established for their benefit by an aunt. During the years leading up to the aunt/settlor’s death, the liquidity in the ILIT was depleted to the point of near insolvency.  This prompted the attorney/trustee to liquidate the policy for $36,000 and by doing so give up the $500,000 death benefit. As it turns out, he did this just days before the death of the aunt/settlor.

The successor trustee sued attorney/trustee for breach, and presented testimony of an expert estate planning lawyer and an accountant, both of whom opined that had the attorney/trustee performed his fiduciary duties with respect to informing the beneficiaries, the beneficiaries could have taken steps to protect their interests and potentially preserved the policy so as to receive some or all of the death benefit.

An Interesting Question

The trustee/attorney moved for summary disposition in the trial court and prevailed on the argument that merely speculating that the beneficiaries could have or might have taken steps to alter the outcome is insufficient, if you don’t explain what they would have done and when.

The Court of Appeals affirmed the trial court, adopting the proposition that merely speculating that something could have been done is insufficient to create a question of fact sufficient to survive summary disposition.

An Uncomfortable Result

A central premise to trust law is that beneficiaries are empowered to protect their interests by being provided information. A trustee protects itself by providing that information.  When a trustee fails to provide the required information, the law holds the trustee liable for the resulting damages and does not allow the trustee the protection of time barriers to claims that would otherwise arise.

For a court to conclude that although a trustee breached its duties by failing to provide the required information, but that the trustee is nonetheless absolved of liability on summary disposition even where experts have opined that something could have been done had the information been provided, just feels wrong.

Conclusion

Bottom line is the beneficiaries lost on summary because they did not specifically state what could have been done to alter the outcome had the missing information been provided. While that seems like a fine line to draw; that is the line that worked in this case, and a line litigators will want to remember when they need to make the same distinction in future matters.

They say it is an ill-wind that blows no one good, and no doubt there is one trustee/attorney who will be full of Thanksgiving today.

Terror Clause Canaries Don’t Fly

In this unpublished decision from the Court of Appeals, a potential litigant filed a “petition for instruction” which asked the trial judge to decide the question of: If a subsequent petition to modify the trust were filed, whether such a petition would be deemed to violate the trust’s terror clause and thereby cause petitioner to forfeit her interest in the trust?

Click here to read: In Re Robert E. Whitton Revocable Trust

Curiously, a trial judge saw fit to issue such an opinion. In this case, the trial court determined that the petition for instruction did not itself violate the terror clause, but that a subsequent petition to modify the trust would violate the clause and that the petitioner had no probable cause to bring that petition.

A terror clause (aka “no contest clause”) is a provision in a will or trust that says a beneficiary will be penalized (typically the penalty is to lose their interest in the estate) if they contest the will or trust at issue.

Michigan law on terror clauses is pretty straightforward and is spelled out in MCL 700.7113 (for trusts) an in MCL 700.2518 and 700.3905 (for wills). (click on the statutes to read them). They are generally enforceable, but will not be enforced in cases where the party had “probable cause” to initiate the proceeding.

Litigants, like the one in this case, have long attempted is to come up with a way of having a court determine whether they will be penalized if they bring an action before actually doing so. They want to know in advance whether they will be deemed to have triggered the terror clause if they file a petition being contemplated.  These efforts don’t work.  Several years ago, the Court of Appeals issued a published decision in a case handled by our firm in which it declared that trial courts lack authority to rule on such speculative matters for the reasons that the issue is non-justiciable (not ripe, as it were).  Click here to read that prior post.  Basically, the appellate courts have said that if you want to contest a document, you have to take your chances.  So, it’s no surprise that the Court of Appeals held that the trial court lacked jurisdiction to decide this case, and vacated that part of the trial court’s decision.  And it’s curious that, in light of the clear law on this point, the trial judge in this matter thought that such an action could be decided.

This case also offers the opportunity to discuss another, perhaps dicier, aspect of our terror clause statutes, which is that the imposition of a penalty is not necessarily limited to proceedings in which the validity of document at issue is being contested. Rather these statutes indicate that a terror clause can be written to impose a penalty for initiating any type of proceeding relating to the trust or will.  So, in this case, the anticipated subsequent petition was being framed as a “petition to modify” a trust to conform with an amendment that the settlor had purportedly had drafted, but never got around to signing.  The appellants in this case were hoping to escape the imposition of the terror clause penalty on the idea that the subsequent petition they were considering wouldn’t actually (per their argument) contest the validity of the trust, but would only inquire as to the validity of an unsigned amendment.  Likewise the respondents in this matter argued that the act of bringing a petition for instruction was itself a violation of the terror clause.  The point of all this is that Michigan law allows for very broad terror clause provisions, including, presumably, a provision that would penalize a litigant for bringing a petition for instruction, or that says a petition seeking to recognize an unsigned amendment is a violation. The opinion in this case indicates only that the terror clause in this trust was “lengthy.”  It is not clear what the scope of this lengthy terror clause is, but it is seems possible at least that a terror clause could have been written which would have been unambiguous on these specific issues.

So, the points here are that (1) There are no terror clause canaries – no free bites at the apple. When a terror clause is in play, you take your chances.  And (2) A terror clause may be written to impose a penalty for initiating any form of proceeding which relates to the will or trust at issue.  The scope of the terror clause itself is significant in deciding how to proceed in cases where these provisions are in play.

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.

 

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.

Section 2503 Grows Up

Kids in suits

This just in – pretty big news – and pretty interesting – the Michigan Court of Appeals holds, in a published opinion, that a draft of a will, prepared by a lawyer, but never signed by her client, could be a valid will. Click on the name to read In re Estate of Attia.

EPIC (the current probate code) was adopted in 2000. It was a big deal in the probate world.  And while most of it was simply clean up, update and clarification work, there were a few new twists that came in with the new code – a few hot topics at the seminars – new concepts that had everyone wondering: Where is this was coming from? – and Where is it going to go?  One of the hottest topics of the day was section 2503.  Section 2503 says, essentially, that even if a document fails to meet the technical requirements for execution of will, and even if it is not a holographic will, it may be treated as a valid will if it can be shown by clear and convincing evidence that the testator intended it to be his/her will.  Before section 2503, a will either met the statutory signature and witnessing requirements of the probate code, met the requirements of a holographic will, or it was out.  Click here to read MCL 700.2503.

The argument for 2503 was that where you have a document that was clearly intended to be a person’s will, and they simply failed to meet a technicality, that document should be given effect – it’s only fair. The argument against the change was that this is the exception that will swallow the rule – someday this will be used to offer any sort of document as a person’s will – and the litigation will be endless.  Did I hear a gulp?

So in Attia, it appears that lawyer met with client, prepared a draft, and scheduled a date for signing. But client died before the document was signed.  Child A submits the draft as the last will under 2503.  Trial court dismisses on summary disposition, says 2503 can’t possibly be construed to mean that an unsigned document can come in as a valid will – certainly the testator’s signature is not one of the technicalities that can be disregarded.  Court of Appeals says, 2503 says what it says, and that means that if it can be shown by clear and convincing evidence that this document was intended to be a will, the lack of a signature from the testator is not controlling, the matter cannot be dismissed as a matter of law, and the proponent gets a chance to try and prove intent.

Fascinatingly, Michigan appears to be the first state to address this issue head on. The opinion cites a New Jersey case, but even there the testator had made some handwritten notes.  In Attia it isn’t even clear, nor does it appear to be relevant, whether the testator ever even saw this document.

So, it took us 16+ years to get here, but it seems that section 2503 is feeling all growed up – and asking for the keys to the car.

Fiduciary Relationship and Undue Influence

In Re Benedetti Estate and Trust is a recent unpublished opinion from the Court of Appeals, so take it for what it’s worth. (Click on the case name to read the case.)

The opinion offers an extensive discussion of a key issue in will and trust litigation, specifically the nature of the relationship that must exist to give rise to a “fiduciary relationship” sufficient to meet the requirements for a presumption of undue influence.

Background: Most contests of this type involve the allegation that the contested document was a product of undue influence. The standard of proving undue influence is very high. One way to overcome that burden (or at least, overcome summary disposition on the issue of undue influence) is to establish three elements that give rise to a presumption of undue influence. Those elements are: (1) That there was a fiduciary relationship between the person who executed the document and the person who is alleged to have exercised undue influence; (2) That the person alleged to have exercised undue influence had an opportunity to do so, and (3) That the person alleged to have exercised undue influence benefited from the document.

This case discusses the first element.

It has been held that the existence of a formal agency (i.e., power of attorney appointing the person alleged to have exercised undue influence) is sufficient to establish a fiduciary relationship. However, the Courts have held that such formality is not necessary and that a fiduciary relationship may exist whenever the person creating the document was in a relationship in which s/he put their trust in the person alleged to have exercised undue influence.

In this case the evidence of a formal fiduciary relationship (power of attorney) was imperfect. However, it appears to be acknowledged that the person alleged to have exercised undue influence did in fact help the person who created the trust and will with his finances, paying bills and other such activities. The trial court held that notwithstanding these activities, the party challenging the documents failed to establish the existence of a fiduciary relationship sufficient to give rise to the presumption. The reasoning hinges on the finding that although the one person was helping the other person with their finances, the person who created the will and trust did not rely on the judgement of the purported undue influencer – that is, they continued to exercise their own independent judgment as to these affairs and the role of the assisting party was more or less ministerial. This is significant. If this is the law, it weakens cases in which these facts are relied upon as a basis for the presumption.

In will and trust litigation, the importance of the presumption of undue influence can hardly be overstated. It is raised in a high percentage of such cases. The presumption is a finding of the court, even in cases that go to the jury. That means a failure to establish the presumption will often result in summary disposition, as was the result in this case. The value of such cases (from the perspective of the contesting party) increases dramatically when it is clear that the case will be decided by a jury. As such, for lawyers handling these types of cases, this case is worth saving as it provides a roadmap when defending documents in which no formal power of attorney exists, the contesting party seeks to impose the presumption, and the question of whether or not the element of a fiduciary relationship has been met is in play.

 

Tell It To Me Slowly

Humming in my head the other day was an old song –

What’s your name?

Who’s your daddy?

Is he rich like me?

Has he taken any time to show you what you need to live?

Tell it to me slowly.

Tell me what I really want to know.

It’s the time of the season for loving.

Not sure about “the season for loving” or “like me” – but otherwise the lyrics to the Zombies hit from 1969 (which, as far as I know, was their only hit) sounds a lot like a Readers Digest version of an initial consult in many of my probate litigation matters (although I would not typically be so direct).

Who’s your daddy and is he rich? Most probate litigation involves substantial estates, and almost all probate litigation involves screwed up families. I have posted before about the unique qualities of driven personalities, typically men, who create wealth (see for instance, Family Dysfunction Part V: The Wake of the High Achiever, March 3, 2013). The point is that people who create wealth are often difficult people.

“Has he taken any time to show you what you need to live?” AKA, did your overly controlling type-A personality judgmental father give you validation, or did he leave you always feeling like you could never measure up. In many of these cases, the answer is of course is that the high achiever parent left the offspring feeling inadequate.

Tell it to me slowly, because this is what really matters. The size of the estate, the specific documents involved, same old same old. What I really need to know is: Who are the players, What are their relationships really built on. Help me understand the particulars of your family’s dysfunction, so that I can start building the story line that will serve as the outline for how this case is presented.

OK – maybe a stretch to say everything you need to know about probate litigation is in a pop song from the sixties. But enough there, I hope, for a summer weekend blog post. Click here if you want to read an article I recently wrote about litigation in the “real world.”

 

The Always Interesting Holographic Wil

A holographic will is a will that a person writes out in their own hand – and signs and dates.  If this is done, the usual requirements that the will be witnessed do not apply.    People like to talk about these cases because they tend to come up in unusual matters.  In reality they are seldom seen.

In any event, the Michigan Court of Appeals recently issued an opinion in a holographic will case.  In this case a woman wrote out what appears to be just such a document, but the trial court said the document was not her will because evidence suggested it was not her intent for this to be a will – but rather only notes about what she might put in her will.  To read the case click here.

I have a problem with this result.  The document at issue starts with the following: “Last Will and Testament.  Being of Sound Mind” At this bottom of the page is the testator’s signature and date.  It is all written in her handwriting. To see the document, click here.

Notwithstanding, the trial court determined that this was not a valid holographic will.  The Court or Appeals upheld this result.  The case is not reported, meaning it has no precedential value.  Nonetheless, in my opinion, the reasoning undermines the statutory basis of holographic wills and creates problems for people seeking to uphold these documents in the future.

Legal Issues:  Michigan law recognizes two types of documents that can be admitted to probate: wills and documents intended to be wills.  Essentially the law says that if a document is a will, it will be admitted.  This can be accomplished in one of two ways: by having the document witnessed in accordance with the law (typically what is done when someone works with a lawyer to prepare their will) or if it meets the requirements of being a holographic will (being written in the testator’s own hand, signed and dated).  If these requirements are not met, the document can still be admitted to probate if it is shown that the person who prepared it intended it to be their will even though the document fails to meet the requirements of either a lawyer-prepared will or holographic will.  This case seems to blur the line between a valid holographic will and a document intended to be a will.  It seems to place the higher standard of proof on a document which, on its face, meets the statutory requirements to be admitted as a will.  To get there the Court looked at “intent.”  The Court determined that for any document to be admitted it must be shown that the testator intended it to be a will.  This intent requirement would presumably be met in almost any case in which the person went to a lawyer to have their will prepared and witnessed.  My concern with this case is twofold:  First, if you have to prove “intent” to admit a holographic will you have essentially demoted every holographic will to the same standard as a document intended to be a will but not meeting the statutory requirements.  This, in my estimation, changes the law as it is written and as it has been interpreted historically.  Second, in this case in particular, where the document states at the outset “Last Will and Testament” and “Being of Sound Mind” – how on earth can the Court conclude that this document was not intended to be a will?  Why would anyone put that on the top of the page if they were not intending to create a will?

In the end, it is only an unreported opinion from the Court of Appeals.  However, the reasoning opens the door to more litigation in cases involving holographic wills.

More Terror Clause Trouble

The Court of Appeals has published another case on terror clauses.  Estate of Eugene Stan.

The facts are that A filed for formal admission of a Will which included A’s appointment as Personal Representative (PR), pursuant to the nomination in the Will.  B opposed the appointment of A, citing bad acts of A in handling affairs of the estate prior to appointment.  The Will was a pourover will (poured over to a trust).  The Will contained no terror clause, but the Trust contained a terror clause that purported to encompass challenges to the Will.  The terror clause language was standard.

The issue was whether the terror clause in the trust was violated by contesting the appointment of A as PR in a proceeding to admit the Will.

The trial court said “no.”  The Court of Appeals said: “Yes, but that the terror clause penalty was unenforceable because B had probable cause to request that A be passed over for appointment based on her bad acts.”

The case is troubling to me for a number of reasons, but mostly because it seems to equate a petition to remove a PR for cause with an attack on a trust sufficient to trigger a terror clause penalty.  That is not true.  A terror clause, such as the one in question here, penalizes an effort to contest the validity of the Trust or Will at issue.  There was no claim in this case that the Will was not valid, that is no claim that the provision of the Will pursuant to which A was appointed PR was invalid as a result of incapacity, undue influence, etc.  The only claim was that A was not suitable to serve, based on her conduct as PR prior to her appointment. 

The case says that the attorney for B conceded that the Petition to preclude A’s appointment was a contest of a provision of the Will.  That was wrong for the attorney to have made that assertion, and wrong for the Court of Appeals to have relied on it as controlling (if that is what it did).  Clearly that is not true. 

This ruling creates confusion about the scope of activities that would potentially create a challenge to a document sufficient to trigger a terror clause penalty.  I suppose this terror clause could have said that any petition to remove a PR would be grounds for invocation of a penalty, but that is not the case.  So we are left with the proposition that an action to remove a PR (or trustee for that matter) who is expressly nominated in the document will be treated as a challenge to a provision of the Will or Trust at issue sufficient to trigger a terror clause.  It leaves us with the question of whether the result would have been different if B had not challenged the appointment of A at the hearing on admission of the Will but had instead waited a week and filed a separate subsequent petition for removal of A as PR for cause. This type of decision only further muddies the waters in what is becoming a troubling mire of opinions (in light of the Perry Trust matter discussed extensively in this blog). 

Why the “Lucid Moment” Needs to End

There’s a case I read a couple years ago that bothers me and that I’ve been wanting to comment on it since.  It is an unpublished decision in which the trial court held that a trust amendment was invalid due to lack of capacity and undue influence.  The Court of Appeals reversed the trial court. It is called Estate of Edward E. Lerg, COA case 293012, January 27, 2011.  Click here to read it.

What bothers me about the case is what bothers me about the legal concept called the “lucid moment.”  The problem I have with the lucid moment is twofold:

(1) It is out of touch with the modern understanding of dementing illnesses.  That is, we’ve come a long way toward understanding cognitive impairment.  One thing we know for sure is that people with dementing diseases don’t get better – only worse.

(2) It supports that concept that the scope of relevant/admissible evidence in capacity contests is limited to the moment of execution.  Again, I would suggest that this is completely inconsistent with the way dementing conditions work, and would, if adhered to, negate most of the best evidence available in these cases.

Mr. Lerg was diagnosed with dementia in 2005 as determined by a medical professional with a high level of expertise in such matters.  The doctor found that he had moderate to severe dementia and that the dementia was then to the point that Mr. Lerg had poor insight and judgment.  Mr. Lerg executed a trust amendment in 2006.  He was evaluated again by the same expert in 2007 and was found to have substantially declined.

While I agree that a well presented case with significant counterbalancing evidence could have been presented to overcome the medical evidence, that’s not how this case played out or how this opinion reads.  Rather, the Court of Appeals reversed the trial court by severely discounting the doctor’s opinion, stating that such evidence (the Doctor’s findings) is of “very little probative value.”  That statement is incredible to me and is, I would suggest, attributable to the archaic concept of a “lucid moment” (although that language was not expressly used by the Court). What’s more, the Court of Appeals cited a 1965 case for the scary proposition that: testamentary capacity “is judged as of the time of the execution of the instrument, and not before or after, except as the condition before or after is competently related to the time of execution.”

At least in the context of dementing illnesses (as opposed, for instance, to mental illness or alcoholism), it is time for the law to catch up with science and for Court’s to recognize that although persons with dementia may be better some days than others, they don’t improve over time, they only get worse.  Evidence of where they were in terms of cognitive impairment a year before they executed the document in question, and where they were a year after, should be extremely probative of the question of their capacity at the time of execution.  Further, if someone is significantly impaired and has a “good day” or “good hour” that “good day” or “good hour” must be seen in the context of their impairments.  That is, if I don’t recall what I did yesterday and won’t remember tomorrow what I am doing today, how can it be said that I fully understand the implications of my actions today?