Presentation At The 2016 Arkansas Bar Association Annual Meeting

Today one of my law partners, Pat James, and I will be privileged to make a presentation at the Arkansas Bar Association Annual Meeting in Hot Springs, Arkansas, where over 1,200 lawyers and judges congregate every June for 4 days of continuing education seminars,  meetings, and socializing.   The title of our presentation is---not surprisingly given that you are reading this blog---"WEALTH WARS:   Arkansas  Estate, Trust, Probate And Inheritance Litigation."

The hour-long presentation is designed to be a broad overview, for the general practitioner, of numerous topics arising in this area of law.   For an A to Z listing of the topics to be discussed, inclusive of some written materials containing a checklist of common claims and causes of action; a checklist of common defenses; an exemplary case theme (the “fraud triangle”); a lengthy list of Arkansas statutes frequently arising in litigated estate and trust matters; and citations to a few helpful general and Arkansas-specific secondary materials,  please click on the following link:    Written Materials For June 2016 CLE Presentation 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Brief Thoughts On Claims Of Undue Influence

As stated in my previous post regarding the capacity of a testator to execute a will or trust, the two concepts are closely related.  For example, incapacity relates to invalidation of a will, trust, deed, etc. because of the testator’s own deficiencies (typically mental impairment).  Undue influence, however, is when the will, trust, deed, etc. may be invalidated by the actions of others because they allegedly exercised such a degree of influence and power over the testator thatthey were induced to act by something other than free will.

As a general matter, the less testamentary capacity that one possesses, the less proof of undue influence will be necessary.  A presumption of undue influence may be triggered by a confidential relationship between the testator and someone who is receiving a benefit from the document, such that the burden of proof can shift to the proponent of the document to prove that there has in fact been no undue influence.  Unless there is “procurement” involved, in Arkansas the proponent merely has the burden of proving no undue influence by a preponderance of the evidence (more likely than not, as opposed to a higher standard such as beyond a reasonable doubt).

Obviously influence is ever-present and we are constantly influencing others to take certain actions.  This is especially true in the context of family and other close relationships.  However, mere influence doesn’t necessarily equate to taking advantage of someone.

Accordingly, while a testator may be legitimately influenced by his children, for example, the influence may go too far if the kids dictate or control the testator.  Likewise, the mere existence of a confidential relationship between the testator and the beneficiary, or a close and affectionate relationship, may not in and of itself constitute undue influence although it can in some instances have the effect of shifting the burden of proof.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Demographic Trends Suggest More Estate, Trust And Probate Litigation In The Decades To Come

I have long been interested in demographic trends, emerging technologies, cultural changes, and shifting societal patterns.  For example, 20+ years ago when I was in college I read Alvin and Heidi Toffler's  "War And Anti-War," which while a bit dated now predicts how future wars will be fought (but with an eye toward peace and avoiding such conflicts).   Similarly, about 5 years ago I read George Friedman's "The Next 100 Years:  A Forecast For The 21st Century,"  which was an eye-opening look at how our  nation and world may likely look in the years and decades to come.  I highly recommend either book for some fascinating reading, and it will be interesting to someday see how accurate or inaccurate their predictions were.

 Then,  a couple weeks ago I came across a very interesting article by a Georgia attorney named John J. Scroggin, in Wealth Strategies Journal,  which focused in particular upon 30 positive and negative trends that will impact estate planning over the next several decades:  "Where Is The Estate Planning Profession Going?"    While I focus much of my law practice upon estate, trust and probate litigation---as opposed to estate planning and drafting of wills, trusts, and the like---the article still addressed my areas of interest and I thought I would share a couple excerpts here.  Better yet, lawyers and laypersons   should take the time to read the entire article  which not only encompasses great analysis but also contains good references to other articles, checklists, outlines, etc.

               For example, with regard to estate and trust litigation in general Mr. Scroggin opines that:

               "(9) Estate and Trust Litigation. As a result of the combination of poorly drafted  documents, dysfunctional families, incompetent fiduciaries, greedy heirs, inadequate  planning and poorly prepared fiduciaries, estate litigation has been booming in the last  few decades. This growth will continue.

               One consequence of the increased litigation will be an increased effort by both individual and institutional fiduciaries to make sure estate and trust instruments provide for strong  fiduciary protection. We should anticipate more protective provisions in fiduciary  instruments, including broader indemnity provisions for fiduciaries, modifications of the  normal fiduciary standards and investment polices, broader use of no contest clauses,  limited liability for delegated powers and limits (or increases) on disclosures to  beneficiaries. These changes will increase the need to create counter-balancing powers  designed to protect beneficiaries (e.g., a wider use of Trust Protectors and fiduciary  removal powers). As a result, there will be longer discussions with clients and the  complexity of the documents will increase."

               Related to the foregoing are Mr. Scroggin's thoughts on avoiding estate and trust litigation altogether, through conflict minimization:

               "(10) Conflict Minimization. The corollary to estate and trust litigation is planning  designed to mitigate the potential sources of intra-family estate conflicts. According to  the Wealth Counsel 6th Annual Industry Trends Survey, the top motivation for doing  estate planning was to avoid the chaos and conflict among the client’s heirs. Many clients  have an abiding desire to establish structures which minimize the potential points of  conflict and provide a mechanism to resolve future family conflicts. Clients want to  dispose of assets in a manner designed to minimize family conflict - leaving a legacy of  relationships rather than a legacy of conflict. This is a growing part of the discussion with  clients and a part of their planning documents. Solutions include using personal property  disposition lists, looking at real or perceived conflicts of interest when appointing  fiduciaries, or passing the family business only to the children running the business. As  noted above, attorneys will need to spend more time talking with clients about providing  greater protections to fiduciaries and creating counterbalancing protections for heirs.

 Many individual fiduciaries agree to serve without fully understanding the potential  liabilities and conflict they may be inserting themselves into. Should attorneys provide written materials (perhaps signed by the client and the fiduciary) detailing the  responsibility of the fiduciary, the risk of conflict and the means by which the drafter has  tried to minimize those exposures? Should attorneys more thoroughly advise their clients  on the necessary skill   sets needed by their fiduciaries - instead of just accepting the  client's choices at face value?"

  In sum, as I have written before on this blog, American society is rapidly changing.  The Baby Boomers have begun retiring over the last many years and will continue to do so over the next 2-3 decades.  Large sums of wealth have been acquired and will be transferred to younger generations.  People are living longer, and the aging population will be less competent due to Alzheimer's Disease and other forms of dementia which will lead to conflicts over whether a deceased person had the requisite capacity to execute a will or trust.  These and other trends strongly support the notion that there will be increasingly more estate, trust and probate litigation in the decades to come.

               Matt House can be contacted by telephone at 501-372-6555, by e-mail at  mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Managing Someone Else's Money

 Estate, trust, power of attorney and probate disputes often develop due to disagreements over the manner in which someone managed another person's money. For example, the beneficiaries of a will might disagree with the executor's claim for fees related to administration of an estate.  Co-trustees might differ as to the best investments for maximizing the income and assets of a trust.  Two children might question the propriety of their third sibling's withdrawals of money from their mother's bank account, pursuant to a financial power of attorney that the mother apparently executed at some point in the past.

 To provide guidance in these situations, the Consumer Financial Protection Bureau has recently released 4 booklets entitled "Managing Someone Else's Money" which are intended for such persons as trustees, agents under powers of attorney, court-appointed guardians, and government fiduciaries.  Not only do they assist those who are honestly and legitimately attempting to assist in the management of money or property for a loved one, they also provide information on warning signs and things to look for when someone else is doing the managing of that person's finances.

 Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Apparent End To The Huguette Clark $300 Million Estate Battle

In a middle-of-the-night deal during jury selection of a New York trial, it appears that a settlement has been reached in the infamous Huguette Clark estate dispute.  You can read all about it at this link.  I had written about this over 3 years ago back in August 2010 at this link.  This litigation serves as a very interesting case study in undue influence allegations and other issues commonly associated with estate and trust disputes.  A more comprehensive overview of the stories, videos, and other coverage of this saga can be found at this link.          

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Arkansas Court Of Appeals Affirms Agreement To Split Joint Accounts Despite Beneficiary Designations

 There is often confusion regarding what property falls within an estate, or trust, and what property falls outside of either.  For example, commonly bank accounts, IRA’s, etc., are titled in such a way that upon one person’s death, the remaining monies are left to the other person or person(s) identified on the account paperwork such that this property passes outside the estate or trust.  It can often be a difficult task to demonstrate that this money should be divided in a different manner.

 However, the Arkansas Court of Appeals recently affirmed a trial court’s ruling that this was what was supposed to occur, in the case of Richardson v. Brown, 2012 Ark. App. 535 (September 26, 2012) stemming from Faulkner County Circuit Court.  This was actually a case that I handled on behalf of a client, and the Judge ruled in his favor.  The ruling was left wholly intact by the appellate court.

Without going into too much detail, the parties' mother passed away leaving three children as her heirs.  Certain property passed to the children pursuant to a will, but the mother had other property (a car, bank accounts, IRA, etc.) that were titled in various ways as between her and her individual children.  Our client argued that despite the titling on the various property, the three children had in fact an oral agreement, as demonstrated by the later actions and conduct of the children, to split all of the properties evenly.  He had received the “short end of the stick” and, basically, believed that his sisters had intentionally deprived him of his equal one-third share.

 In a hard fought battle, our client ultimately prevailed at trial and proved that, notwithstanding the titling on the various properties, there was an express agreement among the siblings to equally divide the various accounts.  The trial court imposed a judgment and a substantial attorneys’ fee award, both of which were affirmed by the Court of Appeals.

 In doing so, among other things the Court ruled that ordinarily ownership of a joint bank account with a right of survivorship is conclusive proof of the parties’ intent for the property to pass to the survivor.  However, this general rule does not prevent the survivor from making a different disposition by agreement, and in this case the trial court determined that such an agreement had in fact been made among the siblings.  This is a difficult argument to make, because courts presume that the titling on an account is strong evidence of how that property is to be distributed.  But, if the facts and evidence warrant it, this case demonstrates that a court will sometimes hold that an agreement to divide the property otherwise will prevail over the titling of an account.

 Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Recent Articles On Alzheimer's Disease, And Trustee/Beneficiary Relationships

There is not much to this post, primarily because the articles referenced below already thoroughly discuss the issues.  Specifically, both articles shed light upon two common problem areas which can often eventually erupt into estate, trust and probate disputes. 

The first article is from the New York Times and addresses the effect of Alzheimer's Disease and dementia upon an individual's ability to control and account for their finances.  Given our aging population and ever-increasing life expectancy, it's recommended reading for everyone as this concern affects innumerable families in this country. 

The second article is from the Wall Street Journal and touches upon the often-tense relationship between trustees and beneficiaries.   It may especially be interesting and insightful for anyone who already acts as trustee or who may eventually act as a trustee in the future.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Stealing From Grandma And Grandpa---Inheritance Theft

A recent lengthy but interesting series of stories (Part I and Part II) on the odd heiress, Huguette Clark, appeared to prompt a good article yesterday from Bob Sullivan, who covers Internet scams and consumer fraud for msnbc.com.  Mr. Sullivan's posting focuses upon allegations and situations involving elder financial abuse, which is a significant portion of my own law practice.  I suggest that you read the article when you have a free moment, as it extensively summarizes a growing issue in this country and is obviously one in which you may very well have an interest if you regularly read or have merely stumbled upon my Blog.  

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Inheritance Hijackers: Who Wants To Steal Your Inheritance And How To Protect It

At the recommendation of a client, I have recently started reading a fascinating book entitled Inheritance Hijackers:  Who Wants To Steal Your Inheritance And How To Protect It (Ovation Books 2009) written by a Florida attorney named Robert C. Adamski.  The book is primarily written for beneficiaries and potential beneficiaries of an inheritance.  Mr. Adamski's book sets forth an extensive discussion of the growing phenomenon which he calls "inheritance theft," and which of course is a primary component of what I do in my own law practice as well (representation of beneficiaries, but also fiduciaries such as trustees andexecutors, in estate, trust and probate litigation).  "Inheritance theft" is defined on page 2 of the book as "the act of diverting assets from the intended recipient to another person[.]" 

While the book is available for sale at Mr. Adamski's own website, Amazon.com, and I'm sure other places, a good overview of the phenomenon can be found below which is directly from a prior post by Mr. Adamski: 

1.  Who steals inheritances?

Inheritance theft is a crime of opportunity committed by those we place our trust in. These are family members, close associates, care givers and others we depend on as we grow older. Inheritance hijacking is always a surprise to the victim, who never expected a trusted family member or friend to betray their trust.

2.  Who are the victims of inheritance hijacking?

There are always two classes of victims. The first is the person who intended to give the inheritance. The second is the person or persons who were the intended recipient of the inheritance. As we age we are all potential victims because we become weaker in our physical and mental ability. We then are forced to rely upon and put our trust in others. This gives the trusted persons the opportunity to hijack our inheritance.

3.  How are inheritances hijacked?

The hijacker's bag of tricks includes undue influence, duress, forgery, theft by an administrator, marriage, and more. Administrators of probate estates and trusts are common hijackers. They have the opportunity and ability to take advantage. Marriage is the 'Silver Bullet" in the world of inheritance theft because it is all but impossible to overturn a marriage which hijacks an estate. Care givers earn the trust of their victims and as a result are often inheritance hijackers. An important element of inheritance theft is the trust which is gained by the hijacker and later betrayed. Without that element of trust it would be very difficult to hijack an inheritance.

4.  How can I determine if my inheritance is at risk?

Take the Inheritance Risk Quiz at www.ProtectYourEstate.Net to determine the risk to the inheritance you intend to give or the inheritance you expect to receive.

5.  How do I protect the inheritance I intend to give or the inheritance I expect to receive?

Self education and proper estate planning are the first steps. But it does not end there. It is vital to understand how inheritances are hijacked and how to guard against inheritance hijacking. The book, INHERITANCE HIJACKERS: Who Wants to Steal Your Inheritance and How to Protect It, was written to help people protect their families from inheritance theft. Learn more about the book at www.ProtectYourEstate.Net

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I have not yet finished Mr. Adamski's book, but can already tell that I will be recommending it to beneficiary-clients, and potential clients, who anticipate possibly receiving inheritances.  The book contains an immense amount of valuable information for a very reasonable price. 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Update On Gary Coleman Estate Dispute

As a child of the 1980's, I grew up watching Diff'rent Strokes like most people my age.  A white, middle-class kid growing up in Oklahoma, I did not have much in common with two African-American orphaned children from Harlem taken in by a rich Park Avenue businessman, but the show constantly had me laughing, especially when Gary Coleman ("Arnold") would throw out his catchphrase "What'choo talkin' bout, Willis?"   So it was disappointing to hear about the recent death of Coleman, whose post-Diff'rent Strokes life was seemingly as scandal-ridden as the lives of his child co-stars on the show, Todd Bridges ("Willis") and Dana Plato ("Kimberly"). 

Coleman was apparently taken advantage of in life (in the early 1990's he successfully sued his parents and business advisor for almost $1.3 million over misappropriation of his $3.8 million trust fund), and now that he has passed away it looks like there may be additional controversy as well.  Specifically, another blogger who writes on similar topics has provided a good update on the documents and characters who are coming out of the woodwork following his death.  Wikipedia of course also has a good summary of his life and recent events. 

Gary Coleman did not have "Michael Jackson money" but it appears that there is still enough to fight over.  Notwithstanding that Coleman filed bankruptcy in 1999, it is possible that the potential heirs fussing over the leftovers havea special interest in the intellectual property and other rights which could conceivably have value in the years to come as the people in my generation watch reruns and relive the glorious(?) early 1980's.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Federal Appeals Court Rules Against Estate Of Pinup Anna Nicole Smith, "Widow" Of Elderly Texas Billionaire

One of the longest-running estate and trust battles on record added another chapter with the Ninth Circuit Court of Appeals' recent ruling in the saga involving Anna Nicole Smith, now deceased, and her estate's attempt to claim a chunk of her former husband's billion-dollar fortune.  Specifically,  Anna Nicole, stripper-turned-Playboy model-turned-pop-celebrity, married elderly oil magnate J. Howard Marshall in the last year of his life.  She later claimed that Marshall promised her over $300 million although there was apparently no written documentation supporting the gift. 

A msnbc.com article from a couple of days ago summarizes the 15-year legal battle and also contains a link to the 68-page ruling: 

"The convoluted dispute over J. Howard Marshall's money has its roots in a Houston strip club where he met Smith. The two were wed in 1994 when he was 89 and she 26. Marshall died the next year and his will left his estate to his son.

Smith challenged the will in a Houston probate court, alleging the billionaire's son illegally coerced his father to exclude the former Playboy model from sharing the estate. She alleged that her husband promised to leave her more than $300 million above the $7 million in cash and gifts showered on her during their 14-month marriage.

While the probate case was pending in Houston, Smith filed for bankruptcy in Los Angeles, alleging in federal court filings that her husband promised her a large share of the estate.

In late 2000, the bankruptcy court awarded Smith $474.75 million, which a federal district judge reduced to $89.5 million in 2002.

Between those two decisions, a jury in the Houston probate court ruled in March 2001 against Smith. The jury found the billionaire was mentally fit and under no duress when he wrote out a will that left everything to his son.

Since then, the two sides have been fighting over which court to obey.

Smith argued that the federal courts were in charge because the bankruptcy court was the first to rule.

Pierce Marshall countered the decision was the jurisdiction of the probate court, because that's where the first legal action was filed and the site of the only full-blown trial."

Ultimately the Ninth Circuit Court of Appeals agreed with the estate of Marshall's son (who died in 2006) and against the estate of Anna Nicole (you will recall that she died of an apparent drug overdose at age 39 in 2007).  Specifically, the Court held that the bankruptcy court did not have authority to decide a probate dispute such that its $475.75 million award was a mere advisory opinion.  The Court also concluded that the lower court should have relied upon the probate jury's verdict against Anna Nicole and dismissed the entire case rather than merely reducing the award to almost $90 million. 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

UPDATED: Dispute Erupts Over Wealth Of Deceased Billionaire Shopping Mall Developer

Pretty much anyone who has lived in Central Arkansas over the last few decades has been aware of if not actually visited University Mall in Little Rock's midtown area.  While it used to be the hot spot for shopping many moons ago, in more recent years it became better known for its empty stores and the litigation that resulted from disputes over the mall's management.  The mall closed in 2007, demolition began in 2008, and a brand new mixed-use development appears imminent for the property in the next year or two.  

Anyone familiar with University Mall is also undoubtedly aware of its close proximity to Park Plaza Mall.  Ever since moving to Arkansas back in 1992, I never understood why University was built almost literally next door to Park Plaza (built a few years earlier in 1959), yet another enclosed shopping mall.  But I guess that's why I'm a mere lawyer and the folks who make the big bucks are mall magnates like Melvin Simon. 

Specifically, University Mall was developed by Melvin Simon & Associates, an Indianapolis-based real estate development and management company which later became known as Simon Property Group.  I mention this because Simon Property Group is evidently the largest public U.S. real estate company, and shopping mall development made the company's namesake---Mr. Simon---a very wealthy man.  He and his brother, who also co-founded the company, eventually purchased the Indiana Pacers franchise of the National Basketball Association. 

According to a recent post on the Florida Probate & Trust Litigation Blog,  the Wall Street Journal writes that a wealth war has begun over the terms of Mr. Simon's will.  Apparently, Mr. Simon's wife was only supposed to receive approximately one-third of his fortune and, after some changes were evidently made to his will a few months before his death, she now stands to receive about one-half.  Considering that his wealth has been estimated at $1-2 billion depending upon the fluctuating stock price of his company, even minor changes in his will could amount to a major redistribution of wealth.  Notably, the changes cut out Mr. Simon's three children from his first marriage.  

At least one of those children is now suing Mrs. Simon, their stepmother, contending that she unduly influenced Mr. Simon and persuaded him to change his will to reduce the children's inheritances.  The lawsuit also alleges that Mr. Simon had dementia and needed assistance signing the document, to which Mrs. Simon has now apparently responded that while he did in fact have Parkinson's Disease and needed help with his signature, he voluntarily signed a new will and trust of his own free will.  This will be a wealth war worth watching in the next few months. 

Seemingly sudden changes to wills and trusts shortly before someone dies are one of the most common disputes arising in estate, trust and probate litigation.  As the Baby Boomer generation begins to retire and ultimately pass away, there will no doubt be millions more similar disputes in the decades to come. 

UPDATE:  The following link contains the latest update (as of 2/11/10) from the Wall Street Journal.

Removal Of A Trustee Under Arkansas Law

My previous blog post generally discussed principles associated with the removal of executors or personal representatives of an estate.  This post is similar except that it analyzes this issue in the context of trusts rather than estates.  Every trustee of a trust, and every beneficiary of a trust, should be aware of these principles as well.  

To remedy a breach of trust under the Arkansas Trust Code, the Court may:

(1) compel the trustee to perform the trustee’s duties;

(2) enjoin the trustee from committing a breach of trust;

(3) compel the trustee to redress a breach of trust by paying money, restoring property, or other means;

(4) order a trustee to account;

(5) appoint a special fiduciary to take possession of the trust property and administer the trust;

(6) suspend the trustee;

(7) remove the trustee as provided in § 28-73-706;

(8) reduce or deny compensation to the trustee;

(9) subject to §28-73-1012, void an act of the trustee, impose a lien or a constructive trust on property, or trace trust property wrongfully disposed of and recover the property or its proceeds, or

(10) order any other appropriate relief. 

See Ark. Code Ann. § 28-73-1001(b).

Also, section 706 of the Trust Code further elaborates on the removal of an trustee:

(a) the settlor, a co-trustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.

(b) A court may remove a trustee if:

(1) the trustee has committed a serious breach of trust;

(2) lack of cooperation among co-trustees substantially impairs the administration of the trust;

(3) because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries;

(4) there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds the removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and suitable co-trustee or successor trustee is available.

See Ark. Code Ann. § 28-73-706(a) and (b) (emphasis added).

So, as one can tell the grounds for removal of a trustee are very broad.  Accordingly, similar to estates, those administering trusts in the State of Arkansas must take their duties seriously so as to avoid placing themselves in a situation in which their actions and inactions could be questioned.  Similarly, beneficiaries of a trust should be vigilant in monitoring the conduct of the trustee to ensure that they are properly doing their job.  In the appropriate case, Arkansas courts have not hesitated to remove trustees where the facts and circumstances warrant it. 

Removal Of An Executor (Personal Representative) From An Estate Under Arkansas Law

As previously discussed on this Blog, an executor, also known as a personal representative, is a person who is charged with the responsibility of administering an estate after another person has passed away.  They will typically do things like collect and inventory the deceased's assets, manage the property, pay the debts, and distribute property according to any will or the intestacy laws (setting forth distribution priorities for those dying without a will).

However, conflicts will sometimes arise between the executor of the estate and the beneficiaries of that estate, the latter of whom are generally supposed to receive bequests or property from the estate.  Perhaps the executor is alleged to be operating under a conflict of interest, is improperly personally benefitting from the property of the estate, or is simply not carrying out their duties.  In Arkansas, there is a specific statute that governs these conflicts and sets forth the grounds for when an executor can be removed from his or her office.  For anyone who currently is or ever anticipates administering an estate in Arkansas, or who is or ever will be the beneficiary of an estate,  it is worth getting familiar with the removal statute.

Specifically, under the Arkansas Probate Code of 1949, Ark. Code Ann. § 28-1-101 et seq., the Court appoints and issues letters testamentary to a personal representative to manage and preserve the property and rights of the decedent until distribution according to the testamentary document or appropriate intestate statute. Ark. Code Ann. § 28-48-102. It is well-established that "[t]he personal representative occupies a fiduciary position toward the heirs, and it is his duty to act toward them, as the beneficiaries of the trust administered by him, with the utmost good faith." Price v. Price, 253 Ark. 1124, 1137, 491 S.W2d 793, 801 (1973). The personal representative generally continues in that office unless removed due to one or more of the grounds set forth in Ark. Code Ann. § 28-48-105.

Ark. Code Ann. §28-48-105(a) (emphasis added) provides that:

(a)(1) When the personal representative becomes mentally incompetent, disqualified, unsuitable, or incapable of discharging his or her trust, has mismanaged the estate, has failed to perform any duty imposed by law or by any lawful order of the court, or has ceased to be a resident of the state without filing the authorization of an agent to accept service as provided in § 28-48-101(b)(6), then the court may remove him or her.

(2) The court on its own motion may, or on the petition of an interested person shall, order the personal representative to appear and show cause why he or she should not be removed.

With this in mind, Ark. Code Ann. §28-48-107(a) (emphasis added) provides that "[w]hen a personal representative dies, is removed by the court, or resigns and the resignation is accepted by the court, the court may, and, if he or she was the sole or last surviving personal representative and the administration is not completed, the court shall, appoint another personal representative in his place upon the motion or petition of an interested person."

Separate and distinct from the statutory grounds for removal of a personal representative, multiple Arkansas cases also shed light on this issue. For example, in Robinson v. Winston, 64 Ark.App. 170, 175-76, 984 S.W.2d 38, 40-41 (1998), the evidence was deemed sufficient to warrant removal of the personal representative due to her attitude toward a person interested in the estate that created a reasonable doubt as to whether she would act honorably, fairly, and dispassionately in her trust, and because the tension and her continuance in the office would likely render administration of the estate difficult, inefficient, or unduly protracted. See also Matter of Guardianship of Vesa, 319 Ark. 574, 579-82, 892 S.W2d 491, 494-95 (1995) ("unsuitability" of ward’s sibling to serve as guardian of the estate, justifying removal on probate court’s own motion and appointment of neutral successor, was established by evidence of family friction among ward’s siblings which adversely affected administration of estate).

Likewise, in Guess v. Going, 62 Ark. App. 19, 23-25, 966 S.W2d 930, 932-33 (1998), testimony of the personal representative that "mother’s love" precluded her from challenging a land sale agreement that was extremely favorable to her daughter, even though the terms of the agreement made it unlikely that the heirs of the estate could ever benefit from what would have been the estate’s largest asset, established a conflict of interest making the executrix unsuitable and warranting her removal. See also Price v. Price, 258 Ark. 363, 378, 527 S.W.2d 322, 332-33 (1975) (wherein a personal representative who had persistently acted in furtherance of her own interests in a manner to deprive her step-children of any benefits from their rights of the father’s property, and who had been recalcitrant about compliance with her fiduciary responsibilities and directions of the court, was deemed unsuitable for discharge of the trust involved in acting as personal representative of the estate such that removal was appropriate).

In sum, those administering estates in the State of Arkansas must take their duties seriously so as to avoid placing themselves in a situation in which their actions and inactions could be questioned.  Similarly, beneficiaries of an estate should be vigilant in monitoring the conduct of the executor to ensure that they are properly doing their job.  In the appropriate case, Arkansas courts have not hesitated to remove executors where the facts and circumstances warrant it.

American Bar Association Releases "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order"

Estate, trust and probate litigation often involves allegations that elderly adults' estate planning desires were not carried out after their deaths (either by someone's intentional acts or negligence), or that those elderly adults were taken advantage of and their estate planning desires were thwarted while they were still living (albeit without their knowledge or consent).  With respect to the latter scenario, sometimes the claims are true, and sometimes they aren't.  Issues of (in)competency, illness, undue influence, and fraud are often raised in these types of proceedings.   Each case is different and we have certainly represented those doing the accusing as well as those being accused. 

But one common theme that I have noticed in virtually all of these cases is that no matter how much estate planning that the elderly person actually did, in virtually every situation they probably could have done a bit more.  It might not have ultimately made a difference with respect to whether or not litigation would have resulted, but where more planning is undertaken that can frequently result in a lesser likelihood of later conflict. 

With this in mind, thanks to a tip on the Wills, Trusts & Estates Blog, the American Bar Association has apparently just released the "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order."  I've given the document an overview and  would heartily recommend it to anyone dealing with such circumstances (or anyone with a loved one who is dealing with this situation).

UPDATED: Practical Help For Estate Administrators (Executors) & Trust Administrators (Trustees)

One of my very first posts on this blog generally discussed the legal duties of trustees under Arkansas law.  While that post summarized some of the more abstact legal principles at issue, a much more common question posed to me and other attorneys at dinner parties and elsewhere is what are the practical duties of trustees (and, similarly, the practical duties of estate executors, a.k.a. personal representatives). 

With this in mind, a couple of days before Christmas while doing some last-minute book shopping at Barnes & Noble for some friends, I happened to come across one of the best little books that I have seen on the subject.   Specifically, I was somewhat surprised to discover that "Estate & Trust Administration For Dummies" is a great resource for lay persons charged with the responsibility of serving as trustee for a trust or executor for an estate.  Even though I am historically the not-so-proud purchaser of multiple "Dummies" books on various mundane topics which I am too embarrassed to detail here, I must admit that I did not expect much substance when I first cracked open this text on the sparsely-populated "Law" aisle at B&N.  However, much to my surprise there was a tremendous amount of solid, easily understandable information there that---if utilized---should help any trustee or executor more ably and easily perform their duties and reduce the likelihood of future estate, trust or probate litigation. 

So, if you're a current or future fiduciary and have a bookstore gift card that you need to burn through, consider heading over to the probably-vacant leather chairs next to the Law section at B&N and checking out this book.  Considering the expense of this type of litigation, it might be the best 15 bucks that you'll ever spend. 

In closing, thanks for checking out the "Wealth Wars" blog over the first 3-4 months of its existence.  I wish you a happy and prosperous 2010.     

UPDATE:  The Arkansas Bar Association's website also has a free publication that may come in handy as well:  Handbook For Personal Representatives In Arkansas.  It is more of a very broad overview than anything else, but is still helpful since it is Arkansas-specific. 

UPDATED: Sentencing Time In The Ultimate Wealth War: The Astor Family Fortune

As we are in the midst of the holiday season and families all around the world are coming together to enjoy each other's company for a few fun-filled days (or in some cases a couple of miserable hours), it can be a little disheartening to read about (much less write about) another wealth war in the news.  However, this one is pretty spicy, has a celebrity aspect to it (Barbara Walters and Henry Kissinger were witnesses at the underlying trial), and even has some criminal twists and turns. 

Specifically, msnbc.com had an article today which contains one of the more extreme examples of an estate and trust battle.  I was vaguely familiar with Brooke Astor, or rather her last name due to her philanthropy, but became much more interested after hearing and reading of the unfortunate last few years of her life in which she was apparently taken advantage of by her only child.  Mrs. Astor's third husband, Vincent Astor, was a descendant of John Jacob Astor, whose fortune was accumulated in fur trading and real estate.  Mr. Astor was one of the first multimillionaires, and Mrs. Astor ultimately gave away almost $200 million to institutions and was given a Presidential Medal of Freedom for her generosity.  She passed away in 2007 with many more tens of millions in her portfolio. 

According to the msnbc.com article, Anthony Marshall, Mrs. Astor's son, apparently led a successful, well-regarded life until one of his own sons, Phillip Marshall, exposed his father's apparent abuse of his mother (Phillip's grandmother) and her wealth in the course of a 2006 civil suit.  The stealing of her fortune was evidently so bad that the 85 year old Marshall actually was convicted of crimes a couple of months ago after a 5 month long trial and now faces sentencing next week, along with an estate lawyer who was likewise convicted of shenanigans associated with Mrs. Astor's fortune.  The case is rather intriguing given the fact that celebrities such as Whoopi Goldberg and Al Roker have come to his defense and pleaded for leniency from the sentencing judge.  Only time will tell whether he actually receives it, as there were tales told at trial of Papa Marshall engaging in gamesmanship with respect to Mrs. Astor's will so as to benefit him over her favorite charities, stealing her artwork, and giving himself a million dollar raise for his efforts in managing her wealth. 

As a lawyer who has previously worked on many white collar criminal defense matters, I speak from some experience in stating that white collar crime is pretty rarely prosecuted.  The public seems to be more taken aback by crimes of drugs, sex, and violence, and therefore the politicians and the strapped resources of governmental officials are largely dedicated to prosecuting those types of crimes.  White collar crimes are also typically complex, document-intensive, and often go uncovered much less unprosecuted. 

The Astor/Marshall case, however, is one instance in which the facts and circumstances can occasionally be so bad that they warrant more than a civil suit and instead the intervention of criminal investigators.  I do not know why, for instance, stealing $100,000 from a relative by altering some documents is any less of a prosecutable crime than stealing a carton of cigarettes from a convenience store, but for some reason it seems like the latter is much more likely to receive the attention of the law enforcement authorities.  In any event, the Astor/Marshall case contains lessons for lawyers and wealthy individuals alike in ensuring that the estate planning and trust administration processes are as free of hanky-panky as possible. 

UPDATED:  According to msnbc.com, Phillip Marshall was sentenced to 1-3 years in prison, although he may be able to stay out of prison on bail pending appeal.  According to the New York Times, Mr. Marshall's lawyer apparently received the same sentence.

Avoiding Estate, Trust & Probate Litigation

Since one of my areas of practice is estate, trust & probate litigation, it is obviously not in my economic self-interest to counsel against getting involved in this type of litigation in the first place.  However, first and foremost is a lawyer's duty to his or her client, which while sometimes involves filing or defending a lawsuit can also mean trying to avoid that lawsuit altogether.  After all, Abraham Lincoln once advised:  "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses and waste of time."  That is still generally solid advice, although sometimes the fight just cannot be avoided.

That said, U.S. News published a good little article over the Thanksgiving holiday entitled "8 Tips To Avoid Nasty Estate Surprises" which provides some good pointers for avoiding estate, trust & probate litigation.  In summary:

1.  Pick aa reputable, experienced lawyer who has not performed any work for any of the other beneficiaries.  Basically, you want an attorney who knows what they are doing in this area, who does not have a conflict of interest, and who will be representing your interests (only). 

2.  Pick an administrator who can get along with the family, maybe even a professional fiduciary (like a bank trust department) if no one else could practically fill this role.  This is a biggie---oftentimes when one beneficiary is chosen to act as executor or trustee it can cause consternation with respect to the other beneficiaries. 

3.  Talk about your intentions with family members before any will or trust is drafted, in order to preclude surprises and fights after death and making everyone aware of your plans and desires.  Open, honest communication can go a long way toward heading off battles over the family fortune. 

4.  Consider your state's laws and create trusts if necessary to bypass probate if it is particularly burdensome under applicable state law.  Again, our law firm engages in estate, trust & probate litigation---not estate planning---however we can refer you to some reputable attorneys in this area if needed.

5.  Update the will or trust often so that challenges are less likely.  One of the best ways to avoid litigation is to occasionally update your documents---under facts and circumstances (lots of objective, detached witnesses, etc.) demonstrating the absence of fraud and undue influence from others---so that it can be demonstrated you were polishing your estate and trust objectives up until the end your life.

6.  Be sure to title your assets properly so that the assets pass through or outside of probate as you originally intended.  Too many folks spend a lot of money creating fancy trusts and then never do the relatively simple work of actually transferring assets into the trust. 

7.  Think about including a no-contest clause tied to testamentary gifts of a degree sufficient to discourage legal disputes.  To help avoid post-death disputes it is worth possibly including a penalty clause that essentially poses a risk of losing their piece of the pie for any beneficiary who challenges the instrument  in question after your death. 

8.  Consider allowing some discretion with respect to distribution of assets so that beneficiaries can agree to a distribution that best meets their own needs and desires.  There is no one-size-fits-all strategy and of course none of us have a crystal ball, so sometimes providing for some flexibility is often a good practical solution. 

While not a fool-proof plan to avoid estate, trust & probate litigation, the foregoing reflects some good first steps to staying out of the courts with respect to the family fortune.  As we are in the heart of the Thanksgiving and Christmas seasons, I extend my best wishes to you with hopes for a fuss-free next few weeks.

Michael Jackson's Father Making Push For Allowance And Say-So In Deceased Son's Estate

At my house we just started giving allowances to our kids so long as they do certain chores around the house, and hopefully the experiment will teach them a number of lessons including personal responsibility, teamwork, the value of hard work, budgeting, saving, etc.  Each of our children will receive one dollar (per year of their age) per week, i.e., our 7 year old will receive $7 per week so long as he does his chores every day (and is docked a buck if he doesn't get them done).  I am hopeful that this will work, but the jury is still out as they have not yet caught on, for example, to the requisite bedmaking every morning.

That allowance, of course, is a mere pittance to the allowance that Michael Jackson's father is claiming from his son's estate.  I wrote about Michael's death a few weeks ago, and sure enough it appears that there are some post-funeral disputes with respect to who will benefit from the assets in his estate.  Specifically, an article today reveals that the gloved one's controversial father, Joe Jackson, recently filed a 60-page motion seeking a $15,000 monthly allowance to help cover his expenses.  Apparently Mr. Jackson's only income other than his son's assistance has been a $1,700 monthly Social Security check.  His alleged monthly expenses evidently include $1,200 for rent for his Las Vegas home (his wife of 50 years lives north of Los Angeles), $2,500 for eating out, $1,000 for entertainment, gifts and vacations; $2,000 for air travel; and $3,000 on hotels.  That actually does not sound too unreasonable considering Vegas prices, separate and distinct from the issue of whether Mr. Jackson should receive a dime to begin with . . .  

Anyway, a judge has ruled that Mr. Jackson can pursue his motion to receive a family allowance from the estate because he claimed his son had long been supporting him, but simultaneously ruled that he will not inherit any of his famous son's assets because he was not named in the will.  Mr. Jackson was deemed not to have standing to pursue his litigation, and therefore also will not be able to challenge the appointment of the executors chosen by the singer to handle the administration of his estate.  There is some indication from the article that an appeal may be forthcoming, but given the well-publicized strained relationship that Michael and Joe Jackson have had in the past it seems unlikely that an appellate court would overrule the trial judge's factual findings as to Michael's intent in drafting his will.

Modern Recordkeeping Fraught With Potential For Abuse When Individuals Die

An interesting article on msnbc.com from a few days ago sheds light on how modern day estate planning probably needs to catch up with the practicalities of modern day life.  Specifically, the article's author discusses how, years ago, when an individual died the survivors typically conducted a search of the house, papers, safety deposit box, etc. in order to determine and collect information and records regarding the assets and liabilities of the estate.  However, these days much of that type of information is not stored in "hard copy" form but rather on a computer, typically protected by a password and known only to the person who just passed away.  One never knows when they will breathe their last breath, of course, and often the decedent never shares their password with another family member, friend, or trusted legal or financial advisor.

As a lawyer who does not engage in estate planning but instead represents clients in estate, trust and probate litigation matters, I believe that the increasing use of digital record keeping is fraught with potential abuse.  Specifically, while most fiduciaries are honest and trustworthy, I have worked on many lawsuits in which shady estate and trust administrators are alleged to have destroyed, concealed, or otherwise failed to produce documents to beneficiaries.  When such records are never even printed out but rather are kept only in digital form, the beneficiaries' discovery of such matters can seemingly be made even more difficult if not impossible.  After all, in some ways it can be easier to manipulate digital data than a hard copy.  So, while computers can no doubt increase the efficiency and accuracy of diligent decedents and honest estate and trust administrators, it basically comes down (as it always does) to a universal truth---people who are inclined to cheat can probably find a way to do it.