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.

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.

Legendary College Football Coach's Son Sues Stepmom Over Trust Obligations

We're in the heart of the 2009 college football season and the Arkansas Razorbacks are having a better year than last year under second-year Coach Bobby Petrino (thank goodness), although losing against the Florida Gators a couple of weeks ago still stings.  Transfer Ryan Mallett had a fantastic game yesterday against the South Carolina Gamecocks, and it is interesting that his former coach at Michigan, Rich Rodriguez, is having a fairly mediocre year in his second year leading the Wolverines. 

This serves as a nice little segue into my latest blog post about a story involving legendary Michigan Coach Bo Schembechler.  Before passing away in 2006, according to the university's website he coached the Wolverines for 21 seasons and had a winning percentage of .796 overall and .850 in the Big Ten Conference.  Although he was never able to win a national championship while at Michigan, he took the Wolverines to 17 bowl games and won 13 conference titles. 

Given his success as a college football coach, and given the money that head football coaches make at major Division I universities, there is no doubt that Coach Schembechler accumulated some substantial assets over the years.  It appears that there is now a family dispute with respect to those assets, as a recent article discusses how Schembechler's son has sued his stepmother (his father's third wife) in Ohio federal court over her alleged failure to provide quarterly statements about the trust under which he is evidently a beneficiary. 

This is one of the most common types of disputes in trust litigation, because one of the very reasons that people form trusts is because of confidentiality concerns, and yet at the same time the beneficiaries of that trust desire and to some extent are entitled to certain information about the trust (depending upon each state's laws).  It will be interesting to see whether this particular conflict evolves into a larger dispute over trust administration and assets or is resolved quickly once the accounting issue is straightened out.

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.   

Children Of Dr. Martin Luther King, Jr. Settle Dispute Over Father's Estate

Anyone who knows me is aware of my admiration for Dr. Martin Luther King, Jr. as a speaker, preacher, writer, community activist, and proponent of peace and nonviolence.  Many do not appreciate the fact that he was much bigger than a mere advocate for racial equality, but rather was a warrior for the larger causes of social and economic justice.  In light of the controversies over his writings and his personal life, he was undoubtedly a flawed figure (aren't we all?) but his legacy and contributions to society are undeniable. 

This is precisely why the battle over Dr. King's estate in which his children have recently been involved has been such a tragedy and---I dare say---an embarrassment.  I cannot help but think that, with so far to go in terms ofachieving just societies and just economies, if he were alive today Dr. King would be sick to know that his children are not so much fighting to carry on his legacy as they are fighting with each other about the assets and property rights in Dr. King's estate. 

That is why it was so refreshing to see that a few days ago the King children evidently decided to resolve their differences and settle their pending litigation with each other.  Specifically, Dexter King's brother and sister sued him alleging that he engaged in improprieties while he was acting as head of Dr. King's estate, and the parties were on the verge of a civil jury trial which would no doubt have aired the King family's finances and any dirty laundry.  Estate, trust and probate battles often unfortunately result in families being completely torn apart, but it appears (from the article at least) that the King siblings are hopeful that they can forgive and reconcile their differences.  This is the exception rather than the rule in such circumstances, but is a development of which Dr. King would no doubt be proud. 

Newly-Discovered Assets In Old Estate Result In New Litigation

A recent decision from the Arkansas Court of Appeals in Ellingsen v. King, 2009 Ark. 655 (October 7, 2009) illustrates how some long-forgotten but newly-discovered property can often send family members and creditors scrambling for their piece of the pie.  This interesting case involved Mr. McAlexander, who died in 1988 a resident of Shelby County, Tennessee.  An domiciliary probate estate was opened in Tennessee, and an ancillary probate estate was opened in Arkansas.  Mr. McAlexander's creditors did not file a claim against the ancillary estate in Arkansas, and its known assets (a fractional mineral interest to 85 acres of land in Conway County, Arkansas) were transferred to the Tennessee estate, such that the Arkansas estate closed in 1990.  In 1991, a Tennessee probate court concluded that the estate was insolvent and approved a plan of distribution to the estate's three creditors (the United States of America [60%], a bank [20%], and Mr. McAlexander's widow [20%]), before the estate was closed in 1996. 

A decade went by and in 1996 it was discovered that Mr. McAlexander had actually also held an interest in the mineral rights to approximately 4800 additional acres of land in Conway County, Arkansas, which everyone in Arkansas now knows is in the heart of the booming Fayetteville Shale natural gas play.  The ancillary estate in Arkansas was reopened but none of the creditors filed a claim.  In 2007 the Arkansas trial court authorized the executor of the estate to execute an oil and gas lease that included a cash bonus in excess of $1,000,000.00. 

At that point, of course, it appears that people came out of the woodwork to claim the money.  Specifically, the executor asked the trial court to determine the rights and interests of the creditors who had filed claims agains the Tennessee estate.  The trial court granted summary judgment in favor of the creditors, with the end result being that Mr. McAlexander's five daughters receiving nothing under the trial court's order.  On appeal, the Arkansas Court of Appeals noted that while there was no evidence to indicate that the creditors properly presented their claims pursuant to Arkansas law, under Arkansas law when an estate is deemed insolvent it is still possible in some circumstances for such creditors to be paid a portion of their claim.  While the Tennessee court had long ago held that the estate was insolvent, that finding was made before the assets at issue were discovered such that the Arkansas Court of Appeals reversed the trial court's summary judgment for factual findings as to the solvency of the estate in light of the newly-discovered assets.

I cannot help but think that in the coming years we will see many more stories like this, as people dust off old deeds and other documents only to discover that they possess mineral rights in North-Central Arkansas land that they never dreamed would become a profit-producing property.

No Breach Of Fiduciary Duty In Unique Trust Lawsuit

The Arkansas Court of Appeals recently ruled in an interesting case that a trustee's encumbrance of trust property did not, under the specific circumstances involved in the dispute, constitute a violation of the trustee's fiduciary duties.  Ordinarily such actions are looked down upon, but this case is an instance in which the unique facts involved apparently warranted a slight departure from the general rule.  

Specifically, on September 9, 2009, the Arkansas Court of Appeals issued its decision in the case of Hanna v. Hanna, #CA08-1256, which was an appeal from Washington County Circuit Court.  The ex-wife had sued her ex-husband for self-dealing, breach of fiduciary duty, and mismanagement of assets in their children's trusts.  The ex-wife had received a $16 million divorce settlement, and the ex-husbanddirected his chief financial officer to form a plan to gather the money (the couple had owned a successful candle company and several other entities) . 

Long story short, the ex-husband obtained loans to raise the funds and also used company assets as collateral for loans to company officers totaling $3 million.  The ex-wife brought the above-described claims against the ex-husband, and he defended arguing that he had not known it was wrong and that he had done it in the best interest of the children.  In doing so the ex-husband offered evidence that it was to the company's advantage that he settle, which he could only do by pledging company assets, and that the bank would not have funded the loan absent using company assets as collateral. 

Ultimately the trial court declined to award damages to the trusts or set aside the loan transactions, but did order the ex-husband to remove company assets as collateral for the officers' loans totaling $3 million.  The Arkansas Court of Appeals affirmed the trial court's decision, holding that this was not a situation in which a trustee was using trust assets solely to pay for his divorce settlement, nor was it an instance in which the trustee's actions failed to benefit the trusts.  The Court instead ruled that the parties to the lawsuit, the companies, and the trusts were all intertwined, and that the ex-husband's actions to carry out the divorce settlement in effect protected them all.  The Court did make clear, however, that its ruling was "confined to the particular circumstances of this case and should not be read to permit a trustee to encumber trust property in the absence of extraordinary circumstances."