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Patricia Annino
Patricia Annino
You are challenging my will
But wait … I’m not dead yet!

June 21, 2012
by Patricia M. Annino, J.D., LL.M.

People have been contesting wills and challenging estate plans for a long time, but until recently, they had to wait until the testator died. Now, instead of waiting until dad dies, a family’s emotional and financial drama can take center stage in court, while he is still alive. Pre-death litigation is on the rise, and guardianship litigation is a forum in which the traditional post-death challenges to estate planning documents are now litigated, while the testator is alive.

Alaska, Arkansas, Delaware, Nevada, North Dakota, and Ohio now permit lawsuits that allow the testator to establish the validity of a will and/or trust prior to his or her death. In those states, the court proceeding involves notifying the named beneficiaries of the will and/or trust and any disinherited heirs of the existence of the will and/or trust and their contents. The court will set a time frame by which any of those people (known as the interested persons) can mount a challenge. If no challenge is made within the period, then those persons are barred from mounting a challenge after the testator’s death. A goal of these laws is to provide certainty to the estate plan.

Drawbacks include:

  1. The provisions of the testator’s will/trust are revealed to all interested parties as part of the court proceeding;
  2. Any subsequent changes to the plan would have to occur through the court system, and the ability to attack the plan would arise with each revision;
  3. The testator may have real estate in jurisdictions that do not allow pre-death will contests and, therefore, certainty on those assets may not be foreclosed; and
  4. It is an open question as to whether future challenges could be foreclosed if the testator moved during his or her lifetime from a jurisdiction that allows pre-death will contests to a state that does not.

 

In most other states, direct pre-death will contests are not permitted based on the concept that the will speaks only upon the testator’s death, and that a testator can change the will at any time during his or her lifetime. States including Florida and New York have enacted statutes that specifically preclude pre-death will contests.

Even in those states, however, indirect pre-death challenges to a will are not precluded; such challenges may occur through guardianship or conservatorship proceedings. The theory here is based on the concept of “substituted judgment.” When a person is put under guardianship or conservatorship, a judge can determine (after medical testimony) if the incapacitated person is no longer capable of judgment, and then substitute the judgment of the court-appointed guardian or conservator for the incompetent ward.

A California case (Murphy v. Murphy, 164 Cal. App. 4th 376 (Cal. Ct. App. 6/26/08)) involved a family feud. The parents, William and Elaine, were married in 1949 and had two children, William Jr. and Maureen. In 1991, Elaine became ill, and Maureen moved into her parents’ home to help care for her mother. Elaine died in 1999, and in 2001 William suffered a major stroke. William Jr. began a court proceeding asking the court to appoint a professional conservator to make decisions pertaining to his father. 

In the papers he filed in court, the son alleged that his sister was imposing her influence on their father. Four days after the court appointed a professional conservator, the father, upset that his son had taken the family’s squabble public and upset about the underlying allegations, handwrote a will and trust that omitted his son and gave all of his assets to his daughter. A year and a half later, the conservator asked the court to approve the estate plan through a petition of substituted judgment.

The conservator had notified both the son and daughter of the substituted judgment petition and the court proceeding, and the son did not challenge his father’s estate plan. After his father’s death, the son tried to challenge the estate plan, but the California court held that he no longer had the ability to challenge it, based on the legal theory of collateral estoppel. In other words, the son was not permitted to relitigate matters that had been already litigated. The issues that the son raised in the post-death challenge (undue influence, fraud, and the existence of an oral agreement) were issues put forward in the substituted judgment case, and either were decided in that proceeding or could have been raised even though they were not litigated in that proceeding.

In essence, the court determined that when a conservator obtains the court’s approval for a living ward’s estate plan, any challenge to the will must be made at that time and not after death.

There are several lessons to be learned from states that allow pre-death direct will contests and from states that allow indirect pre-death will contests through guardianship or conservatorship proceedings:

  1. Weigh the costs and benefits of a pre-death vs. post-death challenge. Witnesses, evidence, and testimony that are available now may be unavailable after death.
  2. Depending on the testator’s capacity, he or she may be a powerful witness. Without his or her testimony, the testator’s wishes may not be given the proper weight. For example, the judge would have to rely on indirect evidence to determine intent.
  3. Understand the possible damage to the testator’s reputation by bringing this type of a proceeding while he or she is still alive. Such a lawsuit can be very embarrassing.
  4. If a guardian or conservator wants to bring the fight forward now and preclude future litigation, he or she can seek court approval to revise the estate plan, notify all heirs-at-law and interested parties, and preclude further objections under the doctrine of collateral estoppel.
  5. If a client receives notice of such a proceeding, do not wait until later to take action; action must be taken in that proceeding while the testator is alive.
  6. If a court proceeding ensues, financial discovery will begin and may include the following documents: copies of all current and prior estate planning documents; a statement of who is a designated beneficiary of all retirement planning assets, annuities, and life insurance policies (primary and secondary); financial statements; tax returns; bank account statements; a complete listing of disbursements and backup invoices; credit card statements; credit reports; insurance policies; deeds; promissory notes; safe deposit boxes; storage facilities; partnership documents; corporate documents; documentation of all gifting (including gifts not reflected on any return); and philanthropic transfers.

If it appears that a client will be involved in this type of litigation, it is prudent to be aware of the scope of the financial discovery.

In summary, forewarned is forearmed. If you have a client whose estate plan will be challenged, or you have a client who wants to challenge an estate plan and that client thinks it is inevitable that the matter will end up in court, it is important to consider pre-death challenges as a possible avenue.

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Patricia M. Annino , J.D., LL.M., is a partner with the Estate Planning practice group at Prince Lobel Tye LLP. She is a Fellow of The American College of Trust and Estate Counsel.

* The AICPA’s PFP Section provides information, tools, advocacy, and guidance to CPAs who specialize in providing tax, retirement, estate, risk management, and investment advice to individuals and their closely held entities. PFP Section members, including PFS credential holders, will benefit from additional resources on this topic in Forefield Advisor on the AICPA’s PFP website at aicpa.org/pfp. All members of the AICPA are eligible to join the PFP Section. CPAs who want to demonstrate their expertise in this subject matter can apply to become a PFS credential holder.