MAY 18, 2015 VOLUME 22 NUMBER 19
So often our clients assure us that their children are different from other children. Our clients know that their children will fundamentally get along. They are sure that there will be no big problems when they die, and that the children will communicate and cooperate. Fortunately, that turns out to be the case for our clients. But other lawyers’ clients seem to be very different.
Betty Lundquist (not her real name) must have thought her two daughters could work well together, because she named them as successor co-trustees of the revocable living trust she set up. She directed that the daughters (Peggy and Lisa) were to split her estate equally. She also signed a “pour-over” will, directing transfer to her trust of any assets not already properly titled at her death. For whatever reason, she named Lisa as the sole personal representative of her probate estate.
Betty had actually transferred pretty much everything to her trust, and so probably envisioned that there wouldn’t be much need for a probate at all. As she approached death, however, things were already getting tense between Peggy and Lisa. The day before Betty’s death, Peggy and her husband tried to transfer some of her trust accounts into their own name. They got the original will and trust documents from Betty’s accountant, and declined to share them with Lisa. Peggy was living in Betty’s home, and wouldn’t let Lisa even into the home to look at — and inventory — their mother’s belongings.
When Betty died in 2011, Lisa filed an emergency petition with the probate court seeking release of the original will and other documentation. She ultimately was appointed personal representative, and Betty’s will was admitted to probate. Peggy thereafter refused to co-sign trust checks to pay Betty’s bills, or motor vehicle affidavits to transfer car titles.
Eventually the probate proceedings were wrapped up, though the sisters were still not getting along. Finally, Lisa filed a request for payment of her mother’s estate’s expenses — including her attorneys fees for the probate proceedings themselves. Peggy responded by arguing that Lisa should have been disinherited because she filed the probate proceedings at all. Her logic: Betty’s will and trust provided for automatic disinheritance for anyone challenging her estate plan, and Lisa’s filing of a probate proceeding amounted to a challenge of their mother’s plan to avoid probate altogether.
The probate court approved payment of attorneys fees of $8,081.20, and a little more than $7,000 of other costs incurred in administration of the estate. Since the bulk of Betty’s estate was actually in her trust, the probate judge also ordered that the payments would come from the trust to the extent necessary. Peggy appealed both the approval of attorneys fees and the order that the trust should pay the fees.
The Arizona Court of Appeals ruled that the attorneys fees were appropriate and reasonable, and upheld the order. Furthermore, it agreed that the probate court had the authority to order payment from the trust — even though the trust had not been submitted to the court for oversight. According to the appellate court, both the trust’s language and Arizona law provide for payment of the decedent’s expenses — including probate and administrative expenses — from trust assets. Johnson v. Walton, May 14, 2015.
Peggy’s argument (that no probate proceedings were even needed) might have carried more weight if the Court had not been convinced that she actively interfered with the orderly administration of her mother’s estate. In fact, with even a modicum of cooperation Betty’s daughters might well have had a smooth, easy and inexpensive trust administration, and no need for any probate proceedings. That is a common result in similar circumstances — especially when one of the children is put in charge and they behave responsibly and honestly. (Of course, the person in charge need not be one of the children — but that is the choice we see most often.)
Was Betty’s mistake putting her two daughters in joint charge, and assuming they would work together? It’s always hard to figure out exactly what else might be going on when reading a Court of Appeals opinion, but if the joint authority didn’t cause the problem, it certainly did not help prevent the later dispute.
Our usual advice: rather than appointing two (or more) children with equal authority, we suggest you default to a choice of the one person who is most responsible, most widely respected among your beneficiaries, most available and most trustworthy. For clients who tell us that each of those terms applies best to a different child, we suggest that they use some method to make a single selection (coin flips work in extreme cases). Fortunately, though, our clients’ children all get along, all work beautifully together and never have disputes. Just like our own children.
