What Can I Do If Someone Takes My Inheritance?

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I have co-authored this blog with Paul W. Norris, a colleague of mine at Stark & Stark.

 

 

In a single case earlier this month the New Jersey Appellate Division upheld a lower court ruling that invalidated:

  • A 1999 Will, a 2004 Codicil, and a 2005 Will;
  • A 2005 Revocable Trust;
  • 2008 Deed for real property; and,
  • Roughly $3,000,000 in lifetime transfers!

These documents and transfers were invalidated because of undue influence by the decedent’s children.   

Undue influence claims are more likely in families suffering from internal conflict, or where family members are excluded. Unfortunately, the proliferation of do-it-yourself estate planning and access to beneficiary designations has made it even easier to deprive others of their inheritance. If you are the victim of inheritance fraud you have rights and need to take immediate action to protect your inheritance.

 

I.  Inappropriate Lifetime Transfers Should be Challenged.

Many times, individuals can be pressured or influenced into making inappropriate lifetime gifts and transfers. These gifts can, in some egregious cases, render an estate insolvent and leave nothing for the other heirs. Lifetime gifts and transfers can occur in several ways, including:

  • Withdrawals from accounts;
  • Checks;
  • Outright gifts;
  • Transfers using Powers of Attorney.

Under New Jersey law lifetime gifts are more susceptible to being overturned than other transfers. If you can show a “confidential relationship” between the person making the gift and the recipient, then the burden of proof shifts to the recipient of the gift. The recipient has a heightened burden to prove that the gift was fair and no undue influence was used. These standards allow individuals who have been victimized by lifetime gifts and transfers to challenge them.

 
II.  Overturning Improper Post-Mortem Arrangements.

The availability of do-it-your estate planning provides an opportunity for those seeking to improperly take assets after a person dies. Many arrangements can be made without the advice of counsel and some options are available online:

  • Beneficiary designations;
  • Joint Accounts;
  • Payable On Death designations;
  • Even Wills and Trusts.

The accessibility of these arrangements heightens the potential for undue influence.  

As with lifetime gifts, the burden may be shifted to the beneficiary of the assets depending on how the arrangements were implemented. The circumstances of each asset are important and should be reviewed with experienced legal counsel who understands the potential issues that may be involved.

 
III.  Conclusion.

You should seek immediate legal attention if you have been improperly deprived of your inheritance. Options are available to protect your rights if undue influence or other means were used to take away your share. Depending on the nature of the transactions involved, the burden may even be on the opposing party to prove that the transfers were appropriate. There are very short statute of limitations periods that may apply and untimely litigation will likely be barred. Therefore, it is important that you enforce your rights as soon as possible.

The Unintended Consequences of A Do-it-Yourself Estate Plan

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A do-it-yourself estate plan can lead to a number of unintended consequences as demonstrated by a recent Florida Supreme Court case, Aldrich v. Basile.  In this case, Ms. Ann Aldrich wrote her own Will on a pre-printed legal form.  Ms. Aldrich specifically listed each item of her property in her Will, including the account numbers for her financial accounts.  The Will left each item of property to Ms. Aldrich’s sister, Mary Jane Eaton; and if Ms. Eaton did not survive, then Mr. James Aldrich was designated as the alternate beneficiary. 

In general, Wills should contain a residuary clause to address any property not otherwise covered by the Will.  Ms. Aldrich did not include a residuary clause in her Will because, most likely, it was omitted from the pre-printed form.  Ms. Aldrich’s Will only contained specific devises that were limited to the property described by her Will.  Failing to include a residuary clause had costly consequences for Ms. Aldrich’s estate.

Mary Jane Eaton predeceased Ms. Aldrich and named Ms. Aldrich as her beneficiary.   Ms. Aldrich created a new account to receive her inheritance from Ms. Eaton and took title to Ms. Eaton’s real estate.  Ms. Aldrich failed to revise her Will to address the new account or the new real estate inherited from Ms. Eaton.    

Following Ms. Aldrich’s death, James Aldrich had to litigate with two of Ms. Aldrich’s nieces over the assets not listed in Ms. Aldrich’s Will.  The Florida Supreme Court held that Ms. Aldrich’s Will only addressed the property specifically devised to Mr. James Aldrich.  Since the Will provided no instruction as to the assets inherited from Ms. Eaton, these assets passed to Ms. Aldrich’s nieces. 

One Justice from the Florida Supreme Court commented that the expensive litigation far outweighed any savings resulting from the pre-printed form.  Perhaps even worse, Ms. Aldrich’s two nieces inherited part of her estate.  These nieces were not named anywhere in the Will and Ms. Aldrich probably did not intend that nieces inherit part of her estate.  However, this intent could not be inferred by the Court, and the nieces took part of Ms. Aldrich’s estate.

Aldrich v. Basile provides a real life example of two basic problems that can result from do-it-yourself estate planning: 1.) unintended heirs; and, 2.) costly litigation.  More complex problems can arise from incomplete tax planning, or family structure issues such as divorce, creditors and others.  These issues often affect even “simple” estate plans and can have profound consequences for an estate. 

Out-of-Date and Incomplete Estate Plans

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One of the unfortunate aspects of estate administration is addressing problems caused by out-of-date or incomplete estate plans.  Wills, Trusts and other documents need to be reviewed on a regular basis to address changes in family structure or applicable tax laws.  News coverage on the Last Will and Testament of actor, Philip Seymour Hoffman, has drawn attention to some pitfalls associated with failing to update an estate plan. 

 

Guardians For After Born Children.

A fundamental problem with Mr. Hoffman’s estate plan was the omission of his two children born after the Will was drafted.  This resulted in a failure to name guardians for Mr. Hoffman’s after-born minor children.  Section TWELFTH of his Will only appoints a guardian for one of his three children.  At a minimum, failing to name a guardian for all of your children creates uncertainty.  In families that are already experiencing discord, this uncertainty can cause disputes and litigation.  It may also result in people, whom you do not know or approve, having a significant role in the lives of your children.

 

Omitted Children May Receive Unequal Distributions.

In general, failure to address after-born children in an estate plan may also have significant financial and tax impacts.  Some states, such as New Jersey, have statutes for children omitted in a will, but these statutes may provide little in the way of tax or asset management planning.   New Jersey’s omitted child statute, N.J.S.A. 3B:5-16, also has few provisions addressing imbalances in non-probate assets such as IRAs, Payable on Death Accounts, etc.

 

Asset Structure.

Depending on the size of Mr. Hoffman’s Estate, and the extent of his non-probate estate planning, his estate plan could result in significant taxes.  For example, the Will only provides a Trust that terminates entirely when his child is 30 years old.  If the Trust receives substantial assets from the Estate, terminating the Trust could result in additional estate taxes on subsequent generations.  Application of the generation skipping transfer tax exemption to a dynasty trust should have been considered.

Estate planning documents should provide effective asset management strategies.  Trusts are useful not only for tax planning purposes, but also for longer term asset management purposes.  Distributing trust corpus to a beneficiary damages the creditor protection and asset management benefits of a trust.  

 

Conclusion

In summary, it is crucial to review an estate plan on a regular basis to identify any issues related to family structure or tax issues.  The review should include: 1.) the terms of the will and any trusts or beneficiary designations; and, 2.)  the agents under a power of attorney and advance directive.  Failure to keep an estate plan up-to-date can cause significant problems and be very costly for an estate. 

Properly Serving As a Power Of Attorney

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At some point in our lives, many of us are chosen to serve as a Power of Attorney for an elderly or an incapacitated person who may need assistance with their day to day affairs, whether due to infirmity, immobility, or issues with their mental capacity.  Prior to taking actions utilizing the Power of Attorney, it is a good idea for an individual to have ground work laid out to properly memorialize any actions taken while utilizing the Power of Attorney to avoid potential future legal action.  As a litigator who works extensively in probate litigation, I have seen many instances where a lawsuit is filed due to alleged abuses of a Power of Attorney.  As such, below are some simple rules to follow when utilizing a Power of Attorney. 

The first suggestion would be to utilize accounting software, such as Microsoft Excel, in order to create a spreadsheet wherein you would track any and all transactions when utilizing the Power of Attorney.  Each transaction can be recorded in an Excel spreadsheet, and furthermore, all relevant receipts can be indexed which are related to the expense.  It is suggested that you spend the time to organize and categorize any and all expenses, as well as the accompanying receipts and keep them organized in a notebook which corresponds with the Excel spreadsheet.  In this notebook, it would also make sense for you to maintain copies of all bills which facilitated and required the payment.  The use of an Excel spreadsheet when coupled with the retention of original bills and receipts is a very strong step towards alleviating any confusion concerning the use of the Power of Attorney should an accountant be required. 

Another important consideration would be to ensure that the party you are assisting has a separate bank account that is not co-mingled with any assets of your own.  Is it is important while utilizing a Power of Attorney that you do not co-mingle any of your assets, or the assets of the person you are assisting.  Maintaining separate and distinct accounts is a good way of ensuring that there is no co-mingling of funds, and as well, alleviates allegations as to the misuse of an account.   In this same breath, it is suggested that a party save any and all bank account statements and keep them in the same notebook which contains the accounting and the Excel spreadsheet that was discussed above.

If there are concerns that a sibling or other family member may challenge your expenses under the Power of Attorney, it is suggested that you continuously invite them to review any expenses on no less than a quarterly basis.  By providing them with this opportunity it may resolve any issues which might lead to future litigation.  Above all else, in order to avoid litigation it is essential that while serving as a Power of Attorney that you maintain transparency with all accounts and that you maintain and organize your records.

An Unfair Will Doesn't Mean an Invalid Will

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Just because a Will may be unfair to different members of a family its lack of perceived fairness does not invalidate the Will in the absence of additional evidence.  It is well settled that if the testator has the capacity to execute a Will, then in that event, it is not the duty of the Court to rewrite the Will, but instead, to enforce it in its current format.  The test of capacity to execute a Will is quite a low standard.  In general, the testator need only understand the property which he possesses and which he wishes to dispose of and the individuals to whom he wishes to bequeath this property.  Provided the testator meets this simple two pronged test, and the distribution is not the subject of an outside influence which is unlawful in nature, then the bequest will stand.  This might be despite the fact that the decedent’s bequest may be extremely unfair to other potential heirs of the Estate.

Often times, a party may seek counsel due to a Will which they feel is unfair or improper.  Usually, this occurs when a change is made in the Will not long prior to the death of the decedent.  Unfortunately, the minimal test of capacity allows the decedent to execute a Will which may drastically differ from his or her previous wishes and one which the Court will uphold if the testator possesses the capacity on the date it was executed.  There are other ways to challenge a Will based upon allegations of undue influence which thereby caused the decedent to execute a Will which was not in accord of his true intentions, but instead, reflects the wishes of another person who has benefitted by same. The test of undue influence, however, is entirely separate and distinct from capacity to execute a Will.

With regard to capacity, if the Court finds that there is sufficient capacity and there is no evidence of any other improper influence, the Will will be enforced in its present format no matter how unfair it may be to the other members of the decedent’s family.  As such, simply because a Will is unfair does not mean that it is invalid.  Obviously, if a party encounters a Will which is grossly unfair and was created not long prior to the death of the testator, then in that event, this individual can consult with an attorney to see whether there are ways to attack the validity of the Will based upon either an allegation of lack of capacity or undue influence.

The Joint Accounts and Multi Party Deposit Account Act

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Often times, in order to simplify writing checks on behalf of an elderly individual or one whose capacity may be failing, individuals may agree to open a joint account which would then permit the person who is providing assistance to write checks on behalf of the individual who actually has deposited the funds into the account.  This typical joint account with right of survivorship is subject to the Multi Party Deposit Account Act.  This Act has important implications with regard to matters wherein the subject account may be a substantial asset of the Estate once the true owner of the account passes away.  It is for these reasons that you should be aware of the Multi Party Deposit Account Act.
 
Under the Multi Party Deposit Account Act, the joint account belongs to the parties in proportion to the net contribution by each to the sums on deposit unless the terms of the contract indicate a different intent or there is clear and convincing evidence of a different intent at the time the account was created. In other words, if one party deposits all the account funds into the account during their life, then in that event, this party owns all the funds contributed to the account. At the time of death of one party to the joint account, however, there is a reputable presumption that a right of survivorship was created in the remaining party. This means that the sums remaining on deposit at the death of a party through a joint account belong to the surviving party, or parties, against the Estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created. As such, the account would pass to the survivor under the account, unless there is clear and convincing evidence that the account was created as a matter of convenience to assist the decedent during his life, or there is other evidence which demonstrates by clear and convincing evidence that the account was not to pass to the survivor upon the death of the decedent. Clearly, this is important when considering how funds may pass to the Estate.
 
In a recent decision, the Court also found that not only may it consider evidence at the time the account is created, but moreover, that the Court may also consider evidence after the account was created to determine whether or not the account was one of merely convenience, or the account passed to the survivor at the death of one party to the account. The standard is whether there is evidence of a clear and convincing nature which demonstrates that the right of survivorship has been invalidated by prior intentions of the true owner of the account. The case law differs, however, whether the account was created as a means of convenience in lieu of the operation of the Power of Attorney or a similar instrument. As discussed above, recent case law has held that the intention of the owner to the account may be revealed at a time long after its creation if the parties’ conduct throughout the time that the account was maintained demonstrates its convenient nature. Regardless you should always be aware of the impact of The Multi Party Deposit Accounts Act as it relates to what assets may compromise an Estate. 

Powers of Attorney for Overseas Assets

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Powers of Attorney are important documents that assist in the management of your assets, and are typically used if you are rendered unable to manage your own financial affairs.  Any individual (regardless of citizenship) who owns overseas property faces unique issues when establishing a Power of Attorney for these assets.  Optimally, a local attorney in the country where the property is located should draft a limited Power of Attorney to address management of the foreign property.  Depending on individual circumstances this may not be realistic or possible. 

If a Power of Attorney cannot be obtained in the foreign jurisdiction, there may be options to have a New Jersey Power of Attorney recognized by a foreign country.   These procedures certify the New Jersey Power of Attorney for use in the foreign country.   At a minimum, the New Jersey Power of Attorney will need to be properly drafted and executed, before it can be certified.

Individuals seeking to have their Power of Attorney recognized overseas should proceed cautiously.  Depending on local preferences in the foreign country, some procedures may be more favorably received than others.  In addition, the application process may involve some elements of which clients should be aware.  

What Happened to My Inheritance?

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According to the New York Times, family members of the copper heiress, Huguette Clark, found themselves disinherited by her Last Will and Testament.  It also reported that the late Ms. Clark executed two (2) Wills in 2005, approximately six (6) weeks apart.  The first Will left a substantial portion of her Estate to her family.  The second Will left many family members with nothing, and included bequests to Ms. Clark’s accountant, her attorney and her longtime nurse.   Ms. Clark’s family members sued, and the parties reputedly reached a settlement.

These circumstances seem all too common in today’s probate and estate environment.  After the death of a loved one, people are shocked to find they have been partially, or totally, disinherited.  Often times, another family member was the driving force behind the loss of inheritance.

Examples include:

  • Lifetime gifts that favor one person;
  • Creation of joint accounts that eliminate some beneficiaries;
  • Removing or altering beneficiary designations on life insurance or retirement accounts;
  • Modifying a Will to reduce, or eliminate, the amount of the Estate going to certain beneficiaries.

This list is by no means exclusive, as there are many ways to defraud someone of their inheritance. 

If you have been victimized by these types of behavior, you have rights.  Individual circumstances vary, and there may be legitimate reasons for the actions that were taken.  Often times, however, there is no legitimate basis for the actions that were taken.  Courts can overturn these transfers, or alterations to a Will, and restore your inheritance. 

You must take action quickly.  If a Will has been probated you could have as little as four (4) months to make a claim.  This makes it important to seek legal counsel about your rights as soon as possible.

Can a Defective Will be Probated?

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Having seen the delays and costs associated with Wills drafted by the decedent or a third-party, the importance of a properly drafted self-executing Will cannot be stressed enough. But what happens if the only Will left behind is defective or improperly executed? Can the Will still be probated?

Clients often have no alternative but to probate a defective Will, particularly where a defective Will contains important changes. Since the testator is deceased, the Will cannot be corrected and the client must proceed to probate. Defective Wills may be admitted to probate as a “writing intended as a Will”, provided that sufficient evidence supports the Will.

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Mistakes in the Format or Terms of a Will Are Costly

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No one wants their Will subjected to costly delays or bitter litigation. Few people realize that mistakes in the Will cause delays and often result in expensive legal action; even simple issues can be very costly.

New Jersey offers streamlined probate procedures, but only for Wills that strictly adhere to procedures for executing and witnessing the Will. Mistakes such as improper execution, incomplete witness clauses or the lack of a proper notary attestation create “doubt on the face of Will” and take away these streamlined proceedings. This causes delays and compromises the Estate’s ability to access its financial accounts or pay taxes and expenses. These mistakes can even require expensive legal proceedings just to probate the Will.

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