Squire Sanders Sues Lawyer’s Estate for Loan Repayment

The claim involved a home and lot purchased by his mother in 1994. She paid the $24,000 down payment, she was the sole owner under the sales agreement, and she was the only person obligated on the mortgage. Three days after the closing, the son gave his mother a $12,000 check, noting that it was for “investment.” Eight years later, the mother transferred title to all her real and personal property into a trust. The purpose of the trust was to provide for her support, maintenance, and health care.

Sometime later, the home was put on the market to provide liquidity to the Trust to enable it to pay the mother’s expenses. In his suit, the son claimed that he and his mother had a verbal agreement to own the home as partners. The mother and trust denied that the son had any interest and filed a motion for summary judgment (a ruling that there are no issues of fact to be decided and so the party moving for summary judgment must prevail). The trial court granted the motion and the Court of Appeals affirmed.¹

The type of implied trust the son attempted to establish was a “purchase money resulting trust” (a trust implied for the benefit of the person paying money for the transfer to another person of title to property). It must be shown, however, that the money was paid at or before the time of the closing, and that it was the intent of the parties at that time that the person claiming the benefit of the trust should pay the purchase money. Here, the son gave his check three days after the closing. The only evidence to the contrary was his affidavit claiming a verbal agreement with his mother, and that evidence was inadmissible.

¹ Rosado v. Rosado, 2008 WL 2151717 (Ga. App. 2008)

After the man died, his daughter filed a caveat (objection) to the will, which left his primary residence to the nurse and the rest of his estate to his sister and brother-in-law. A jury found the will to be invalid because it was the product of undue influence. When the brother-in-law, as Executor, appealed, the Supreme Court upheld the jury verdict.¹

A presumption of undue influence invalidating a will arises when a beneficiary under the will has a “confidential relationship” with the testator (exercises a controlling influence over the conduct and interest of the person executing the will).

Here, the man was almost completely dependent upon the nurse for all of his personal and medical needs, she isolated him from his daughter, and she took part in the preparation of the will. That evidence was sufficient to support a jury finding that the will was the product of undue influence by the nurse. The will was therefore invalid, and the daughter became the sole beneficiary of her father’s estate.

¹ Bean v. Wilson, 2008 WL 2077911 (Ga. 2008)

Here, the shareholder had filed a direct action against the officers. One exception to the general rule, however, is that a direct action may be brought when there are no other shareholders involved. Though the minority shareholder argued that suits from other shareholders were unlikely, the court found that he failed to prove that assertion, and thus the rule prohibiting direct actions applied in this case.

¹ 2008 WL 756112 (Ga. App. 2008)

The New York Court of Appeals ruled¹ that a child who is adopted out of a family cannot share in a class gift (a gift to a group of persons, such as “my children,” uncertain in number at the time of the gift but to be ascertained at a future time, who take in equal shares depending on the number of persons in the group). The court cited New York’s Domestic Relations law that terminates an adopted child’s right to inherit in this manner from the biological family (although preserving the right of an adopted child to inherit if he or she is specifically named in a biological family member’s will).

The court cited three policy reasons for its holding: (1) promoting the adopted child’s assimilation into the adoptive family, (2) keeping adoption records confidential, and (3) assuring the finality of judicial decrees by foreclosing the possibility that a secret out-of-wedlock child could materialize, years later, to intervene in the distribution of an estate or trust.

¹ 2008 WL 656471 (Ct. App. N.Y. 2008)

After the man died, the executors claimed that he did not have legal capacity at the time he signed the stock transfer requests, and they brought an action against the corporate entities that guaranteed his signature. The Court of Appeals ruled¹ that the Commercial Code in Georgia makes a signature guarantor liable only to persons taking or dealing with a security for losses due to the breach of warranty; it does not allow recovery by the stock owner himself (or his legal representatives after his death). Thus, Wachovia and Regions Bank were not liable to the executors.

However, AFLAC, Regions Financial, and Southern Company had a different role, since they issued the stock that was the subject of the transfers and signature guarantees. The court ruled that a stock issuer is liable for wrongful registration of a stock, and a signature guarantee does not absolve the issuer from the liability, though it shifts the financial risk to the guarantor. In making their case, the corporate defendants had argued that the man was not harmed by the change in ownership status, since he owned the stock until his death. The court disagreed, ruling that the issuer’s conduct deprived the man of the right to decide who should have his property after his death.

¹ 2008 WL 624957 (Ga. App. 2008)

The Court of Appeals agreed¹.

While there were no previous Georgia cases interpreting the phrase “sums of money” with regard to conservators, the Georgia Supreme Court had interpreted an almost identically-worded statute governing executor fees. In that case, the Supreme Court found that “sums of money” meant currency or a medium of exchange. Stocks, bonds, and real property are not sums of money because they have to be converted to cash. Additionally, the Court of Appeals ruled that the conservator was required to pay prejudgment interest (interest accruing from the time the dispute arose, rather than from the time the court issued its judgment) on the excess commissions.

¹ 2008 WL 565702 (Ga. Ct. App. 2008)

¹ 2008 WL 400375 (Ala. Civ. App. 2008)

¹ 2008 WL 350941 (Ga. 2008)

¹ 2008 WL 215217 (Ga. 2008)

Trouble viewing this presentation? Please click here.

The Georgia Supreme Court decided¹ that a “security deed” such as this one was nothing more than a lien, conveying legal title only for the purposes of security, not ownership. The court held that a deed to secure debt did not sever a joint tenancy with right of survivorship, and thus the effect of the man’s death was that his sister, as surviving joint tenant, became the sole owner, and the property did not go to his estate. The man’s death terminated his interest in the property, and thus extinguished the security interest held by his sister-in-law.

¹ 656 S.E.2d 835 (Ga. 2008)

The daughter disclaimed only the assets that went to the foundation and the trust annuity; she did not disclaim the contingent remainder in the property passing to the trust. On the estate’s tax return, it deducted as charitable contributions the disclaimed property passing to the foundation as well as the present value of the annuity interest passing to the charitable trust. The Tax Court held¹ that the estate could deduct the entire value of the property passing to the foundation because that was an effective “qualified partial disclaimer” in conformity with the provisions of Internal Revenue Code Section 2518.

The court also agreed that the charitable deduction could encompass a higher valuation than was first reported on the estate tax return, because the parties agreed that the value of the property had increased substantially since the date of the mother’s death. However, the court allowed no deduction for property passing to the trust, because the partial disclaimer of that property was not effective, since the daughter disclaimed only the annuity portion and not the contingent remainder portion.

¹ 130 T.C. 1 (2008)

Prepared and presented by: Georgia Council of Probate Court Judges and the Fiduciary Law Section of the State Bar of Georgia.

¹ 2008 WL 81307 (Ga. App.)

The decedent’s sister filed a caveat alleging that the decedent lacked testamentary capacity and had been unduly influenced by the executor. The caveat also claimed that the person named as sole heir was neither the natural nor adopted child of the decedent, thereby making the caveator the decedent’s sole heir-at-law. After a hearing that was not transcribed, the probate court issued an order dismissing the caveat because the caveator failed to prove that the child was not the decedent’s heir-at-law and thus the caveator lacked standing to caveat the will. Upon appeal, the Supreme Court held that in the absence of a hearing transcript, there was a presumption of correctness to the probate court’s determination.

¹ 2008 WL 65452 (Ga.)

The caveators, sons of the testator, raised claims of undue influence and revocation. The undue influence claim was based on the role the executor, another son, played in selecting the attorney who drafted his father’s 1998 will and his alleged participation in preparing the will. The trial court excluded much evidence the caveators attempted to present, including evidence of the testator’s conduct years later, since it was not probative of whether the will was a product of undue influence when it was executed. Further, the trial court denied a request to charge the jury that there was a presumption of undue influence, since the caveators introduced no evidence showing either that the testator was weak, and hence susceptible to undue influence, or that the executor occupied a dominant position with regard to his father. On appeal, the Supreme Court upheld the trial court’s rulings on the admissibility of evidence and jury instructions. The revocation claim was based on documents showing that the testator planned to execute a new will. The testator had marked up a copy of his will, making changes and noting specific bequests, and had sent a letter to the executor requesting that the new bequests be given effect if he died before his new will was executed. The Supreme Court held that O.C.G.A. § 53-4-44 permits a presumption of revocation only if the original will or a material portion of the original will suffers destruction or obliteration. (A predecessor statute allowed for the destruction of “the original will or a duplicate.”) Thus, the testator’s markings on a copy did not raise the presumption of revocation.

¹ 2008 WL 65261 (Ga.)

Incapacity

A testator must have “testamentary capacity” in order to make a valid will. Generally that requires that the testator be of “sound mind,” as shown by the testator’s capacity to (1) understand the nature and extent of his or her property, (2) know the persons who would naturally benefit from the will, and (3) realize that the will he or she is executing does indeed makes a disposition of his or her property. A testator may be shown to lack testamentary capacity if it can be proved that at the time of executing the will he or she exhibited signs of dementia or mental illness or was under the influence of alcohol or drugs. Generally, the mere fact that a testator shows signs of advancing age, feebleness, or eccentricity is not enough, in and of itself, to prove testamentary incapacity invalidating a will.

Undue Influence

A will can be overturned if the challenger proves that at the time the will was made, the testator was subjected to such strong influence by another that the testator made a disposition of estate property that he or she otherwise would not have done. Coercion and duress are examples of undue influence.

Fraud

To invalidate a will on grounds of fraud, the challenger generally must show that the testator relied on a fraudulent misrepresentation and was deceived by it when he or she executed the will. Evidence of only the opportunity or motive for fraud, without showing that the fraud had an effect on the testator, is not enough to invalidate the will.

Improper Execution

Each state has procedural requirements for the execution of a will, generally including a number of required witnesses. Many states also require that the will be in writing or that the signatures of the testator or witnesses be notarized. A will that does not conform to statutory requirements may be held to be invalid.

Existence of a Later Will

Generally, a validly executed later will is presumed to revoke any prior wills.You should consult an experienced probate attorney if:

• You are the executor of a will that is the subject of a will contest;
• You are the beneficiary of a will that is the subject of a will contest; or
• You want to challenge a will that you believe is invalid.

A widow died with her petition for a year’s support from her late husband’s estate still pending. The executor of the widow’s estate, who also was the executor of the husband’s estate, filed an amendment to the year’s support petition. Upon the filing of the petition, the probate court issued a citation to the executor to show cause why the petition should not be granted. The court ordered that the executor of the estate of one of the husband’s sons was entitled to notice of the citation by mail. That executor objected to the amended petition, but the probate court dismissed the objection as untimely. The written objection was required to be filed in the probate court no later than ten days from the date the executor received service by mail. When no written objection was filed by that time, the year’s support proceeding automatically became in default. Six days later, however, the executor opened the default by the payment of costs and the filing of defenses objecting to the amendment. The Court of Appeals held that the provisions of the Civil Practice Act relating to the opening of default judgments as a matter of right within fifteen days of default apply to year’s support proceedings in probate court. Thus, the objection filed by the executor pursuant to the notice was timely, and the probate court’s dismissing it without ruling on the merits was error.

¹ 2007 WL 4357730 (2007)

If a decedent leaves a valid will, the will generally names an executor to handle the administration of the estate. The estate assets are distributed by the executor in accordance with the provisions of the will and under the supervision of the probate court.

If a decedent does not leave a will, or if the will is found to be invalid for any reason, the decedent is said to have died “intestate.” The state’s inheritance laws determine how the estate assets are distributed, and the probate court appoints an administrator to administer the estate.

Some types of assets do not have to go through the probate process, including life insurance, tax-deferred retirement plans such as IRAs and 401(k)s, and property owned jointly with a right of survivorship. These non-probate assets are usually directly payable to a named beneficiary or co-owner. Additionally, property held in a revocable living trust does not have to go through probate.

For large and complicated estates, probate can be time-consuming and costly. Most states, including Georgia, provide a streamlined and less expensive process for smaller estates. No matter what the size of the estate, however, dealing with the probate process and preserving estate assets requires an understanding of probate and tax laws. If you are involved in any way with administering an estate, you should contact, an attorney with experience in probate and estate administration for guidance.

• Petitioning the court to probate the will;
• Sending notice of the probate to named beneficiaries, other interested parties, and creditors of the decedent;
• Collecting, inventorying, and if necessary, appraising the assets of the estate;
• Collecting any payments, debts, and income due to the estate;
• Paying any debts owed by the estate;
• Filing federal, state, and local income taxes for the estate; and
• Distributing the remaining estate assets to beneficiaries in accordance with the terms of the will, or in accordance with state intestacy laws if there is no will or if the will is determined to be invalid.

When an estate is probated, it becomes a matter of public record, meaning that anyone can find out the size and contents of the estate and names of the estate beneficiaries.

Time and Expense of Probate

Probate may be a time-consuming process. While it may take only one or two months to probate a simple estate, the process may continue for a couple of years, depending on the size of the estate and the complexity of collecting, valuing, and distributing estate assets. Any will contests or other challenges over the estate will naturally lengthen the duration of the probate process. A lengthy probate process can also be costly, although normally the expenses of probating an estate, including legal fees, are paid out of the estate assets.

Small Estates

Georgia and many other states have a simplified process for small estates that fall within certain guidelines. The simplified process will generally be less expensive and of a shorter duration than the normal probate process.

Intestacy

When a person dies without a will, or if the probate court determines that the will is invalid, the person is said to have died “intestate.” In that case, the state’s intestacy laws will determine who is to inherit the estate. The intestacy statutes establish a default inheritance scheme which generally provides that estate property goes the decedent’s spouse and children and then to parents and other close family members. If the decedent leaves a valid will, however, the provisions in the will control the distribution of estate assets, and the state intestacy laws are not applicable.

Do You Need to Consult an Experienced Probate Attorney?

While probating a small and uncomplicated estate may not be difficult, it is best to seek the advice of an experienced probate attorney. If you have been named as the executor of an estate, an attorney can guide you through your state’s probate process; explain all of the duties of an executor; assist with filling out court forms, sending out required notices of probate and meeting court deadlines; and suggest ways to avoid or mitigate potential estate claims from other parties. You should consult an attorney promptly if any legal challenges are raised regarding a will under which you serve as executor.

The executor must be capable of performing all the duties required of him or her under the will and in accordance with the state’s probate process. The executor owes fiduciary duties to anyone who has an interest in the estate, and the executor must act in the best interests of the estate. For example, if an executor mismanages the estate assets, he or she can be held personally liable and may have to repay the estate for any losses. If a person cannot serve or refuses to serve as executor for any reason, the probate court generally will appoint another person to administer the estate.

The executor has many responsibilities, including:

• Locating documents left by the testator, such as will, trusts, and deeds;
• Initiating the probate of the will;
• Notifying Social Security, pension providers, insurers, financial institutions, and other entities of the death of the testator;
• Collecting, inventorying, and if necessary, appraising the estate assets;
• Collecting debts owed to the estate;
• Paying claims against the estate;
• Distributing the remaining assets in accordance with the terms of the will; and
• Closing the estate.

Initiating Probate

If you are named as an executor of an estate, you should consult an experienced probate attorney to discuss the responsibilities you are expected to fulfill. An attorney will represent the estate during probate, explain the probate process, and delineate each of your duties. An attorney can obtain the required forms, such as a death certificate and original copy of the will. These forms are needed to probate the will and to notify Social Security and financial institutions of the decedent’s death. An attorney also can send notices of probate to interested parties, as required under the state’s probate code.

Inventorying Assets

An executor is responsible for marshalling all the assets of the estate, including the real and personal property of the decedent, for distribution according to the terms of the will. An executor must locate deeds to real property, gather assets in the decedent’s bank and investment accounts, and inventory the decedent’s personal property, including automobiles, furniture, and household items. If the decedent owned any personal property of value, such as jewelry or collectibles, the executor may have to arrange for that property to be appraised.

An executor also is responsible for preserving and protecting estate assets prior to the eventual distribution of those assets to beneficiaries. Preservation of estate assets can be accomplished through reducing estate taxes when possible and taking advantage of appropriate asset valuation techniques. An experienced attorney can assist the executor in implementing effective asset preservation and tax strategies.

Collecting Debts

The executor is responsible for identifying and collecting any debts owed to the estate. For example, an executor should check with the decedent’ employer to determine if any unpaid salary or benefits are owed. Any expenses of collecting debts owed to the estate, such as the costs of hiring a collection agency, are generally paid out of estate assets.

Paying Claims

The executor must pay all valid claims against the estate. Such payments would include taxes and creditor claims. An experienced probate attorney can assist an executor in filing an estate tax return.

Distributing Assets

Generally, the costs of probating the estate, including attorney’s fees, are paid by the estate out of estate assets before those assets are distributed to the named beneficiaries. After all debts are collected and claims are paid, the executor is responsible for distributing the remaining estate assets according to the terms of the decedent’s will.

Closing the Estate

When all of the estate assets have been distributed, the executor can close the estate. This generally involves giving the probate court evidence that all required notices of probate have been sent, all debts owed to the estate have been collected, all claims against the estate have been paid, and all remaining estate assets have been distributed in accordance with the provisions of the will.

When the probate court is satisfied that the estate is closed, it will release the executor from any further responsibilities on behalf of the estate.

Assets are considered non-probate when, by contract, the beneficiary is already named. The most common examples of non-probate assets are life insurance proceeds and tax-deferred retirement plans, such as IRAs and 401(k) plans.

Life Insurance Proceeds

A life insurance policy is a contract with an insurer that specifically identifies who will be paid after the decedent’s death. Since payment of the proceeds to the named beneficiary is part of the contract, there is no reason for the life insurance to go through the probate process.

Tax-Deferred Retirement Plans

These plans generally require the participant to name a beneficiary who will receive the proceeds of the plan in the event of the participant’s death. Since the beneficiary is determined by contract in advance, there is no need for the plan to go through the probate process.

Revocable Living Trusts

A revocable living trust is a legal entity established to hold title to property. When the property owner gives property to the trust, title to the property passes to the trustee of the trust. The document establishing the trust designates to whom the trust property will be distributed at the donor’s death. Since the trust is revocable, the donor has access to the property during his or her lifetime and can, if he or she chooses, take back title to the property. At the donor’s death, the property in the trust passes outside of probate because title is not in the name of the donor.

Other Non-Probate Assets

If an owner of property contractually names a beneficiary who will succeed to ownership in the event of his death, then the property falls outside the probate process and the asset will go directly to that named beneficiary. Methods of establishing non-probate property include:

• Joint Tenancy with Right of Survivorship – When two or more people own an asset jointly, it is often held with a right of survivorship. If one of the owners dies, the other owner(s) then automatically acquires the decedent’s ownership interest in the property. It is common for married couples to hold real estate or bank accounts in joint tenancy with right of survivorship.
• Payment on Death Bank Account – A beneficiary is named when an account is opened. The beneficiary has no ownership interest in the account while the account owner is alive, but at the owner’s death full ownership of the balance in the account automatically passes to the named beneficiary.
• Transfer on Death Securities – Stock, bonds, and brokerage accounts titled in this manner work the same way as POD bank accounts. The account owner names a beneficiary, the beneficiary has no ownership interest in the securities while the owner is alive, and at the owner’s death full ownership in the securities passes to the named beneficiary without probate.

Each of the foregoing strategies presents some attendant risks. For example, a person who opens a bank account jointly with a right of survivorship gives up exclusive control of the funds in the account. The other joint owner may take the funds or a creditor of the other owner may reach the funds.

If you are interested in strategies to avoid probate, please consult with an experienced attorney who can offer comprehensive estate planning advice.

Thanks to the Daily Report.

Source: Daily Report.

¹ Baker v. Merrill Lynch Trust Co., __ S.E.2d __, __ Ga. App. __, 2007 WL 1933135 (July 5, 2007).

¹ Ashburn Health Care Center, Inc. v. Poole __ Ga. App. __, __ S.E.2d __, 2007 WL 1764217 (June 20, 2007).

¹ Booker v. Booker, File No. A07A0110, __ S.E.2d __ , 2007 WL 1761173 (June 20, 2007)
² Hall v. First Nat’l Bank of Atlanta, 89 Ga. App. 853(2), 81 S.E.2d 522 (1954)

The U.S. Supreme Court’s 5-4 ruling last week in Bowles v. Russell contains an important reminder for lawyers who handle appeals before the intermediate federal appellate courts: If an appeal is not filed within the time provided by federal statute, the appeal cannot be heard and decided on the merits.

Here is the full article (a subscription may be required): Appeal on Time, or Don’t Appeal at All, U.S. Supreme Court Advises

State Farm settles Katrina lawsuit on day of trial for an undisclosed amount. The plaintiff, Michael McCoy, was seeking $189,402, plus $5 million in punitive damages for damage done to his home during Hurricane Katrina. “State Farm says flood, which the company doesn’t cover, reduced McCoy’s house to a slab.”

“depositing at least $865,000 owed to him for an unnamed project into an attorney client trust account against his wishes.”

Opri’s original suit claims that Birkhead has failed to pay his legal fees for her representation of him during his paternity suit.

For the full story: Federal court dismisses Fannie Mae shareholders lawsuit.

“same-sex couples to enter into civil unions with the ’same rights, responsibilities, and obligations as married couples’ beginning in January 2008.”

For the full story: New Hampshire governor signs civil unions bill

In Young v. Williams, 2007 WL 1121740, Docket No. A07A0030 (Ga. Ct. App. 2007), the attorney who drafted a will for James Williams neglected to include requested language leaving the marital residence to Betsy Williams, the surviving spouse. Mrs. Williams, represented by Gaslowitz Frankel LLC, sued the drafting attorney for malpractice. The drafting attorney admitted that he had made a terrible mistake that would otherwise constitute malpractice, but he argued that Mrs. Williams did not have standing to sue him for malpractice.

The trial court rejected this argument and entered summary judgment in favor of Mrs. Williams. On appeal by the drafting attorney, the Court of Appeals affirmed holding that a contract with a lawyer to draft a will, like any other contract under Georgia law, was subject to the third-party beneficiary rule. Thus, where a person hires a lawyer to draft a will and intends for the will to benefit a spouse (or other person), the spouse (or other person) has the right to sue the attorney for malpractice after the will is probated if it did not provide for what the decedent wanted.

¹ 277 Ga. App. 524, 627 S.E.2d 141 (2006)