Home > Uncategorized > Avoiding Estate Litigation – And Why a Corporate Trustee Could be a good idea.

Avoiding Estate Litigation – And Why a Corporate Trustee Could be a good idea.

I have written posts in the past about lawsuits – how they usually do not get resolved when they should when the parties take the matter personally.

Never is this more evident than when fights erupt over a deceased loved one’s wishes about “who gets what” – so to speak.

Estate Litigation cases are very contentious and generally stem from a few issues:

1. Decedent Didn’t Create a Proper Estate Plan.

This could mean they didn’t create a will, or trust, or it could mean that they created the estate plan themselves without an attorney involved and used some online form (see my blog post – take caution when using such forms) https://jeshualaukalegalnews.wordpress.com/2013/05/09/the-problem-with-universal-legal-form-documents-unaccompanied-by-your-lawyers-review/

Not creating a proper estate plan could result in loved ones simply not knowing what the decedent intended. Even if the family members have no animosity, it may mean that an attorney needs to be retained to file a petition with the probate court to reform or interpret a Trust or Will.

2. Decedent Didn’t Communicate With All Beneficiaries About Their Estate Plan.

This is more often the case that I see. Even if an Estate Plan is carefully drawn up – there could still be problems if a decedent’s wishes aren’t communicated properly to all beneficiaries.  Maybe one sibling takes care of mom or dad in their old age, because the rest live out of town, and that sibling is more closer to mom or dad than the rest.  sibling takes mom or dad to attorney to “update” an estate plan to that sibling’s benefit and the rest of the kids simply didn’t hear it from mom or dad’s own mouth that this new estate plan was indeed their intentions. Communication is key.

3. Decedent Listed Family Member as Trustee/Executor

Don’t hear me wrong – I am not saying it is never a good idea to list a child as a “fiduciary” for an estate. But, see point number 2 above. Issues can arise when communication has broken down and the other siblings simply do not trust their “fiduciary” sibling.

This sensitive situation can be compounded by the fact that “Fiduciary” sibling is held to a high standard of care, as a fiduciary.   A person acting as an executor of an estate or Trustee of a Trust is a “fiduciary”. They have duties to act in the best interest of the beneficiaries, and the Trust.  These duties are codified in Michigan statute.

Beneficiaries are entitled to certain disclosures pursuant to MCL 700.3703, “a personal representative is under a duty to settle and distribute the decedent’s estate in accordance with the terms of a probated and effective will and this act, and as expeditiously and efficiently as is consistent with the best interest of the estate.

Further, “the personal representative shall keep each presumptive distributee informed of the estate settlement.

Until a beneficiary’s share is fully distributed, the personal representative shall annually, and upon completion of the estate’s settlement, account to each beneficiary by supplying a statement of the activities of the estate and of the personal representative, specifying all receipts and disbursements and identifying property belonging to the estate.

Simply put, if a sibling is acting as a fiduciary, without intending, they  might not know or follow all of their legal requirements. This creates problems and can open up a fiduciary to be sued for breach of fiduciary duties.

To Avoid this problem, it may be a good idea to list a “corporate fiduciary” as maybe a co-executor, or co-trustee, to walk along side the sibling fiduciary and assist them in complying with their legal duties. This also may dispel any level of mistrust from the other beneficiaries.

4. What You Can Do If you Suspect Someone of Breaching Their Fiduciary Duty Owed to Beneficiaries of an Estate or Trust.

a. Communicate

The First thing you should do when problems arise is talk to the fiduciary. Let them know your concerns.  Ask for transparency.  If an executor is not providing information to the beneficiaries to keep them apprised of the Estate (what the assets are, what money is coming in, what money is going out, and for what purposes), at the very least that can create mistrust. If after communicating your concern with the fiduciary you do not get an appropriate response, consult an attorney. If fiduciary already has an attorney involved, you  might want to consult with an attorney.

 

b. Consult with an Attorney About your Options.

If there is evidence of breach of fiduciary duties, fraud, concealment, embezzling from the estate, or undue influence, an attorney can file a petition with the Probate Court to hold the fiduciary responsible for breach of fiduciary duties, and seek their removal.  Often, an attorney will seek that all estate funds be held in a “constructive trust” – during the litigation.

“A constructive trust may be imposed when property “‘has been obtained through fraud, misrepresentation, concealment, undue influence, duress, taking advantage of one’s weakness, or necessities, or any other similar circumstances which render it unconscionable for the holder of the legal title to retain and enjoy the property….” Ooley v. Collins, 344 Mich. 148, 158, 73 N.W.2d 464 (1955).

 

Lesson: Consult an Attorney and Communicate with loved ones about your intentions when you pass away. This can ensure that family members do not end up in a bitter legal battle over the Estate. 

 

Do you have an interesting legal issue ? I’d love to hear about it.   

Email or call me.  Ph: (616) 454-3883; Email: Jeshua@dwlawpc.com

 

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