Naive short-cut increased conflict and expense of settling estate

2014-12-29This column first appeared on the Express-News MySA site on December 29, 2014.

Dear Mr. Premack: My mother transferred her money into an account owned by Roger, the person named as Executor in her Will. She gave him verbal instructions to distribute the funds according to her Will. She died, her Will was probated, and Roger became her estate Executor. The Executor is not distributing the money as mom instructed. Is there anything we can do? – CP

This situation must be examined from a variety of perspectives. Without the evidence, is difficult to predict what might be decided by a court.

Your perspective is that your mother wanted one outcome but due to her choice may have caused a different outcome. You think Roger did the wrong thing when he kept the funds. You want the money to be treated as part of her estate, so it will pass under her Will – and I assume, you will receive part or all of the distribution. Your mother’s perspective was that she trusted Roger to follow her instructions. She authorized transfer of the money to Roger’s personal account.

Roger’s perspective is less well known. He may have thought the transfer created a gift from your mother to him; that it became his property when she transferred it, and was not included as part of her probate estate. He may claim to be unaware of any instructions from your mother. But as her Executor, he was in a position of trust. Keeping the money may create a legal conflict of interest which could disqualify him from continuing as Executor. Your attorney could seek to have Roger removed as Executor and to compel him to turn your mother’s funds over to the new Executor. The court could impose a constructive trust over the funds to compel their return.

As similar event occurred a few years ago in Tyler Texas. Ronald named Valerie as beneficiary of his life insurance, his Agent, his Executor and his sole devisee. Later Ronald made a different Will leaving his estate to David and naming David as beneficiary of his life insurance. He did not revoke Valerie’s status as Agent under his Durable Power of Attorney, so later Valerie signed papers as Agent to restore herself as beneficiary of the life insurance. After Ronald died, David sued Valerie to recover the life insurance proceeds, asking the court to impose a constructive trust over the proceeds.

A constructive trust is a legal idea designed to prevent a wrongdoer from profiting from wrongful acts. The law required David to prove 1) that Valerie had a special fiduciary relationship with Ronald, or that she committed fraud against him, 2) that she was unjustly enriched, and 3) that the funds could be clearly identified. The court found that as Agent, Valerie had the duty to inform Ronald she had changed his beneficiary designation, that failure to do so violated her fiduciary duty, that she was unjustly enriched with the policy proceeds, and that a constructive trust could be imposed forcing her to return the money.

In your situation, then, did Roger have a special fiduciary relationship with your mother? Yes, she trusted him because she had nominated him as her Executor. Did Roger breach that duty by keeping the money? If you can prove your mother instructed him to distribute the money as Executor, then keeping the money was a breach of his duty. Was he unjustly enriched? Yes, if this is money he would not have otherwise received. The quality of your evidence against Roger and for your mother will determine whether imposing a constructive trust is proper.

This could have all been avoided if your mother had kept her own money in her own account. She was trying a short-cut, likely hoping to avoid probate of the funds. Her short-cut was a poor decision which only increased the conflict, cost and time needed to settle her estate. Anyone with a similar idea should consult with their legal counsel before trying any naive short-cuts.

Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and business entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.

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