Virginia Fiduciary Law Blog

CAN A TRUSTEE HIDE MATERIAL TRUST INFORMATION FROM THE TRUST’S QUALIFIED BENEFICIARY?

In the law of trusts, basic transparency isn't optional; it’s foundational. Despite some trust instruments attempting to restrict beneficiary access to information, the fiduciary duties of a trustee make clear that a trustee cannot prevent a qualified beneficiary from protecting their interest in the trust or evading core fiduciary obligations. The trust law affirms that trustees have a duty to keep beneficiaries reasonably informed and to furnish material information necessary to protect their interests.

Crucially, this duty cannot be wholly eliminated by trust language, especially after the settlor’s death when the trust becomes irrevocable and a qualified beneficiary’s interests become fully vested. Core trust law principles provide that a beneficiary is entitled to request such information as is reasonably necessary to enable the beneficiary to prevent or redress a breach of trust. This principle underscores that core disclosure duties serve not just individual beneficiaries but also the integrity of the trust relationship itself.

The common law of trusts has long echoed this policy. The trustee's fiduciary duty encompasses providing material information to a trust beneficiary. A trustee's arbitrary or capricious application of trust provisions to limit access to key financial information required to protect a beneficiary’s interests risks a breach of the trustee's fiduciary duties. The takeaway for trustees and drafters: fiduciary duties are not entirely waivable, and a trustee, particularly if also a beneficiary, must act with impartiality and transparency.

ASSET PROTECTION THROUGH TENANTS BY THE ENTIRETY OWNERSHIP

A key component of asset protection in Virginia is the extension of the tenancy by the entirety to personal property. This extension occurred through legislative grant. While often also used in the context of real property and protecting real property against third party claims, Virginia recognizes the tenants by the entirety form of ownership over personal property. This form of asset protection is only available to married persons, and, in the context of personal property, it applies whether or not personal property represents the proceeds of the sale of real property.

  Parties engaged in comprehensive estate or succession planning, particularly professionals and those with real property interests, should carefully consider these protections and their scope afforded under Virginia law. Moreover, in considering the powers of trustees in trust instruments or agents under powers of attorney, consideration should be given to whether the powers of trustees or agents (formerly, “attorneys-in-fact”), particularly when these roles may be occupied by successors, should be limited in the case of tenants by the entirety property, and whether these limitations should apply equally to real property and personal property.

  The grant of a power to sever or convey tenancy by the entirety property should be carefully evaluated, particularly if either spouse has strong opinions or specific intentions regarding such property’s ultimate disposition.  

MISUNDERSTANDING THE OFFICE OF THE COMMISSIONER OF ACCOUNTS

   A common misunderstanding in Virginia practice and procedure arises in the context of Commissioners of Accounts.  Individuals interacting for the first time with a Commissioner of Accounts’ office may misapprehend the nature of that office, believing it to be fulfilling a merely ministerial or administrative function.  In fact, it is a quasi-judicial office, with appointment made by the court.

  Persons appearing before the Office of the Commissioner of Accounts, including its staff, would do well to remember the judicial nexus.  While a level of informality is permitted to occur, a fiduciary’s continued failure to comply with the Commissioner’s mandate can result in substantial negative repercussions.  In extreme cases, even arrest and incarceration may be sought from and ordered through the court for contempt.

  On the other hand, beneficiaries who believe that a Commissioner’s office is a free tool to settle scores with a fiduciary may be in for a surprise.  The Commissioner’s office may be willing to pursue a particular fiduciary for compliance, and if a fiduciary satisfies the Commissioner’s office through substantial compliance with pending requests, the issue may stand ended. Beneficiaries who are primarily pursuing a vendetta also may come to learn that a fiduciary is not expected to bear legal fees and costs from the fiduciary's personal funds to perform their duties.

PITFALLS IN LETTING “THE STATE” WRITE YOUR WILL: MINDING THE SEPARATE MOIETIES IN CASES OF INTESTACY

    A longstanding saying within the estate planning bar proceeds approximately as follows:  the prospective client can either engage a competent estate planning attorney to write a proper will or let the State do it for them at their peril.  The reference to the “State,” in this context, refers to ceding this important right, namely, of creating a last will and testament, to the state's intestacy statute, as enacted by each state’s legislature.  Some individuals may well ask, however, Why, if the intestacy statute exists, do they really need a will?  The answer is that the intestacy statute is not a substitute for a will reflecting your wishes, but a fail-safe device of last resort; prospective estate planning clients would still do well to avoid intestacy by adopting a properly drafted will (or living trust).

  In an instructive but infrequently discussed intestacy case in Virginia, the question arose whether a decedent’s estate passed half of the paternal share (called the “paternal moiety”) to the share of the decedent's maternal kin (called the “maternal moiety”), or whether a paternal “half uncle” could take the entire paternal moiety.  The trial court had held that the paternal half uncle would be permitted to take a portion of the paternal kindred’s share—one half of the paternal moiety, as he was an uncle of the “half-blood” under Virginia law, with the rest passing to the “maternal moiety,” to be divided equally among 14 maternal second cousins who would also receive the entire maternal moiety. 

   On appeal, however, the Virginia Supreme Court reversed the trial court.  The Supreme Court noted that the paternal and maternal moieties theoretically may be rejoined, but only if there is no kindred of one moiety and one or more kindred of the other moiety.  In the event that there are one or more kindred of both paternal and maternal moieties, the interests of each moiety are determined entirely separately.  The Court thus awarded the entire share that would pass to the paternal moiety to the decedent’s “half uncle” because his status as an heir of the “half-blood” under Virginia law had no application outside of the paternal moiety.  The maternal moiety separately would be divided by the 14 second cousins. The ruling thus eliminated any interest that the 14 maternal cousins were awarded by the trial court in the paternal moiety.

   An ounce of prevention, in the form of a properly drafted last will and testament or living trust, can go a long way in avoiding these kinds of disputes and the attendant litigation delays, fees and costs.

 

POWERS OF ATTORNEY: CHANGING A PRINCIPAL'S ESTATE DOCUMENTS

For most individuals, a durable general power of attorney is a protective device, intended to avoid the need for a guardianship or conservatorship in the event of a disability.  Two questions often arise, however:  how broad may an agent’s powers be and can these powers be used to change a principal’s estate plan? The Virginia Supreme Court recently made clear that the answers to these questions would turn on the language of the instrument, against the backdrop of the principal’s circumstances, and Virginia’s Uniform Power of Attorney Act.

In this case, a wife who had no children died disinheriting her husband’s adult children.  The wife’s act of disinheriting her husband’s children contravened the spouses’ understanding that both the wife’s relatives and the husband’s children would receive a share of their estates.  When the wife died disinheriting her husband’s children, the husband no longer had capacity to change his estate plan.  His daughter, as agent under his power of attorney, created “two new trusts,” naming herself and her brother remainder beneficiaries to the exclusion of the wife’s relatives. The wife’s relatives sued, insisting that they had to be included as beneficiaries. The trial court disagreed, validating the daughter’s act of creating two new trusts as agent under her father’s power of attorney.

On appeal, the Virginia Supreme Court also upheld the use of the daughter’s power of attorney to exclude the wife’s relatives.  The Court found that the agent’s actions fell within the express terms of the power of attorney.  On a companion point, the Court noted that language in the power of attorney also allowed a beneficiary change to be made to a retirement account.  The Court held that although the power of attorney did “not track the language” set out in Virginia’s Uniform Power of Attorney Act, the agent’s powers over the retirement accounts, coupled with a broad grant of general powers conferred upon the agent, sufficed to permit the beneficiary change made by the daughter.

The case is Reineck v. Lemen (Nov. 23, 2016).

PROBATING A LOST WILL: NOT AN EXISTENTIAL QUANDARY AFTER ALL

  An adult child recently fought against the admission to probate of a copy of his biological father’s missing will.  The adult child insisted that, without proof of what happened to the will, its copy could not be admitted to probate. Without proof of what happened to the lost will, the adult child argued, the lost will’s proponent could not overcome the legal presumption that the decedent must have intended to revoke the will. The trial court disagreed, admitting the copy of the missing original of the will to probate. 

    An appeal followed, challenging the trial court’s ruling.  The Virginia Supreme Court upheld the trial court’s decision to recognize and admit to probate the copy of the lost will.  Notably, in doing so, the Court clarified more than a century of case law. The Court held that the proponent of the lost will did not have to prove what actually became of the decedent’s will. 

    Although the Court recited the evidence in support of the trial court’s holding, it did not limit its ruling to the specific facts of the case presented.  The Court did note, however, that the proponent of a lost will had to overcome the presumption of revocation that applied if the original will was in the testator’s custody. That is, the proponent of a lost will still had to prove that the testator “did not destroy the will with the intention of revoking it.”  The proponent of the lost will in the case at issue had met that burden under the applicable “clear and convincing evidence” standard. The case is Edmonds v. Edmonds (Va. 2015).

EQUALITY VS. IMPARTIALITY: A ZERO-SUM CHOICE FOR FIDUCIARIES?

A notion frequently presented by beneficiaries of a trust or an estate is that the trustee or executor is doing something unlawful if the beneficiaries are not treated “equally.” Although equality between or among beneficiaries appears to be a readily understandable concept, it is not the same as being entitled to receive an equal share of a trust or an estate.  In the context of beneficiary disputes, the claim is not complicated to summarize: if the trustee (or executor) did not treat the beneficiaries equally, the fiduciary must have breached a duty. This argument has a surface appeal, but it is not necessarily consonant with the law.

    Trustees and executors often face zero-sum situations, particularly without express instructions from the governing trust instrument or will. For example, two or more beneficiaries may wish to select the same tangible personal property. Alternatively, two or more beneficiaries may wish to receive the same real property. Some beneficiaries simply object to other beneficiaries receiving any specific property, or anything in-kind, even if such a transfer would not result in a shortfall of benefits or property distributable to the other beneficiaries. 

    There are guideposts in the law that may help pave the fiduciary's way out of such a quagmire.  For instance, Virginia’s Trust Code, substantially modeled on the Uniform Trust Code that is now the law in a majority of states, focuses on the legal concept of impartiality. The concept of impartiality is different from the commonly understood notion of equality. Impartiality by a trustee focuses on equitable treatment:  in investing, managing, and distributing the trust property. As a legal construct, impartiality is also qualified, and may require more than the rote exercise of the fiduciary's taking identical actions for each beneficiary.

    The laws governing trusts and estates generally permit fiduciaries to reach an appropriate resolution even in the case of an apparent impasse. These legal guideposts are not always readily discernable, however, and distinctions can become easily blurred when arguments are made on the basis of surface appeal, including those asserting a lack of equality.  A trustee or executor challenged by such arguments should either involve legal counsel early in the process of a trust's or estate's administration to prevent such claims from being litigated needlessly or seek counsel with relevant experience in the event that litigation arises.

LITIGATING TRANSFER ON DEATH DEEDS: IS THE DISCOVERY RULE DEAD?

     An estate planning tool perhaps as yet unnoticed by estate and trust litigation counsel recently was enacted by the General Assembly.  New to Virginia practice is the “transfer on death deed.”  This form of conveyance permits the grantor of such a deed to designate a person to receive property in a transfer on death deed without creating any legal or equitable property rights in the designated beneficiary until the death of the transferor.  The conveyance passes real property interests at the transferor’s death by operation of law, thus falling outside of the probate process and, generally, the provisions of a transferor’s lifetime trust. Although this planning device may make sense in limited settings, its piecemeal application in estate planning could give rise to a variety of unintended consequences in later litigation. 

    One such consequence is the passage of title to property without any form of accounting or oversight under the aegis of fiduciary duties applicable to trustees.  Although creditor’s claims, statutory allowances, and estate administration expenses theoretically may be claimed against such property, the lifetime recordation of a transfer of death deed could cause real property quietly to slip forever into the hands of a designated beneficiary or alternate beneficiary.  Under the Virginia Code, after a transfer on death deed is recorded, “it can be revoked only by an effective revocatory instrument recorded prior to the death of the transferor and may not be revoked by a revocatory act taken against or on the original or a copy of the recorded transfer on death deed.”

    The statutory scheme contains a publicly available form for such deeds. A compelling feature of the form is a provision for alternate beneficiaries, generally absent in garden-variety survivorship deeds.  The real distinction between transfer on death deeds and other deeds that convey current property interests, however, stems from the manner in which real property interests openly intended to be conveyed paradoxically may remain obscured.

    Because there is no present transfer of  ownership, and the real property in question remains owned by the transferor until death, family members may not notice or become aware of the transfer on death deed’s existence or even its prior recordation.  The prior recordation of a transfer on death deed may affect later legal claims.  Post-mortem claims alleging undue influence or constructive fraud, for example, may be barred even under a “discovery” statute of limitation due to the public nature of the earlier act of recording such a deed.  The potential later inability to challenge or dispute a transfer on death deed’s past execution, in the face of its prior public recordation, is an uncertain feature of this new estate planning device.

LITIGATING POWERS OF ATTORNEY: AN OUNCE OF PREVENTION

 Individuals looking for assistance with the management of their financial affairs are often advised that they need a “power of attorney.”  The notion is not altogether misplaced.  Few people want to be the subject of costly guardianship proceedings, involving court filings and medical or psychological determinations. Powers of attorney, now that they can be “durable” and can last through any period of disability, may be the right answer.  But, given the increasing litigation over actions taken by attorneys-in-fact or agents, the inquiry should not end there.

 Naming someone attorney-in-fact, or “agent” under modern Virginia statutes, creates a fiduciary relationship.  A fiduciary relationship implicates duties of care and loyalty by the fiduciary toward property or money belonging to the fiduciary’s principal. Standards of care and loyalty applicable to a fiduciary's dealings are generally higher than in arm's length commercial transactions.

 Both principal and agent must be mindful of these considerations.  In particular, and although a power of attorney may be designed to be revocable, if the principal were to become disabled, an agency under a power of attorney may in fact result in a longstanding legal relationship, possibly lasting until death.  (Death revokes all powers of attorney.) What is more, the majority of financial powers of attorney are drafted to take effect immediately:  that is, they are “live” upon the principal’s signing and do not require a prior determination of disability to be triggered. 

 The alternative to a “live” power of attorney would be to create “stand-by” powers of attorney.  Stand-by powers of attorney are dormant, “springing” into force upon the happening of some specified future event.  For most individuals, there may be cogent reasons not to create “stand-by” powers of attorney, however.  One such reason is that third parties, with whom the agent must deal, may not have a satisfactory  way of determining whether the conditions necessary to trigger the agency have occurred.  This could negate the agent’s effective ability to serve the principal if doing so requires the cooperation of such third parties.  Another reason may be  that triggering events can involve an emergency, such as a disabling event, and obtaining the requisite documentation at such a time may be inconvenient or, worse, impossible to obtain.

 Because financial powers of attorney frequently are broadly drafted, the intended principal who is considering asking his or her lawyer to draft up a power of attorney should first reflect on the objectives to be served by the power of attorney.  The choice of agent under a power of attorney merits equal consideration. If a client has a broader estate plan, care should be given to determine whether different appointments in fiduciaries are indicated—should your trustee be the same as your agent, for instance? 

 Despite the routine manner in which powers of attorney today may be treated by clients, lawyers and even non-lawyer commercial suppliers of power of attorney forms, clients seeking to create such relationships would do well to give careful thought to the nature and scope of such appointments.  Likewise, any agent who undertakes to fulfill such an appointment should consult counsel early to determine the contours of the agent’s duties.  The alternative is to be embroiled in costly fiduciary litigation—regardless whether the actions of an agent are ultimately held unlawful. 

SHORT-CHANGING A SURVIVING SPOUSE? THINK AGAIN….

Many people have heard the phrase “taking against the will” or “electing against the will.”  Generally, this refers to protections in the form of an “elective share” of an “augmented estate,” created for a surviving spouse who has been disinherited.  In Virginia, the concept of an “augmented estate” reflects a legislative public policy determination:  disinheriting a surviving spouse is easier said than actually done, even when a predeceasing spouse makes certain transfers before death. Moreover, the augmented estate can be affected not only by the assets owned or transferred by a decedent, but also by liabilities incurred.

    If a deceased spouse leaves no children from a prior marriage, a surviving spouse generally may elect to claim half of a predeceased spouse’s “augmented estate”—a statutory concept that involves a “lookback” to include certain pre-death transfers.  This election overrides the predeceased spouse’s will or estate plan to the contrary.  The applicable fraction is reduced to a third of the predeceased spouse’s augmented estate if there are children from a prior marriage. Sounds straightforward in the abstract, but is it in application? 

    In a recent case, the Virginia Supreme Court had occasion to deal with subtle distinctions in the law governing the composition of the augmented estate.  The decedent disinherited her husband and their two adopted children, leaving her entire estate to her son from a prior marriage.  In computing the augmented estate, two issues arose:  (1) whether the husband had consented to the wife's transfer, during her lifetime, of half of certain jointly owned funds to her son from a prior marriage; and (2) whether her surviving husband was entitled to contribution for half of a joint debt.  The trial court had held against the surviving husband on both counts. 

    The Virginia Supreme Court reversed, holding that the surviving husband had not consented to permit his wife to transfer her half of the jointly owned funds to her son. He had only consented to permit his wife to transfer these funds into her sole name, which did not “decrease the value of the decedent’s estate”—the linchpin of whether his consent did, or did not, exclude these funds from the computation of the wife’s augmented estate.  The Court also held that where the husband and wife were co-makers of a promissory note, they were subject to this liability equally, and the husband was entitled to contribution from the wife’s estate for the full half of the joint obligation.  The case is Tuttle v. Webb (2012).

INCAPACITY AND CONSERVATORSHIP: BARS TO MAKING A WILL?

The Supreme Court of Virginia recently took up the appeal of a son, David, who challenged the testamentary capacity of his father, Eugene, to make a 2002 will.  Eugene had been found in need of a conservator in three different states, including Virginia, since Eugene suffered a head and spinal cord injury after being hit with a metal pipe at a bar in 1982. At the time, his son David was an infant. 

David challenged the 2002 will.  The will left 25% of Eugene’s estate to Eugene’s brother and 25% to Eugene’s sister-in-law.  Eugene’s brother and sister-in-law had become Eugene’s court-appointed conservators after filing a petition with a court in Tennessee in 2000.  Without the will, Eugene’s entire estate would have passed to his son, David.

The Supreme Court of Virginia affirmed the Virginia trial court by upholding the will that left Eugene’s brother and sister-in-law with a total of 50% of Eugene’s estate.  The Supreme Court noted that the proponent of a will bears the burden of proving the existence of testamentary capacity by a preponderance of evidence, not by a higher “clear and convincing evidence” standard.  The trial judge had found that Eugene had sufficient testamentary intent and was not subject to undue influence in making the will.

Eugene’s will was upheld despite the fact that Eugene was under a conservatorship at the time because he had a mental or physical incapacity and even though Eugene’s brother served as Eugene’s “translator” during the drafting of the will since Eugene spoke through a “voice box due to a tracheotomy.”   The Court cited past precedent for the proposition that “the mere fact that one is under a guardianship does not deprive him of the power to make a will.”  The “condition of being unable, by reason of weakness of mind, to manage and care for an estate, is not inconsistent with capacity to make a will.”  What about the conservatorship proceedings?  The Court held that none of the conservatorship statutes “required a specific factual finding that Eugene was incompetent to such an extent that he could not execute a will....” The case is Parish v. Parish (Va. 2011).

COURT CONTINUES REVIEW OF ESTATE DISPUTES

In 2010, the Virginia Supreme Court issued no fewer than 10 opinions bearing on the laws affecting fiduciaries, executors, trustees, and the estates of decedents.  Yet as civil litigators in Virginia are apt to remind clients (and potential clients) exploring an appeal, being granted an appeal in a civil case to the Virginia Supreme Court is anything but  assured.  Appeals of civil cases to the Virginia Supreme Court generally require the grant of a writ of appeal by the Court.  And even then, the Court may limit the writ of appeal to just one or two appeal issues, known as "assignments of error," that a party seeks to appeal.  It is significant, therefore, that so far in 2011, the Virginia Supreme Court continues to show interest in adjudicating fiduciary litigation cases. 

One appeal to watch this year is the case of Mary Ann Weedon, Individually and as Executor of the Estate of Dorothy Rose Weedon v. Larry Weedon, et al.  In that case, the Court granted the petitioner a writ of appeal on five (5) assignments of error:

1.    The trial court erred in failing to determine that Dorothy Rose Weedon had the requisite testamentary capacity when she executed the 2008 Will.

2.  The trial court erred in failing to properly weigh the evidence of the fact witnesses at the time of the execution of the 2008 Will by ruling that the drafting attorney did not have the right to delegate certain duties owed to the testator.

3.  The trial court erred in ruling the 2008 Will was the result of undue influence.

4.  The trial court erred in admitting the testimony of the expert witness of the contestants and by giving undue weight to the evidence of the expert witness contrary to Virginia law.

5.  The trial court erred by failing to rule that the contestants did not have sufficient corroborative evidence to support their allegations of lack of testamentary capacity and undue influence.

These assignments of error implicate a broad cross-section of legal issues in will contests, and parties who face or seek to bring a will contest will no doubt want to be on the lookout for developments in this case. 

TACKLING THE UNIFORM TRUST CODE IN COURT

Provisions in the Uniform Trust Code (“UTC”), adopted in a growing number of states, explicitly contemplate a modification or termination of a trust under circumstances not anticipated by the settlor.  These provisions hold the potential to prevent or resolve trust litigation, particularly if all parties can concur on a desired outcome.  Given a sound basis in law and parties who agree to a settlement, judges tend to be practical; they are not inclined to thwart the resolution of costly trust disputes.  The UTC’s provisions for the modification and termination of trusts, particularly in the case of noncharitable trusts, contemplate the application of such common sense.  What happens if the end of hostilities is not quite so tidy, however?  The Virginia Supreme Court recently addressed just such a case in Ladysmith Rescue Squad, Inc. v. Newlin. 

The costs of failing to achieve unanimity

After “several years of litigation” relating to a multi-million dollar testamentary unitrust, the parties in Newlin reached a settlement of the trustees’ original suit for aid and direction.  They agreed to submit several unresolved issues to the trial court for approval:  the trustees, the income beneficiaries, and Upper Caroline, one of two charitable remaindermen, moved the trial court to permit the trustees to divide the trust into two equal trusts—to be called the “Upper Caroline Trust” and the “Ladysmith Trust.”  These parties also sought to terminate the Upper Caroline Trust by commuting the income beneficiaries’ interests based on their life expectancies and by distributing the remainder to Upper Caroline.  Ladysmith, the other charitable remainder beneficiary, objected.  Over Ladysmith’s objections, the trial court granted the motions to divide the unitrust, commute the income interests, and terminate the Upper Caroline Trust.  The Virginia Supreme Court granted Ladysmith an appeal. 

 Preserving the guiding principles of the trust law under the UTC

In support of the trial court’s rulings, the trustees cited § 55-544.17 of Virginia’s UTC, claiming the trust’s division was proper.  They relied on § 55-544.12(A) to argue that the trial court could modify and terminate the trust under circumstances not anticipated by the settlor.  The trustees also argued that the 2005 adoption of the UTC “effected a ‘dramatic change’ in the trust law of Virginia.”  The Virginia Supreme Court reversed, finding the trustees’ arguments unavailing:  “The framers of the UTC were careful to preserve the guiding principles that have historically been the foundations of the trust law.”  The court noted that to the extent provisions of the UTC were in derogation of the common law or principles of equity, they must be strictly construed.  “The UTC has not so altered the law as to permit beneficiaries, after the death of a testator, to defeat the terms of his will that postpone their enjoyment of his bounty, merely because they ‘would rather have [their] money today than wait.’”

 The court further noted that the record did not disclose evidence of trust assets being “mismanaged,” the trust becoming “uneconomic,” that its objects were “unobtainable,” or that any factor, “aside from the desires of the beneficiaries,” justified amending the trust.  It explicitly disagreed that the settlor could not have foreseen the beneficiaries’ desire to accelerate payment.  The court lamented the “depressing frequency” with which beneficiaries had “for centuries” engaged in litigation over wills and trusts, noting that the likelihood of such litigation increased “in direct proportion to the amount in controversy.”

 Broader perspectives of Newlin for UTC states

With 22 states and the District of Columbia having adopted the UTC, and more slated to do so, Newlin is instructive in several respects.  The UTC has undeniably begun to shape the landscape of trust litigation.  As estate planning attorneys and counsel to trustees in administration begin to scrutinize the possibilities offered by the language of the UTC, so must courts increasingly grapple with the UTC’s inherent ambiguities and limitations.  While the UTC makes available a number of salutary statutory devices to trustees and trust beneficiaries, the settlor’s intent may still predominate. 

Although the UTC’s treatment of the modification and termination of charitable and noncharitable trusts presents subtle but important distinctions, the Newlin decision did not explicitly address the UTC’s wider statutory scheme in this regard.  When dealing with charitable trusts, however, absent of one or more of the substantive factors listed by the court in Newlin—mismanagement, uneconomic administration, or unobtainable purposes, for example—courts are likely to remain wary of finding “circumstances” not anticipated by a trust’s settlor as grounds to alter a trust. 

In a broader sense, with the proliferation of multi-party trust disputes, the premium on achieving unanimity has never been higher.  Almost every will or trust is different—hence the old estate planning adage, “no will has a twin brother.”  Evaluating and seizing on these nuances can offer opportunities for achieving finality earlier in the litigation process, even in the most difficult trust and estate disputes.  Whether in conveying a demand or evaluating those of another claimant, parties should keep in mind that achieving a global resolution often requires mutual economic concessions carefully calibrated to conclude all controversies.  The alternative for parties embroiled in costly trust disputes can mean more of the same:  protracted litigation. 

IN ESTATE LITIGATION, WHAT'S OLD IS NEW AGAIN

Picture your client:  the executor of an estate. 

She wants to know from you whether and how to pay a mortgage that encumbered the decedent’s real estate.  The decedent was the sole party liable on the loan, which was secured by the real estate in question. Your trouble, and the executor’s, is two-fold.  The real estate was held with rights of survivorship with the decedent’s second spouse. And, of course, the decedent’s children don’t want their stepmother, who takes the property, to have the loan paid off for her by the executor. The children therefore point to the article of the will forbidding the executor to pay any debt secured by mortgage of real property “owned at death,” and requiring “such property [to] pass subject to such mortgage.”

In short, the second spouse says, “pay the mortgage, but not from my real estate,” and the children say, “you can’t pay the mortgage, because it must pass to our dear stepmother with the lien on the property.”  What to do?

If you said get the court’s aid and guidance, you’d be one step ahead of the curve.  The trial court reasoned that the will’s intent was to pass the property subject to the lien.  And the will’s stated intent must ultimately control, right?  

The Virginia Supreme Court, in Dolby v. Dolby, reversed the trial court.  The Supreme Court held that the estate was obligated to pay the decedent’s mortgage debt and that because the real estate passed outside of the probate estate by operation of law—namely, pursuant to the survivorship clause in the deed—the provision in the will relied upon by the decedent’s children did not apply.  The Court’s decision, issued in 2010, relied upon the principle that the duty of an executor of an estate is to first pay the decedent’s debts.  In doing so, the Court cited to Edmunds v. Scott, a prior decision of the Court.  The Scott opinion was issued in 1884.

PERILS IN VIRGINIA ESTATE LITIGATION: LESSONS OF PARTS I-IV

  
Litigation of Fiduciary Cases: Technicalities Abound

The primary lesson of the four cases featured in our four-part series of posts (Perils in Virginia Estate Litigation) is not so much that the Virginia Supreme Court stands on technicalities—many lawyers might agree that it can and does so regularly, yet they might further observe that “technicalities” exist for a reason.  Rather, one lesson is that personal representatives, be they executors, administrators or trustees, and their trial counsel would do well to consult with experienced fiduciary litigation counsel even when the subject matter of the case does not directly implicate a will or trust.  The four 2010 Virginia Supreme Court opinions discussed in our four-part installment illustrate only two of the complexities in dealing with or representing fiduciaries in court—standing and proper parties.  As the Virginia Supreme Court’s recent decisions continue to reflect, there are many other complexities. With the advent, adoption, and overlay of the Uniform Trust Code, these complexities will only continue to surface in the fiduciary litigation setting, increasingly placing a premium on the fiduciary litigator’s substantive knowledge of fiduciary law in Virginia.

PERILS IN VIRGINIA ESTATE LITIGATION - Part III

May the Administrator Appeal pro se?

The third of the Virginia Supreme Court's recent opinions in our four-part installment also turned on standing or, more accurately, lack of standing.  In Hawthorne v. VanMarter, the decedent’s administrator was represented as a plaintiff by licensed counsel in the trial court on a claim of negligence for personal injuries.  After the jury trial resulted in a defense verdict, the administrator of the estate appealed “pro se.”  The Virginia Supreme Court considered the appellee’s objection to the estate’s appeal, holding that, under Virginia law, the administrator could not mount an appeal pro se but must be represented by licensed counsel.  The cause of action at issue belonged to the beneficiaries of the estate, which the administrator only served in a representative capacity.  The court dismissed the administrator’s pro se appeal.

 

PERILS IN VIRGINIA ESTATE LITIGATION - Part II

Thinking Before Qualifying as Administrator

In Part I of our four-post series on the perils in Virginia estate litigation, we discussed a recent Virginia Supreme Court opinion on proper parties. In that case, naming the "Estate" as the defendant proved fatal to the plaintiff's claims.  In Part II of our four post-series on the subject, we discuss another 2010 opinion by the Virginia Supreme Court.  

In Antisdel v. Ashby, the Virginia Supreme Court affirmed the dismissal of an action filed by an estate’s administrator for lack of standing—the converse of the complication encountered by the plaintiff in Helou (the subject of our first in a four-post series on standing and proper parties).  The estate’s personal representative in Ashby had properly qualified under Virginia law to serve as administrator for the purpose of bringing a wrongful death claim.  The administrator later brought suit not to assert a wrongful death claim, but personal injury “survival claims” instead—claims the decedent could have asserted during his lifetime in his own right.  The Virginia Supreme Court found that the applicable statute in the title of the Virginia Code governing Wills and Decedent’s Estates permits appointment of an administrator for purposes of bringing personal injury claims, wrongful death claims, or both. 

In Ashby, the order granting the appointment only reflected the administrator’s request to bring a wrongful death claim, however. Thus, the administrator lacked standing to prosecute the personal injury or “survival claims.” Affirming the dismissal of the case with prejudice, the court also rejected the administrator’s argument that the trial court should have modified the order of appointment nunc pro tunc.

PERILS IN VIRGINIA ESTATE LITIGATION - PART I

“MEASURING TWICE” BEFORE FILING SUIT

In 2010, the Virginia Supreme Court has published numerous opinions implicating the laws governing fiduciaries, wills, or trusts.   Four of these decisions are particularly instructive about two continuing perils:  standing and proper parties.  Here is a little teaser:  have you, as counsel of record, or has your lawyer, named the such-and-such “Estate” or the so-and-so “Trust” as the party—whether as plaintiff or defendant—in your case?  If so, you should read on, as we will bring you a four-part series of posts to discuss these cases on standing and proper parties.  Our first of four case discussions appears in the post below.

PART I:  HAVE YOU SUED THE "ESTATE" LATELY?

In Idoux v. Helou, the Virginia Supreme Court affirmed the dismissal of claims filed against the “Estate of Raja Alexander Helou.” The court reiterated that under Virginia statutes and Virginia precedent the “Estate” could not be a proper party to the lawsuit.  In Virginia, the proper party is the personal representative—in Helou, it would have been the executor.  The problem for the plaintiff in Helou was that the lawsuit filed against the “Estate” amounted to a “legal nullity.”  Accordingly, it did not toll, or halt, the running of the statute of limitation, which had expired. Therefore, the plaintiff could not amend his complaint to substitute the executor as the proper party.