By Analija M. Zampogna, Esq.
The bottom line for estate planning clients and attorneys is that even the best laid plans can go awry. However, with a strategic plan in place and an understanding of its potential for litigation, you can ensure your estate has the best chance of being administered and distributed accordingly.
Much like the theme of Robert Burns’s poem, “To a Mouse,” the all-too-common reality of estate planning in Pennsylvania is this: no matter how experienced the attorney or how thorough the estate plan is, some factors simply cannot be controlled—not by a trust, an in terrorem (no-contest) clause, an expert’s assessment of capacity, a self-proving will, a small estate, nor even a statute that provides for the transfer of assets by operation of law. This is because heirs and beneficiaries are wild cards that an estate planner cannot wholly predict nor control, and the laws and courts provide certain exceptions or leniencies that enable estate litigation.
After demonstrating some possible scenarios for estate plans based upon real litigation matters, the takeaway is that, in general, clients may not realize how their estate plans turn out, nor stick around to find out, and having experience in estate administration and litigation can improve the strategy, communication, and drafting of effective estate plans. While it is necessary to understand the effects and importance of estate planning strategies and documents (e.g., Last Will & Testament, Power of Attorney, and Living Will), it is just as important to know how and why some strategies and documents can fail and/or lead to litigation.
The Joint Account Exception
Creating a joint account can be an effective estate planning tool because it avoids probate and minimizes inheritance taxes for surviving joint owners who are not spouses (note that inheritance taxes for spouses is 0%). By law, the surviving owner of a joint account automatically becomes the sole owner upon the death of the other joint owner. However, 20 Pa.C.S.A. § 6304 provides that an exception exists if there is clear and convincing evidence the decedent had a different intent when creating the joint account. This exception is used to either protect intended beneficiaries or initiate less-than-warranted litigation against surviving joint owners.
For example, in Estate of Strahsmeier, 54 A.3d 359 (Pa. Super. Ct. 2012), the Court found that a Decedent’s ITF (“In Trust For”) account belonged to the estate, rather than the child designated as the sole beneficiary. In this matter, there was clear and convincing evidence that the Decedent intended for his account to be distributed equally amongst his three children. Evidence included testimony from the Decedent’s lawyer, detailed-records prepared by the Decedent proving his intent for the ITF account, and actions and statements by the designated beneficiary acknowledging the Decedent’s intent for the ITF account to be shared. However, in an estate litigation matter handled by our firm, disinherited children attempted to make the same argument against our client. But unlike Strahsmeier, the disinherited children in our case had minimal evidence to prove the decedent’s intent at the time certain joint accounts were created. Ultimately, our firm proved that the evidence showed the decedent’s intent was to disinherit the absent and/or unaffectionate children.
Given the statutory exception to the rule regarding joint accounts, it is important that an estate planner understands all benefits, drawbacks, and potential outcomes from creating a joint account and is explicit about his or her intent at the time of creation.
The Surviving Spouse’s Elective Share
Pennsylvania protects spouses from being disinherited by granting them the right to an elective share, or one-third of certain assets in a deceased spouse’s estate. See 20 Pa. C.S.A. § 2203. This right can be waived or forfeited, such as by way of a prenuptial or antenuptial agreement, or by failing to file for an elective share within six months of the date of death or date of probate. Additionally, even if a spouse dies before divorce proceedings are finalized, the surviving spouse loses the right to an elective share if grounds for divorce were established during the proceedings.
There are many reasons why an estate planning client may want to minimize the portion of his or her estate that will be distributed to the surviving spouse. In one estate litigation matter handled by our firm, a surviving spouse was given much less than one-third of a decedent’s assets in an effort to avoid indirectly benefiting the surviving spouse’s children from a previous marriage. Because the surviving spouse properly filed for an elective share, the decedent’s intentions failed. Religious considerations may be another reason for limiting a spouse’s distribution. For example, according to Islamic rules of inheritance, a wife’s fractional share may be less than one-third, in which case the wife could exercise her statutory right to an elective share.
Because a surviving spouse has a statutory right to one-third of his or her spouse’s estate, the best way to ensure that any limited distributions are upheld may be through a valid waiver. At the very least, it is crucial that married couples are aware of the potential for elective-share litigation when creating their estate plans.
Will Contest Claims of Incapacity and/or Undue Influence
In general, a person must have testamentary capacity before he/she can obtain or update estate planning documents, which is why it is crucial to do so before any issues or concerns with capacity arise. For many reasons, mental capacity can be easily compromised and difficult to ascertain, but the reality is that a litigator will find an expert who can provide a medical opinion that supports an argument for or against capacity.
Despite the fact that there is a presumption of testamentary capacity and a lack of undue influence once a properly executed Will is presented, see In re Hoffmann’s Estate, 147 A.2d 633, 639 (Pa. 1959), the threshold for alleging claims of a weakened intellect and undue influence is minimal. Proving those claims, however, are not as simple. For example, a party claiming undue influence has the burden to “establish, by clear and convincing evidence, that: (i) the testator suffered from a weakened intellect at the time the will was executed; (ii) there was a person in a confidential relationship with the testator; and (iii) the person in the confidential relationship received a substantial benefit under the challenged will.” In re Bosley, 26 A.3d 1104, 1107-08 (Pa. Super. Ct. 2011).
When an estate planning client wants to disinherit or make a minimal distribution to a child or family member, any concerns for capacity and intellect should be addressed to mitigate potential (or inevitable) will contests. However, even with a doctor’s confirmation of capacity and will provision clarifying the disinheritance and lack of undue influence, a disgruntled heir may nevertheless litigate against an estate. In turn, the litigation will preclude the estate planning attorney from assisting with the administration of the estate and subject him or her to becoming a witness at trial.
In summary, estate planning can involve much more than selecting executors, avoiding probate, and allocating assets. Practical experience in estate litigation or secondhand knowledge of it can be highly beneficial for estate planning clients and attorneys alike. An effective estate plan should be assessed for its potential for litigation–with the understanding that some preventive measures may not deter heirs from filing claims against the estate. At the same time, it is equally important for beneficiaries to understand what rights they may have against defective estate plans or improperly administered estates.
Take Control of Your Estate’s Future Today
Estate planning and litigation can be complex and unpredictable in some ways, but with the right legal guidance, you can understand and minimize the risks involved and secure a reliable strategy.
Whether you need assistance creating an estate plan or navigating disputes involving joint accounts, elective shares, or will contests, our experienced team is here to help, call us at 412-209-3200 or email azampogna@PaLawFirm.com to schedule a free, no-obligation consultation.