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Probate/Estate Administration; Probate and Trust Litigation

Probate/Estate Administration; Probate and Trust Litigation

When someone passes away, sometimes it’s hard to know where to start. We’ve created a checklist of some of the immediate items you will want to handle. We recommend contacting an attorney early in the process to help with estate administration.

Rinke Noonan is equipped with experienced attorneys specializing in estate administration, as well as probate and trust litigation, should any disputes arise during the estate administration process.

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What Is Probate Litigation?

Probate litigation involves disputes relating to a deceased person’s (decedent’s) estate.  A common example would be in the case of a decedent executing a deed, will, or other legal instrument affecting their interest in certain property or assets at a time when they were believed to have lacked capacity or were subjected to duress or undue influence.  As the medical world continues to learn more and more about the impacts of degenerative dementia and Alzheimer’s disease, circumstances in which capacity may be an issue are more common place.  There may also be issues raised regarding the personal representative’s management of the deceased person’s estate.  Whenever such disputes arise, our firm is there to assist you through the process and resolve the matter as efficiently and cost-effective as possible.

Capacity

The test of whether or not someone lacks capacity at the time of signing a will or other legal document is whether they had sufficient active memory to collect in the [their] mind and comprehend, without prompting, the condition of the [their] property, testators relations to children and others who might be beneficiaries, scope and bearing of [their] Will and to hold these things in his mind for a sufficient length of time to perceive their obvious relationship to each other and form some rational judgment in relation to them.  This legal test for capacity is a subjective standard; one that has seen its fair share of litigation over the years.  For those diagnosed with degenerative dementia or suffering from some other condition affecting their ability to comprehend legal transactions, reasons to call into question their capacity at the time of the transfer can be all the more compelling.  Our trial attorneys have extensive experience litigating capacity cases toward successful resolutions.

Undue Influence

Undue influence occurs when a influential person, trusted advisor, family member or friend exert their influence over a vulnerable person and cause them to make an ill-advised transfer of their assets.  There can be a wide variety of circumstances that give rise to undue influence and Courts consider several factors to determine whether a grantor was unduly influenced by another party, including: (1) the opportunity to exercise influence; (2) the existence of a confidential relationship between the grantor and the person claimed to have influenced the grantor; (3) active participation by the alleged influencer in preparing the transfer; (4) an unexpected disinheritance or an unreasonable disposition; (5) the singularity of provisions; and (6) inducement of the grantor to make the  transfer.  Here again, people suffering from certain medical conditions (i.e. dementia) may be more susceptible to the influences of a loved one or someone to whom they are close.  If you or a loved one have concerns about whether someone may have been taken advantage of by someone having a close relationship with the Decedent, you should contact an attorney as soon as possible.

Duress

Duress is coercion by means of physical force or unlawful threats which destroys the victim’s free will and compels him or her to comply with some demand of the party exerting the coercion. The standards of resisting power of the victim are personal and subjective rather than objective — that is, the existence of duress is to be determined by whether the coercion was of such a character as to overcome the free will of the victim rather than that of a person of ordinary courage and firmness.  While perhaps not as commonplace as undue influence concerns, concerns about whether someone was under duress when executing a legal document can and do occur.

Concerns about a family member being the subject of undue influence or duress or being presented with a legal document when they lack capacity are serious.  More often than not, these concerns often involve other family members.  For this reason, we strive to understand and appreciate the emotional concerns related to such claims in addition to understanding our clients’ goals.  Losing a loved one is hard enough by itself.  Finding out that the executed a document they did not have the capacity to understand or as a result of the influence of a loved one can be overwhelming.  Rinke Noonan strives to handle these types of cases with civility, compassion and a commitment to cost-effective results.

Trust Litigation

Trusts have become more and more commonplace and its use as an estate planning tool continues to gain popularity.  As they gain popularity, more and more issues have come to the forefront.  Trusts may have a variety purposes and related terms.  In addition to having seasoned estate planning attorneys skilled at crafting trusts to suit our clients’ needs, our office has skilled litigators to handle any and all disputes concerning trust administration and termination.  Issues that can come up through the course of trust administration, include but are not limited to the following:

Fiduciary Duty

A trustee has a fiduciary duty to the beneficiaries of the trust, both the current beneficiaries and any “remaindermen” named to receive trust assets upon the death of those entitled to income or principal now.  A fiduciary is held to a very high standard of care concerning the administration of trust assets.  Beneficiaries of the trust, whether current or remaindermen, have standing to scrutinize the actions of a trustee.  A trustee that has breached his or her fiduciary duty to the trust may not only be removed as trustee, but may be exposed to potential liability for damages to the trust as a result of that breach.  If you are a beneficiary of a trust and believe there have been questionable actions taken by a trustee, or you as a trustee are being accused of having violated your fiduciary duty to the trust beneficiaries, our probate and trust litigation attorneys can assess any such claims and advise you as how to best handle the situation.

Terms of the Trust

Read the trust itself carefully, both now and when any questions arise.  The trust is the road map for the trustee(s), whom must follow its directives, whether about when and how to distribute income and principal or what reports need to be made to beneficiaries.  Sometimes the terms of a trust can be ambiguous, or susceptible to more than one interpretation.  Or, there may be terms within the trust that are inconsistent with one another and cause confusion as to the direction a trustee is to take.  When ambiguous or inconsistent trust terms exist within the document itself, the easiest resolution is for all interested parties to agree on a meaningful interpretation of the trust and memorialize that interpretation with an amendment to the trust document.  When the parties cannot agree on the manner to resolve an ambiguity or inconsistency within the trust, the district court can be called upon to clear up the ambiguity and confusion and either modify the terms of the trust itself or provide the trustee with clear instructions on how to act in spite of the trust language.

Investment Standards

Trustees of a trust are required to be prudent investors, meaning that they cannot place money in speculative or risky investments. This can sometimes be tricky because investments must take into account the interests of both current and future beneficiaries.  For instance, in the case of a current beneficiary who is entitled to income from the trust, he or she may be best served by a conservative, short-term investment approach.  However, this may be viewed as detrimental to the interest of later beneficiaries who would be happiest if the trustee invested for growth. In addition to balancing the interests of the various beneficiaries, you must consider their future financial needs. Sometimes the language in the trust provides the trustee(s) with clear guidance on what types of investments should be made, but there may be occasions where the Trust is not clear and when beneficiaries opinions may differ.

Distributions

Sometimes trustees have the discretion to make distributions to a beneficiary.  Whether such a distribution may be made is often based on a number of factors, including but not limited to the evaluation of the beneficiary’s current needs, their future needs, their other sources of income, and the trustee(s)’ responsibilities to any other beneficiaries.  All of these considerations must be made in light of the size of the trust. Often the most important role of a trustee is the ability to say “no” and set limits on the use of the trust assets. This can be difficult when the need for current assistance is readily apparent.  Disagreements on discretionary distributions can often be the source of conflict and is something our attorneys have encountered and dealt with on numerous occasions.

Accounting

One of a trustee’s jobs is to keep track of all income to, distributions from, and expenditures by the trust. Generally, a trustee must give an accounting of this information to the beneficiaries on an annual basis, though the trustee must look to the terms of the trust to be sure, as the trust terms may dictate otherwise.  In strict trust accounting, you must keep track of and report on principal and income separately.  The trustee must keep a record of all receipts, expenditures, distributions and income. The trustee must also document sales, loans or other dispositions of the trust assets. Under no circumstances should any trust assets or funds be co-mingled with those of a trustee or any other third party.

Taxes

Depending on whether the trust is revocable or irrevocable and whether it is considered a “grantor” trust for tax purposes, the trustee will have to file an annual tax return and may have to pay taxes. In many cases, the trust will act as a pass through entity with the income being taxed to the beneficiary. In any event, if the trustee keeps good records and turn this over to an accountant to prepare, this should not be a big problem.

Payment of Expenses by Trustee

The trustee must pay all trust expenses, including taxes, as required by the trust document or by law after verification that the expenditures are proper and valid.  All expenses paid must be deemed reasonable.  The question of whether certain expenses are or were reasonable can come up through the course of administration.

Payment to the Trustee

Typically, the trustee is entitled to receive reasonable compensation for his/her services rendered to the trust. This must be reported as taxable income to the Trustee and as a deduction for the trust.  A beneficiary has standing to challenge the reasonableness of any compensation the Trustee pays to him or herself.  Sometimes the trust document itself will specifically address the issue of trustee compensation, but other times it is not clear.  Issues concerning the reasonableness of the trustee’s rate and the amount of time the trustee spends on administration may arise.

Professional Fees

One of the concerns that a trustee or a beneficiary may have is how attorney or other professional fees will be paid.  The trustee may retain advisors to assist with the accounting, investing and legal issues of the trust.  Fees may be paid from the trust so long as they are incurred to further the best interests of the trust.  Many times the payment of fees is subject to judicial determination.

Discretion by Trustee

Minnesota Courts have adopted the following six factors when determining whether a trustee has breached their fiduciary duty to the trust: (1) the extent of the discretion conferred upon the trustee by the terms of the trust; (2) the purposes of the trust; (3) the nature of the power; (4) the existence or non-existence, the definiteness or indefiniteness, of an external standard by which the reasonableness of the trustee’s conduct can be judged; (5) the motives of the trustee in exercising or refraining from exercising the power; and (6) the existence or nonexistence of an interest in the trustee conflicting with that of the beneficiaries.  There may be few or many discretionary acts which are the responsibility of the trustee(s).  Trusts vary in specificity and in some cases give the trustee very little guidance on how to proceed with aspects of the administration.

Many administrative issues can arise during the course of trust management.  Rinke Noonan has experience representing both beneficiaries’ interests and the interests of the trustee(s).  Cases may vary in complexity and cost, but there is no case or issue too big.  Conflicts can be the result of a dispute between and amongst the trustees and other times it may be a dispute between beneficiaries of the trust and a trustee.  These disputes are often linked to concerns over the management of the trust assets and/or whether or not the trustees are appropriately carrying out the purpose, intent and terms of the trust.  Minnesota Statutes Chapter 501B offers the District Court a number of remedies in order to resolve problems with Trusts, including but not limited to the following:

  1. Removal of trustee(s);
  2. Reforming the language in the trust to resolve a dispute or an ambiguity or inconsistency in the trust terms;
  3. Termination of the trust;
  4. Instructions to the trustee(s);
  5. Deviation from the trust terms.

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