The following publication will be used as seminar materials in the upcoming NBI Seminar: Estate Administration Procedures: Why Each Step is Important. Click here to access e-brochure: http://www.nbi-sems.com/Details.aspx/R-71827ER%7C?ctname=SPKEM
Common Issues to be Prepared for in Litigation and Probate
General advice for preventing contested issues: In my experience, I have found that the best way to avoid contested probate matters is by creating as much transparency as possible in the administration process. Share. Disclose. Communicate. Gain the trust of the beneficiaries and stay true to your word. I tend to exceed the statutory requirements for disclosing and communicating to beneficiaries for exactly that reason. The more you try to hide, the more suspicious the beneficiaries become, and the more difficult they will make your life. Make sure that the PR and Trustee understand that they are only a fiduciary for the decedent. It’s not their money, and it’s not their wishes that control
A. Title and Discovery of Assets
The first topic of the seminar was identifying probate and non-probate assets, and later you talked about the steps involved in transferring jointly held assets. This can be a sticky situation and can cause issues between the beneficiaries. This is why I usually urge people not to create joint accounts with their children if they will have more than one beneficiary. Accounts that pass by operation of law include those with more than one name on the account, accounts with Transfer on Death (TOD) or Payable on Death (POD) provisions, and those with beneficiary designations.
Unfortunately, almost all the clients that I have talked to and I think almost all the bank tellers do not understand that there is no such thing as a “convenience” account. I have seen people add one or more of their children to their accounts, and I have seen people add their siblings to accounts, and the list goes on. Adding a person to an account, for any reason, creates ownership in the account for every person on the account. This means several things:
1. There is a survivorship interest created between the parties. This will not be a probate asset, and will not pass by the terms of the Will;
2. This creates liability for every owner. If one owner has a creditor after them, either because of bad money management or a tort suit, they have an ownership interest in the funds. Why would anyone want to expose themselves to someone else’s legal problems?
3. Adding a “signer” to an account gives them full access to the funds. They could use any or all of the funds for whatever they want and they would be fully within their legal rights. Why would someone want to set themselves up for that?
4. Even if the surviving owner/signer considers the money as belonging to the decedent, they still have to transfer the money into an estate account, so what have they saved?
5. A Durable Power of Attorney can accomplish the same thing as creating a “signer” or “convenience” account without adding any liability or creditor exposure, and will make administration very clear when the true owner dies;
TOD and POD accounts are much easier to work with. These accounts or assets essentially act as beneficiary designations. The asset or account will pass directly to the person or persons designated on the account. And nobody else. This type of asset is protected during the decedent’s lifetime because there is no other owner to add liability or risk to the account.
One common problem with joint accounts is that the joint owner may not be willing to turn over the funds to the estate. This generally invokes litigation by the other beneficiaries because they all knew that the funds were deposited by the decedent and that the surviving account owner was put on for “convenience” purposes. Unfortunately, the surviving owner is the true owner, unless the beneficiaries challenge the contribution made by the surviving owner, and can prove the intent of the decedent. That’s not always cost effective to pursue, and often there is no way to prove the decedent’s intent other than by hearsay.
Another issue that comes up in contested probate matters is the matter of finding assets. Often times litigation erupts because beneficiaries believe that decedent had assets in addition to those that have been reported by the fiduciary. Sometimes this is just a matter of finding out how assets were titled, whether there were named beneficiaries, and other methods of transfer by operation of law. Regardless of the reason for looking, once a case if filed with the Court, the parties can begin the discovery process. If there are certain financial institutions or insurance companies that the beneficiary has reason to believe hold decedent’s accounts or assets, Subpoenas can be issued to those institutions to obtain any information on accounts for the decedent. If the beneficiary has no idea where assets may be located, then issuing Subpoenas is not an option. In that case, you would have to issue Requests for Admissions, Interrogatories, and Requests for Production to a party who might have that information. Probably the most frustrating part of these fishing expeditions is when the beneficiary is convinced that there are more assets and the fiduciary responds to their discovery requests indicating that there are no other known assets. At that point, it’s all about trying to prove a negative, which is impossible. Usually the beneficiary is just never convinced that the fiduciary didn’t somehow “steal” funds or assets.
B. Contested Claims and Contingent Liabilities
As you discussed in section III today, there is a statutory priority of paying claims, allowances and beneficiaries. It’s critical to hold assets until the claims period expires so that you don’t make distributions to creditors and beneficiaries and then later find out that there isn’t enough money to pay someone with a higher priority. As you know, the claims period for creditors to file their notice of a claim is 4 months after the date of publication, or after being served with actual notice. That’s the first hurdle. After 4 months, the fiduciary should assess whether there are sufficient assets to satisfy all the claims, and whether any of the claims are invalid. Once that determination has been made, the fiduciary either pays all the claims, disallows parts of the claims or all of the claims. Then begins the second phase, waiting 63 days to find out whether any of the creditors file suit to collect the disallowed claim.
When disallowing a claim, the fiduciary must be prepared to respond to any suits to recover. Therefore, the fiduciary must be familiar with MCL 700.3800 et al. Below is a quick reference guide to the sections and their topics:
700.3801: describes how, when and where the fiduciary should publish notice to any unknown creditors, and how to handle known creditors;
700.3802: describes the ability of the fiduciary to raise the statute of limitations as a defense to claims, and when the statute begins running;
700.3803: explains the different time limits for bringing claims, depending on whether and how notice is given, and what type of claim is presented;
700.3804: describes the manner in which a claim must be presented;
700.3805: sets forth the statutory order of priority of claims in the event the estate assets are insufficient to satisfy all claims;
700.3806: sets forth the manner and impact of disallowing claims in part or in whole, whether the fiduciary may change the allowance or disallowance of a claim, and how a judgment in a proceeding in another Court against a fiduciary to enforce a claim against the decedent’s estate constitutes an allowance of the claim;
700.3807: describes the time and procedure for payment of the claims according to the order of priority and the status of each claim;
700.3808: is near and dear to every fiduciary’s heart— or should be; this section explains when the fiduciary is or is not personally liable for claims, contracts, torts, and other potential proceedings while acting as the fiduciary;
700.3809: directs the fiduciary to pay secured claims if the creditor surrenders the security; if they won’t, this section explains what and when the fiduciary may do regarding the secured claim;
700.3810: directs the fiduciary in dealing with claims that are not yet due, or will be due at a future time (contingent claims); this will depend on several factors, including the type of claim, when it becomes due, whether the claim was allowed, and what the payment options are;
700.3811: If the estate has a claim against a claimant (a counterclaim), the fiduciary may deduct the amount of the counterclaim;
700.3812: Explains when a lien may be placed on estate property, and more importantly, when it cannot;
700.3813: allows the fiduciary to settle the claim when it is properly presented and it appears to be in the estate’s best interest; typically, this is done when there is no question of liquidity to satisfy all claims;
700.3814: describes how and when the fiduciary can settle a claim involving an encumbered asset, such as a house with a mortgage;
700.3815: explains that claims from estates being in administered in other states can be satisfied with assets held in Michigan; this section sets forth the procedures for doing this;
Failing to pay a claim, disallowing a claim without a valid reason, or treating one creditor differently than another are fast-tracks to a lawsuit in estate administration. Beneficiaries are always anxious to get their distributions, and often times become very hostile if they have to wait. This is where transparency and communication can go a long way. If the fiduciary educates the beneficiaries at the beginning of the administration process and sets their expectations correctly, it will greatly reduce the animosity and pressure that the beneficiaries present towards the fiduciary. Many times it is possible for the fiduciary to give partial distributions throughout the administration process, but I would caution all fiduciaries to be prudent and conservative when making any distributions out of the order of priority. This means that no creditors should be paid until the claims period has expired unless the fiduciary is absolutely certain that there will be sufficient funds to pay them all. Since beneficiaries are the last to be paid, and there is no way to determine how much a residuary beneficiary will be entitled to until all the claims and expenses have been determined, it is very risky for the fiduciary to make distributions to the beneficiaries before they creditor claims have been fettered out. There is very little doubt that if a fiduciary makes payments or distributions outside the order of priority and later determines that there are insufficient funds to satisfy higher priority payments, they will be digging into their own pocket to satisfy the outstanding payments.
C. Marital Agreement Concerns
Marital agreements were commonly known as “ante-nuptial agreements” or “pre-nuptial agreements”, or just “pre-nups”, because they were generally accepted only if executed prior to the marriage. That is no longer the case, so they are referred to as “Marital Agreements.” Marital agreements allow the parties/spouses to pre-determine the division of their property both upon divorce and death. They are uncommon with first marriages, primarily because first time couples tend to have very few assets and do not anticipate needing to plan for subsequent marriages and blended families.
MCL 700.2205 governs marital agreements which take effect at death. The agreements allow parties to partially or wholly waive spousal allowances and elections by a written agreement executed either before or after marriage, after fair disclosure. The spousal elections and allowances currently include up to $64,000 in Homestead Allowance, Family Allowance, and Exempt Property alone. Spouses also have a right to elect against the Will under MCL 700.2202, and a right to an intestate share under MCL 700.2102. Surviving widows also may elect to take their Dower rights under MCL 558.1, which grants the widow “the use during her natural life, of 1/3 part of all the lands whereof her husband was seized of an estate of inheritance, at any time during the marriage, unless she is lawfully barred thereof.” It is not clear how this right will apply to same sex marriages. As you can tell from the language style, this is antiquated law and I have no idea why it is still on the books.
Some of the advantages for using a marital agreement in estate planning include:
• Providing that each party’s individual property passes to their own family;
• Setting forth how expenses, taxes, and other obligations are handled during the marriage, which may inadvertently help prevent a divorce;
• Providing for the surviving spouse with income, assets, a right to occupy the marital home or a vacation home, etc;
• Providing burial arrangements of the parties;
• Distribute tangible personal property to respective heirs (although this can be done with a Will or Trust alone);
• If federal estate taxes are a potential issue, the use of a marital agreement can be helpful, but care must be taken to capture the marital deduction;
Most importantly, it is critical to ensure that the estate planning documents, titling of assets, and the marital agreement are all consistent with each other. This is important not only at the time the documents are initially drafted, but it should always be verified whenever there is a change in ownership of a major asset, a change or acquisition of an asset with a designated beneficiary, and an update to an estate planning document, throughout the marriage.
Why are marital agreements pertinent to probate litigation? For several reasons. It is critical in the administration process that you correctly make the distributions to comport with the agreement. Failing to do so will result in the first area of litigation, which would be a claim against the PR/Trustee for improper distributions (which the fiduciary can be personally liable for). If the marital agreement and the estate planning documents are inconsistent with each other, the best course of action for the fiduciary is to file a Petition for Instruction with the Probate Court, and the earlier the better. This throws the decision of distributions over to the Court, which resolves the issues before any assets are distributed, and protects the fiduciary from making the wrong call.
The other area of litigation of marital agreements, both in the family law arena and the probate arena, is the validity of the agreement itself. It is important to know what to look for in challenges to the validity of the document. The party challenging the document has the burden of proof for invalidating the document. MCL 700.2205 permits parties to enter into marital agreements either before or after the wedding, “…by written contract, agreement, or waiver signed by the party waiving after fair disclosure.” (italics added). Unless otherwise stated, “a waiver of ‘all rights’ in the property or the estate of a present or prospective spouse or a complete property settlement entered into after or in anticipation of separate maintenance is a waiver of all rights to homestead allowance, election, dower, exempt property, and family allowance by the spouse in the property of the other, and is an irrevocable renunciation by the spouse of all benefits that would otherwise pass to the spouse from the other spouse by intestate succession or by virtue of a will executed before the waiver or property settlement.”
The leading case on challenging the validity of marital agreements is In re Estate of Benker, 416 Mich 681, 331 NW 2d 193 (1982). The Benker case set forth new guidelines for marital agreements, such as declaring that they are now favored by public policy. Benker also requires a fair disclosure of assets by both parties, and sets a new standard that marital agreements, “…give rise to a special duty of disclosure not required in ordinary contract relationships so that the parties will be fully informed before entering into such agreements.” Benker at 689. However, if less than fair disclosure is alleged, “…the burden of proof rests with the party seeking to invalidate the ante-nuptial agreement.” Benker at 690.
The Benker court also found that the court can presume fair disclosure unless circumstances are sufficient to raise a rebuttable presumption of non-disclosure. In the Benker case, the court found the following examples of circumstances which would raise a rebuttable presumption:
• A complete waiver of rights of inheritance by the widow, but no provision for her upon her husband’s death;
• Husband’s estate was “very ample” relative to her estate;
• Decedent was secretive about finances, lived modestly, and did not display his wealth;
• The document made no statement as to whether the parties were fully informed of each other’s assets;
• One spouse is not represented by counsel;
• The drafting attorney admits that he was not concerned about what the other spouse received upon her husband’s death;
Finally, marital agreements are like all contracts in that they are not enforceable if they are obtained through fraud, duress, mistake, misrepresentation, non-disclosure of a material fact, unconscionable, or there has been such a change in circumstances and fact that enforcement is unfair and unreasonable. Where duress is defined as “…one party being illegally compelled or coerced to act by fear or serious injury to her person, reputation, or fortune.” Farm Credit Services, v Weldon 232 Mich App 662, 681 (1998). A contract must be both procedurally and substantively unconscionable in order to be invalidated. Procedurally unconscionable refers to the weaker party having no realistic alternative to accepting the terms of the contract, whereas, substantively unconscionable refers to a provision that is not reasonable in its substance. However, a marital agreement is not unconscionable just because it is foolish for one party and very advantageous to the other party. The inequity of the terms has to be so extreme as to shock the conscience in order to invalidate the agreement.
In spite of having a valid marital agreement in place, another hotspot for probate litigation, which drives every litigation attorney mad, is tangible personal property. It is not uncommon for a surviving spouse to claim that jewelry, small equipment, or other personal property was given to them by the decedent during the marriage, therefore it would not be subject to the marital agreement. One way to avoid and prevent these issues to have the parties videotape their personal property. The parties could also keep a running list of their personal property during their marriage, deleting items that they have gotten rid of or gifted and adding newly acquired property. The reality is, however, that very few couples will hassle with this. Shy of tracking these items during the marriage, there really isn’t any good way to guarantee that there won’t be issues between the beneficiaries. If you’re lucky, the value of the disputed property won’t be worth the cost of the lawsuit.
D. Contested Wills and Alternatives: Is it Valid to Disagree?
Any estate planning document can be challenged. This would include a Durable Power of Attorney (“DPOA”), a Patient Advocate Designation (“PAD”), a Will, a Trust, or any restatements or amendments and codicils made to the Will or Trust. However, it is not very common to see a challenge to a DPOA or PAD. Typically, the only challenges that arise to these documents involve allegations that the agent is not acting in the best interest of the principal, therefore a different agent is needed. Sometimes there will be financial recovery sought from the “bad acting” agent if the challenge involves the DPOA. By far the most commonly challenged documents are the testamentary documents. The typical challenges arise when a beneficiary does not receive the share of the estate that they anticipated, or had been promised, or had been allocated in previous documents. There are two main theories upon which the documents are challenged: lack of capacity or undue influence. The challenger must prove that the documents do not reflect the wishes of the testator.
Lack of Testamentary Capacity: Under the Estates and Protected Individuals Code (“EPIC”) and Michigan Trust Code (“MTC”), which is a part of EPIC, the standard for determining whether a testator or grantor has the requisite capacity to execute a Will or Trust is the same. That standard is set forth in MCL 700.2501:
“(1) An individual 18 years of age or older who has sufficient mental capacity may make a will.
(2) An individual has sufficient mental capacity to make a will if all of the following requirements are met:
(a) The individual has the ability to understand that he or she is providing for the disposition of his or her property after death.
(b) The individual has the ability to know the nature and extent of his or her property.
(c) The individual knows the natural objects of his or her bounty.
(d) The individual has the ability to understand in a reasonable manner the general nature and effect of his or her act in signing the will.”
MCL 700.7601 defines the capacity to create, amend, revoked, or add property to a revocable trust as the same as that required to make a will.
It is important to note that the lack of capacity to execute a testamentary document is determined as of the time the document was signed. This is critical because a person suffering from dementia, drug addiction, depression, anxiety, or other mental and physical illnesses does not necessarily lack testamentary capacity at the time of the document is signed. This is also one of the issues that makes proving a lack of capacity difficult.
How do you prove a lack of capacity? First, you start with the attorney who prepared the document, and all the witnesses to the signing of the document. They will be your fist witnesses to interview. However, note that there are few attorneys who would admit that the client lacked testamentary capacity at the time the document was signed, or who even admit that they failed to do proper screening to determine testamentary capacity. The witnesses, if available, may be a better source of determining whether the attorney screened the client, and what the client’s behavior and understanding was at the time of signing. If the document was not prepared by an attorney, you have a much better chance of finding a lack of capacity simply because most estate planning attorneys are well aware of the requirements of testamentary capacity and perform some type of formal or informal screening process.
Other potential pieces of evidence include medical records, if you can get them. Since the testator/grantor is unavailable (ie dead), you will need authorization from the Personal Representative of the Estate to authorize release of the medical records. If that person happens to be the same person that benefits from the document, it’s not likely that they will grant such authority. In that case, you will need a court order. Even if you obtain the medical records, you still have to show that the testator/grantor lacked testamentary capacity at the time of the signing. A diagnosis of dementia, Alzheimer’s, or some other cognitive disorder alone is usually not sufficient. Also note that a Trustee does not have the power to authorize the release of medical records. It’s not uncommon to need to open an estate just for the appointment of a Personal Representative to release records.
At the end of the day, even if you can prove that the testator/grantor lacked capacity at the time of signing the document, you still need to prove what it was that the testator/grantor truly wished the document to say. It must be more than a result that the challenger didn’t expect, or didn’t like. For example, if the testator/grantor executes a new will or trust to leave 90% of their estate to the hot young new spouse and only 10% to their children, that may very well be what the testator/grantor wanted to do!
Undue Influence: The key case in any undue influence case is Kar v Hogan, 399 Mich 529; 251 NW2d 77 (1976). “To establish undue influence it must be shown that the grantor was subject to threats, misrepresentation, undue flattery, fraud, or physical or moral coercion sufficient to overpower volition, destroy free agency and impel the grantor to act against his inclination and free will. Motive, opportunity, or even ability to control, in the absence of affirmative evidence that it was exercised, are not sufficient.” Kar at 537.
In sum, the grantor must be subjected to:
• Undue flattery
• Fraud physical or moral coercion
Which is sufficient enough to:
• Overpower volition
• Destroy free agency
• Impel the grantor to act against his inclination and free will
Pretty high standards. And note that “motive, opportunity, or even the ability to control, in the absence of affirmative evidence that it was exercised, are not sufficient.” (italics added).
In some transactions, there is a presumption of undue influence. The presumption arises when there is evidence introduced which would establish:
1. The existence of a confidential or fiduciary relationship between the grantor and the fiduciary (ex: agent under DPOA, Trustee, etc.)
2. The fiduciary, or an interest which he represents, benefits from the transaction, and,
3. The fiduciary had an opportunity to influence the grantor’s decision in that transaction.
What is less clear is what the effect of the presumption does. It does not shift the burden of proof. The plaintiff who alleges the existence of undue influence bears the ultimate burden of persuading the trier of fact that undue influence has actually occurred in the transaction.
“This does not mean that the ultimate burden of proof has shifted from Plaintiff to Defendant, but rather that Plaintiff may satisfy the burden of persuasion with the use of the presumption, which remains as substantive evidence, and the Plaintiff will always satisfy the burden of persuasion when the Defendant fails to offer sufficient rebuttal evidence.” Kar at 542.
Suffice it to say that you must be prepared to prove the actual existence of undue influence in each specific transaction that you are alleging was the product of undue influence.
How Easy/Difficult Are These Cases to Prove? Difficult. Very difficult. And very expensive. Discovery alone can be very time consuming and very expensive. Those trying to prove lack of capacity may face the following challenges:
• Medical records can be hard to obtain without a release or court order;
• If an attorney was involved in the preparation and execution of the documents, it’s difficult to obtain an admission from the attorney that the grantor lacked the requisite capacity;
• If there was no attorney involved, it may be easier to determine that the witnesses did not do any due diligence in determining capacity, therefore, the grantor’s capacity may be questionable;
• Getting an Independent Medical Exam (“IME”), if the grantor is still alive, will require a court order, which can be difficult to obtain without anecdotal evidence;
• Sometimes getting the grantor to appear in the courtroom can be a challenge in itself. Since the client is only required to be at certain events, and possibly none in the case of the GA/CA proceedings, you may need to file a motion to have the court require their appearance for the purpose of determining whether an IME is necessary;
• Even if you can determine that the grantor did not have testamentary capacity at the time of executing the document, you still need to show what the grantor’s wishes were (or else just have the document invalidated and the previous existing documents, if any, will prevail);
Proving undue influence can be every bit as difficult, even when you know in your heart and mind that it definitely existed.
• Is there a presumption? Is there a confidential or fiduciary relationship between the grantor and the alleged “wrong-doer”? Sometimes its easy, such as when an agent has been actively using a DPOA or is a joint owner on a financial account. Sometimes is not; Just because a DPOA exists doesn’t mean there’s a presumption. Sometimes an agent doesn’t even know the DPOA exists, or has never attempted to use it.
• Whether there is a presumption or not, you must be able to prove, for each and every specific transaction that you are alleging undue influence that:
o There were threats/misrepresentation/undue flattery/fraud/physical or moral coercion……which was sufficient enough to:
o Overpower the volition/destroy free agency/impel the grantor to act against his inclination and free will;
In general, these cases require a substantial amount of discovery of documents, witnesses, testimony, medical exams (in some cases), which becomes very expensive very quickly. And I mean very expensive, very quickly. I have seen clients spend in the range of $10K to $300K on legal expenses on some cases. Obviously, you need to make sure it will be cost-effective to pursue. As an attorney:
• Make sure you get detailed information on what your evidence will be before you take the case; make sure there are sufficient assets to justify the case;
• Make sure you are very candid with the client on the realities of the case in terms of evidence, proof, scope, time, energy, and financial commitments;
• Get your money up front; I typically will take a $10K retainer to hold in my IOLTA account and require the client to pay each monthly bill for actual time and expenses; that way I can usually ensure that I won’t eat more than a month’s worth of fees;
• Be careful in paying costs, such as filing fees, transcript fees, mediator fees, etc. I suggest making the client pay these directly;
In Terrorum/Terror/No Contest Clauses: The key case in terror clauses is Perry v Perry (In re Perry Trust), 299 Mich App 525; 831 NW2d 251 (2013). I actually did the initial intake on this case and worked on the probate court file. The firm I was with also handled the appeals. When the Michigan Trust Code (“MTC”) was created/modified in 2010, terror/no contest clauses were narrowed down by MCL 700.7113, which states that:
“A provision in a trust that purports to penalize an interested person for contesting the trust or instituting another proceeding relating to the trust shall not be given effect if probable cause exists for instituting another proceeding contesting the trust or anther proceeding relating to the trust.”
Essentially, when a will or trust contained a terror clause, any challenges to the document would result in the challenger forfeiting their share. Of course, if the challenger was completely written out of the document, then they have nothing to lose by challenging.
Understanding that sometimes wills and trusts are created or modified when a lack of capacity or undue influence really does exist, the MTC was revised to allow a beneficiary (or would-be beneficiary) to challenge the document if probable cause exists. Which leads to the determination of whether probable cause exists. Which leads to the Miller Osborne Perry Trust case.
Susan Perry was one of two of General Miller Osborne Perry’s (“MOP”) children. Her brother pre-deceased her by many years, leaving a son, Mark Perry, and daughter Debra Pinedo. Susan and her widowed father were very close. Susan was unmarried and had no children. Although she lived in Missouri and MOP lived in East Lansing, Susan spent quite a bit of time with MOP in East Lansing and at a seasonal residence out of state. MOP was able to live alone but enjoyed Susan’s company, and appreciated her driving long-distances with him.
MOP’s attorney had relocated to “up-north”, so when MOP wanted to update his estate plan she accompanied him. After MOPS death, Mark Perry was properly given a copy of the trust showing that he was to receive 12.5% of MOP’s estate. For some reason, he was absolutely convinced that MOP told him he would receive 50%. However, he knew that if he challenged the 12.5% provision, he would end up with nothing. What’s a boy to do?
Mark hired a very experienced probate attorney in Lansing who was well aware of the revisions to the MTC. In a sense, he had been waiting for these circumstances to arise so that he could test the new statute.
Therefore, he crafted a petition asking the probate court to make a decision as to whether he would have probable cause to challenge the trust based on undue influence. That way, he would get a decision “up front” so to speak as to whether he would lose his hare by challenging the 12.5% provision of the trust.
The first issue that came up was whether Michigan was the correct jurisdiction for the petition, since the trustee and the trust records were located in Missouri. And if Michigan did have jurisdiction, why Ingham County? After discussion back and forth, that issue was resolved by Susan Perry deciding not to challenge jurisdiction.
The petition was asking whether Mark Perry had probable cause to challenge the trust, but Susan Perry countered with a claim that the petition for determination itself constituted a challenge to the trust, thereby invoking the terror clause.
One big problem that Mark Perry faced was the fact that he had never seen any previous versions of the trust. In other words, he didn’t even know whether there had been any changes made to his share. Since the statute does not require that a beneficiary received copies of previous, now modified or invalidated trusts, Susan was never ordered to provide a copy. And to this day, she has refused to provide any previous trust document to Mark Perry.
Long story short, the probate court determined that:
a. Mark Perry did not have probable cause to challenge the trust (a win for Susan Perry)
b. But that the petition for determination itself was not a challenge to the trust, which would revoke Mark Perry’s share (a win for Mark Perry).
Susan Perry appealed, arguing that the request for declaratory relief did constitute a challenge to the trust, and, therefore, the terror clause should apply. The Court of Appeals determined that the declaratory action would only invoke the terror clause if it came “strictly within the express terms” of the terror clause at issue.
“Under section 4.4, Miller Perry did not provide that a beneficiary would forfeit his or her rights under the Trust if the beneficiary filed any legal action – however tangentially related to the Trust. Instead, he provided that only a beneficiary who contests or challenges the Trust’s admission to probate or who challenges a provision will forfeit his or her rights under the Trust.” Perry at 530
Since Mark Perry:
a. Did not challenge the trust itself
b. Did not ask the probate court to pass judgment on any term of the trust
c. Did not allege that the terror clause was invalid, and
d. Did not seek monetary relief,
The Court of Appeals found that his requests did not fall under the scope of the terror clause, therefore, his share was not forfeited.
Another interesting issue that Susan Perry failed to raise was whether the trial court had authority to decide what was essentially a hypothetical scenario. The court states, that, “…Mark Perry likely failed to allege a justiciable controversy.” Perry at 531. Since this issue was not raised in the appeal, the Court of Appeals was forced to ignore it.