In her original will, Ms. Clark made a provision for a significant amount to be distributed to her nurse and companion, Hadassah Peri. Ms. Peri had received a substantial amount of gifts during Ms. Clark’s lifetime (approximately $31 million). In the settlement, Ms. Peri agreed to pay back the estate $5 million over the course of 6 months. The settlement also provided that if any other assets totaling over $100,000 are determined to have been given from Ms. Clark to Peri or her heirs, the estate could seek the return of additional funds from Ms. Peri, leaving her obligation to the estate open.

This case brings to mind the fiduciary duties associated with probate matters and probate litigation. In a recent case from the 3rd District Court of Appeal of Florida, McCormick v. Cox, 118 So. 3d 980 (Fla. 3rd DCA 2013). McCormick, the attorney for the decedent, prepared two trusts. McCormick was also named as the trustee.

McCormick arranged for an appraisal of the property as of the decedent’s date of death. The appraiser reported a fair market value of the property, as an operating golf course, of $2,500,000. However, billing records provided by McCormick shows he had been working to convert the property from a golf course into residential property. The appraisal McCormick used on the decedent’s estate tax return did not reflect the best use of the property, nor did McCormick communicate with the beneficiaries about the value. The property ultimately sold for $12,000,000.

McCormick also did not provide a trust accounting report to the beneficiaries until April, 2005. The trial court found this to be a “significant breach of obligation”. Then, when the property did sell, McCormick instructed the closing agent to make separate distributions to the trust, primarily to fund “trustee’s fees”, totaling over $1 million. The beneficiaries ultimately filed a lawsuit against McCormick and his firm. After a trial of 8 days, the trial court ruled, and the appellate court later upheld, the removal of McCormick as trustee, that McCormick had breached his fiduciary duty, and required McCormick to repay funds to the trust.

The Court noted that McCormick’s extraordinary and unilateral payment to himself of a seven-figure fee from trust monies, without prior disclosures of alleged entitlement and amount to either the beneficiaries or the court, constituted a flagrant breach of duty. Even when the beneficiaries learned of the funds paid to McCormick’s firm and confronted him about the amount McCormick, instead of restoring the payments or placing the disputed funds in a separate account, simply retained the funds and waited for the beneficiaries to sue him.

The trial court required McCormick (and his firm) to pay back $2,146,812 in expenses incurred due to their undervaluation of the property, found the legal fees charged were unreasonable, and required disgorgement of $1,348,000 in attorney’s and trustee’s fees.

The post Undue Influence and Fiduciary Breach Can Reverse Terms of Will In Probate, a quick look at Clark and McCormick appeared first on McNeal Legal, LLC.

“A designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent. An individual retirement account described in §408 or §408A of the Internal Revenue Code of 1986, or an employee benefit plan, may not be treated as a trust for purposes of this section.”

In reality, once the marriage is dissolved, and a Final Judgment of Dissolution is filed with the Court, any asset transfer or payment as listed in Florida Statute §732.703 (i.e. life insurance policies, POD accounts, retirement accounts) becomes a nullity and is not valid. However, after a dissolution it is still very important to change the beneficiaries to those assets (obviously, if those are assets not distributed to the former spouse). If the beneficiary to a policy is not changed after a dissolution, the “payor” may still submit payment to the former spouse after death. This means the current beneficiaries (most often children or the current spouse) would then have to file a lawsuit against the former spouse and/or the asset manager (retirement company/insurer/etc.) to recover those assets transferred to the former spouse. A failure to timely change beneficiaries to those assets after a dissolution could cause delay, expense, and frustration for grieving families.

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