I’m a Beneficiary, I’ve Been Wronged… Now What?
The process of administering a trust or estate can be lengthy and complex. It seems even longer for a beneficiary who has the expectation of receiving funds or property after an estate or trust is settled. While most administration efforts end successfully, and the beneficiaries receive the property or funds to which they are entitled, many beneficiaries feel that they have been slighted, wronged or are otherwise dissatisfied with the administrative process. In some cases, they are correct and there are processes in place to right the wrongs, while in others, there is nothing to be done because no wrongs have actually occurred.
In the case of probate estates and revocable trusts, it is important to know that before any beneficiaries receive funds, any creditors of the decedent must be paid. Therefore, in some situations where the decedent had significant medical bills, outstanding creditors, owed back taxes, or had other debts, those bills would be paid before any distributions are made to beneficiaries. Incidentally, it can take a significant amount of time to discover what those outstanding bills may be which lengthens the time to complete the administration of an estate or trust.
Once all creditors have been located and paid, distributions must be made in accordance with the legal document (either will or trust). If all the bills have been paid, and a beneficiary didn’t receive what they anticipated, then what?
I. Beware of Joint Ownership
Accounts or assets which were either titled jointly with a decedent and another individual or which named a beneficiary, pass outside of an estate or trust and are not subject to distribution according to the legal document. Instead, that account or assets passes to the surviving joint owner or named beneficiary. For example, consider a parent who has 4 living children and a will that leaves assets equally to the 4 living children. However, that same parent has one bank account that was titled jointly with one child who lived close to home and who had been helping the parent in their final years. After the parent’s death, the bank account belongs wholly to the surviving child and is not subject to being divided equally according to the will. Therefore, while the other three remaining children believed they were to inherit an equal share of the parent’s estate, they will receive nothing from that account. In this case there is no wrongdoing and no cause of action that allows the remaining three children to inherit from that one bank account.
II. You Weren’t Named as a Beneficiary
No child, grandchild, cousin, step-child or other relative has a right to inherit. In fact, only a surviving spouse has a right to inherit from a deceased spouse, so long as there is no marital or pre-marital agreement which waives that right between spouses. If a surviving spouse is not named as a beneficiary, then they have the right to file a claim against the estate of their deceased spouse in order to claim their share. With respect to anyone else, a decedent is not required to leave them anything. So, while an individual may be an “heir at law”, they may not have been named as a beneficiary of an estate. Similarly, a decedent may have made statements during their lifetime as to who they intended to inherit from them at their death, however, unless they put those same statements into a valid testamentary instrument (will or trust) or named the appropriate individual as a beneficiary, then that person has no right to inherit. Unfortunately, it is all too common to hear that someone was informed that they would inherit from a loved one but then, upon death, it happens that the loved one never executed a valid will.
III. The Will (or Trust) had been Changed
If a beneficiary was aware that they were named as a beneficiary, all the creditors had been paid, and the beneficiary still hasn’t received anything, then there is a possibility that the will (or Trust) had been changed to remove that beneficiary. Generally, wills that are probated in a court are available to the public, so the beneficiary can obtain a copy of the will to determine if they were still a beneficiary. If the will had been changed, then it can be examined and potentially contested if the testator lacked capacity or was being unduly influenced at the time the new will was executed. It is important to remember that everyone has the right to change their mind and their will. It is not an easy task to challenge a will based on a lack of capacity or undue influence, however, with appropriate evidence it can be done.
IV. The Trustee Failed to Administer the Trust Properly.
Revocable Trusts (the type most commonly created for estate planning purposes) are legal instruments which provide for the management of assets during an individual’s lifetime, the payment of bills and expenses at their death, and the passing of assets to the beneficiary. Trusts have a number of estate planning benefits, which are beyond the scope of this article, however, they offer privacy which can be frustrating for a beneficiary wanting to know more. A Trustee accepts certain duties and responsibilities when they accept the role of trustee. They have a duty to administer the trust, which includes the duty to reasonably inform the beneficiary of the progress of administration as well as to report on trust income and expenditures. They have a duty to exercise reasonable skill and care in administration, the duty to act prudently and the duty to administer the trust solely for the interests of the beneficiary. Should a Trustee violate these duties, then a cause of action may be brought against the Trustee for their breach. It is important to remember that, as with every cause of action, some evidence must exist to support the claim that they breached their duty. In addition, there must be some actual harm (damages) that the beneficiary suffered because of the Trustee’s breach. Like contesting the validity of a will, successfully prosecuting a breach of duty claim against a trustee can be challenging, however, with appropriate evidence, it can be done.
While stories of individuals who have been “wronged” somehow in the administration of an estate or trust are quite common, it is far more likely that no wrong had occurred and instead a circumstance was not as the beneficiary had thought, such as the decedent owed more money than anticipated or accounts were actually titled jointly with another individual. In cases where there was some wrong doing such as a will was changed and the testator was subject to undue influence, then it is important to remember that a contesting beneficiary needs evidence in order to support the claim. While the contest may be an uphill battle, remedies do exist under the law which can assist a beneficiary in making a claim to what is rightfully theirs.
Ask Dan: A Christmas Puppy
Hook Law Center: Hi Dan! I’m really excited for Christmas and this year I want a puppy. Is that a good idea, why or why not?
Dan: A Christmas puppy sure would be cute – who doesn’t love a puppy?!?! Especially one that will support a cute red Christmas bow tie. You may have heard that a Christmas puppy is a bad idea but I’d say it depends. If you have done your research about the breed and type of dog you want, have the space in your home and heart, and are prepared for all that comes with a puppy, then Christmas time is as good as any. For some people, Christmas may be a great time to get the puppy they’ve always wanted since many people take time off around the holidays and don’t mind the middle of the night potty trips and time to begin appropriate training for the newest furry family member. However, if a Christmas puppy is just a gift like any other and the recipient (or their family) isn’t prepared for the time, space, expense, and other responsibilities that come with having a new pet, then the gift of a puppy is setting both the owner and puppy up for heartbreak when they realize that the puppy was more than they bargained for. I’d also like to point out that there are lots of adorable dogs and cats that live in shelters who want a home at Christmas too. Puppies are adorable but older dogs have benefits such as already knowing their full size, being potty trained, and having a good temperament. Shelter dogs (and cats) make great pets too.
Letha Sgritta McDowell
757-399-7506 | 252-722-2890
Letha Sgritta McDowell is a Shareholder of Hook Law practicing in the areas of estate planning, elder law, special needs planning, estate and trust administration, asset protection planning, long-term care planning, personal injury settlement consulting, guardianships & conservatorships, and tax law. Ms. McDowell’s clients range from high-net-worth individuals with over $75 million in net worth to families with limited assets.
Ms. McDowell is a past President of the National Academy of Elder Law Attorneys and was named as a Fellow of the prestigious American College of Trusts and Estates Council (“ACTEC”) in 2020. She is certified as an elder law attorney by the National Elder Law Foundation (“CELA”) and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization. Furthermore, McDowell is accredited to prepare and prosecute claims with the Department of Veterans Affairs.
Ms. McDowell is currently the chair of NAELA’s strategic planning committee, a member of the Board of Directors for the North Carolina Chapter of NAELA, and a member of the Board of Directors for the Purdue Center for Cancer Research. She is the former Chair of the North Carolina State Bar’s Elder Law Specialization Committee and is the former Editor-in-Chief of “Gray Matters”, the newsletter for the Elder Law Section of the North Carolina Bar Association. She is a consultant for InterActive Legal and has worked on several law and technology initiatives including IBM’s Watson project. Along with her experience practicing as an attorney, she has dedicated much of her time writing for national publications including, but not limited to: Wolters Kluwer, Wealthmanagement.com, the NAELA Journal, Trust & Estates Magazine and many more.
- Elder Law
- Estate & Trust Administration
- Estate Planning
- Asset Protection Planning
- Long-Term Care Planning
- Special Needs Planning