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Estate Controversy: Types and Causes
There is no shortage of issues – ranging from bad
documents and sibling rivalries to alleged breaches of fiduciary duty – that can
give rise to inheritance disputes and other legal battles over who should get
what when a loved one dies.
Below: Causes of Estate Controversy | Challenging a Fiduciary | Challenging a Fellow Heir or Beneficiary |
Guardianships or Conservatorships
In this article, we take a look at the types of
estate controversies and what generally causes them to occur.
In an estate controversy, there are generally two groups
First, there is the fiduciary: the Trustee of the
trust or the Personal Representative of the estate. If you are the fiduciary,
you generally have the most liability exposure: You have power over all the
assets, but you have duties also, to everyone else who is involved – either the
heirs of the estate or the beneficiaries of the trust – to:
keep them notified of where you are in the
let them know what the estate or the trust owned
and what it’s worth, and, at the end of the process,
account for your administration, basically
describing all of the money that left the trust or estate while you were in
Second, there are the beneficiaries of the
trust or the heirs of the estate, who have legal rights under the will or trust.
If their rights have been violated, they can pursue legal action against the
fiduciary (if they allege a breach of fiduciary duty) or other parties (including
each other) in an effort to enforce their rights.
Causes of Estate Controversy
There are two basic causes of estate controversies:
flaws in the drafting process, and improper administration of the estate.
Document Flaws. Flaws in the drafting
process can range from relatively trivial – e.g., the documents were not
properly witnessed, lack the right number of witnesses, or were improperly
notarized – to very serious. More grave examples include the will or the trust
being the product of someone exerting a malign influence over the person who was
wishing to express the testamentary intent, or the person who was
drafting or signing the will or trust was incapacitated at the time and lacked
testamentary capacity to even create such documents.
Those types of deficiencies in the original documents
mean that those documents are vulnerable to challenge and can be completely
invalidated after the person has passed away. This is obviously a very bad
outcome for the Decedent and his or her heirs, as all of the time, money and
effort that they put into having those documents drawn up is now for naught;
their wishes may not be fully honored; and their estate may become subject to
Arizona's intestacy statutes.
Improper Administration. Despite what you
see in the movies, deficiencies in the documents themselves are relatively rare.
It's the second type of estate controversy, the kind that comes out of improper
administration, that is far more common.
Someone who has a will or a trust passes away, and their
Personal Representative or Trustee – let’s call those two roles collectively as
the “fiduciary” – steps in, often with little or no knowledge of the laws
involved. They may start to marshal assets, pay bills and debts, and ultimately
make distributions to the heirs (named in a will) or beneficiaries (named in a
trust) – with little understanding of or regard for the complex legal process
that governs their duties, decisions and actions. There are notices that have to
be given at certain points, there are priorities among creditors, and one
misstep at any point along the way can subject the estate to litigation and, in
some cases, subject the fiduciary to personal liability.
A wise step for the fiduciary is to seek good legal
counsel. Without a professional who knows the process inside and out, the
fiduciary has no one to help him or her avoid the pitfalls of probate or trust
The most common types of errors involve how to handle
estate assets and knowing what sorts of notices the fiduciary needs to give to
people. For instance, if the fiduciary is not keeping the heirs or beneficiaries
in the loop, they may suspect that something shady or underhanded is going on.
Simple communication – letting everybody know what is going on, what the process
entails, and what to expect over the coming months – tends to go a long way
toward defusing tension, heading off contentious family politics, and avoiding
In a probate situation, our
Representative Handbook describes in detail what that process looks like,
from when the person passes away to when their nominated Personal Representative
decides to take on that role and applies to the court for the necessary
documentation that will grant them the authority to take control of assets and
start paying bills. Mailing notices to known creditors, publishing notices to
unknown creditors, informing heirs of the estate that the Personal
Representative has stepped in and is beginning the process all the way through
the end, to making final distributions and hopefully being done.
Improper administration can be relatively innocent, such
as errors of omission or commission stemming from unfamiliarity with fiduciary
duties, or they can take the form of outright fraud or malfeasance. In the
latter case, someone may step in as the Personal Representative of an estate or
the Successor Trustee of a trust, and they feel that they don’t have anyone
looking over their shoulder and they have free rein to do what they think is
right, and they end up either straying from the will or the trust or profiting
themselves at the expense of the estate. A breach of fiduciary duty can end up
being a very expensive mistake.
Successor Trustee Handbook
If you are unhappy about how a fiduciary is managing the
estate or trust assets or otherwise carrying out their responsibilities, the
first step is hiring a lawyer who is experienced in estate controversy. The
attorney will draft a demand letter and send it to the Trustee or the Trustee’s
attorney. Frequently, getting a lawyer involved moves the ball forward and helps
get past a lot of communication issues and emotional tension, because it allows
the lawyers to discuss the case dispassionately with regard to the legalities
and the facts. However, assuming that the issue with the fiduciary is not
something that can be resolved by improved communication between two lawyers,
you would typically file a petition in the court in the county where that person
You would explain how the fiduciary has fallen short of
their statutory obligations to the estate or trust, or to you as an heir or
beneficiary. Examples might include failure to provide you with required notices
– perhaps he never gave you a copy of the trust – or failure to give you an
inventory of the trust or estate assets, so you have no idea what the trust or
estate owns. In such a case, your argument to the court is simply to force the
fiduciary to do their job.
If you believe that the fiduciary has mismanaged the
estate or trust assets, made bad investments, paid an illegitimate creditor or
paid a legitimate creditor at the wrong time, those sorts of situations are not
as easily remedied because, at that point, you might be asking the court to
order the fiduciary to make the estate or trust whole again.
Challenging a Fellow Heir or Beneficiary
Consider an example of two siblings who disagree as to
what Mom and Dad wanted each of them to have. Such situations are certainly not
uncommon, and they almost always center on errors in document formation and
arguments over what the decedent really intended. When it comes down to that,
you have (a) those who want the will or trust to be enforced as it was written, and
(b) the other side – the challengers – who feel like the will or the trust
does not accurately or adequately reflect the decedent’s intent.
The challengers are at a significant disadvantage,
because they bear the burden of proving in court that, when the will or trust
was drafted and signed, the decedent either lacked testamentary capacity or was
Testamentary incapacity can be a difficult condition to
prove, as even people who have dementia or were on medication are frequently
able to meet that standard if the signing of the will or trust occurred when
they were having a good day. If the maker of the will or trust can be shown to
have understood who their heirs were, had a rough understanding of what they
owned, and could grasp how the document they were signing determined how their
property would be distributed, the standard of testamentary capacity will
generally be met.
Also difficult is invalidating a will or trust on the
basis of undue influence. Here, the challengers have the burden of proving that
the document that is being offered as the legitimate expression of the
decedent's testamentary capacity was not really what Mom or Dad wanted and was
only the product of someone else's malign influence – maybe an adult child who
moved in late in life and convinced the parent to disinherit a sibling. While
it’s possible that that would not be the actual intent of the decedent, it's
also possible that giving more to the adult child who took care of them at the
end of their life is actually what they wanted to do with their money.
From a strategic and financial standpoint, challengers
have a third burden: Paying for the legal action they intend to pursue against
the estate or the fiduciary. Unless they can prove that the fiduciary truly
committed acts of malfeasance or otherwise breached their duty, all of the
fiduciary’s legal fees in defending against those claims are going to come out
of the trust or estate. Meanwhile, the challenger generally must fund their
legal challenge out of their own pocket.
Therefore, there really needs to be some hard calculus
done up front as to the challenger’s prospects for winning, and what they are
likely to win by pursuing a costly legal action that will diminish the personal
wealth of the challenger or the value of the estate over which the fight is
Contested Guardianships and Conservatorships
Not all estate controversies involve the death of a
person; they can also arise when a person becomes incapacitated and unable to
manage their own affairs. In this context, there are many similarities between
death and incapacity. In both cases, a third party steps in, takes control of
assets, and takes on fiduciary obligations to certain other people.
In the case of a decedent, the assets that belonged to
the deceased person and are held for the benefit of trust beneficiaries or heirs
of the estate. The fiduciary relationship involves the estate or trust, the
Personal Representative or Trustee, and the heirs or beneficiaries.
Similarly, when an adult becomes incapacitated, and a
guardian or a conservator steps in to manage the affairs of that adult, the
fiduciary obligations are only between the guardian or conservator and the
now-incapacitated adult (or “ward”). That creates new sets of issues; if there
is malfeasance in that relationship, the person who is most immediately
vulnerable and would normally be best able to detect that malfeasance and raise
it as an issue is the person who is incapacitated.
Consequently, in a guardianship or conservatorship, it
frequently falls to third parties – people who are not part of the fiduciary
relationship – to step in and file a third-party objection on behalf of the
incapacitated adult. With a guardianship or conservatorship, there is always a
hearing before the judge, where someone has to bring the allegedly incapacitated
adult before the judge, and explain why the appointment of a guardian or
conservator is necessary and who should be given that responsibility. The judge
will ask the incapacitated person some questions and make sure they understand
what's going on, but that sort of a proceeding is an ideal place for somebody to
step in and file an objection if they feel that the petitioning guardian or
conservator has a conflict of interest or would not have the ward’s best
interest at heart, or if there is someone with higher priority to serve in that
role under Arizona statutes.
Determining incapacity can often give rise to
controversy. When someone either has had an accident or perhaps goes downhill
quickly with dementia, it's not uncommon for adult children to step in and try
to get an estate plan in place. That potentially raises issues down the road,
whether in administering that plan post-death, or determining whether the person
had testamentary capacity to sign the documents in the first place. Thus,
determining whether an adult has capacity is a key portion of any guardianship
or conservatorship proceeding. A judge will not appoint someone as a conservator
or guardian unless it is necessary, and it is generally necessary only if the
adult at issue is incapable of making decisions for themselves.