Advisors can be caught in the middle when family disputes erupt.
When it comes to a last will and testament, some
people write a will once and never touch it again, while others
deliberate, changing their minds and legal documents frequently. Either
scenario could lead to a contested will.
Sometimes, your client is a twice-divorced oil baron
with six kids from his prior marriage who just married his beautiful
and young secretary, whom he met at the local bar. When he leaves her
everything and ignores his six children, you can be assured that a will
contest will ensue.
Almost universally, will contests entangle the
deceased individual's financial advisor who, due to the intensely
personal nature of financial planning, could know quite a bit about the
deceased's intentions. If you are a financial advisor for
high-net-worth clients, here is what you need to know to protect
yourself and the interests of your clients during will contests.
How Disputes Get Underway
Disputes generally begin after the reading of the
will, when heirs realize that their inheritance is not what they
expected. Will contests are governed by state laws, which vary among
jurisdictions. However, all states have a finite period of time after
probate to contest a will. An attorney should be consulted immediately
to learn the applicable deadline. (For example, challengers of a will
have only one year from the date the will was probated to contest it in
Pennsylvania.)
Once a dispute is filed, the court generally will
consider several factors to determine if a will contest is justified:
mental and physical condition of the deceased at the time the will was
signed, and his or her historical relationship with family members. The
court is looking to determine if changes to the will came at a time
when the deceased's decision-making capacities, or testamentary
capacity, might have been impaired by mental or physical illness.
The court will also examine if the will accurately
reflects the deceased's relationships with family members, or whether
it was the result of a favored beneficiary's overriding influence upon
the deceased. For example, if the deceased had a large family and doted
on children and grandchildren but left the entire estate to a distant
cousin, there could be grounds for a dispute, especially if that cousin
had isolated the deceased from other family members. If the disposition
of the assets seems unnatural to those who knew the deceased best, then
a will contest may be considered.
Medical Records Are Crucial
Written reports by physicians documenting the
medical condition of the deceased play a vital role in determining the
deceased's decision-making capabilities.
The time lapse between when the deceased signed a
will and when he or she was examined by a health professional is
crucial. Without medical documentation produced near the time that the
will was signed, the mental and physical condition of the deceased
individual can be disputed. Generally, family members do not have the
medical expertise to accurately characterize a person's mental or
physical condition.
To avoid such disputes, estate and trust attorneys
typically advise their clients to undergo a professional medical
evaluation prior to or just following the signing of a will.
Additionally, in almost every state, wills are executed in front of two
to three witnesses. If the capacity of the signer is in question, more
witnesses are present than are legally required. And, there will
usually be a thorough discussion of the will's provisions in front of
the witnesses to confirm the signer's capabilities and intentions.
To protect a client even more, will signings
increasingly are videotaped to document the capacity of the signer
among the witnesses. Once, I had a client who desperately wanted to
disinherit her closest living relative, a nephew whom she despised. We
videotaped her execution of the will and she had a gleam in her eye as
she faced the camera to explain exactly why she disinherited her
ne'er-do-well nephew.
Advisors May Be Compelled To Testify
Once a dispute is formally underway, document review
and depositions begin. Financial advisors are likely to be asked to
submit the same type of financial data provided in any estate
situation. In addition, advisors may be asked to give background
information, such as notes and verbal testimony regarding the creation
of the deceased's financial or estate plan or the deceased's desires
for the disposition of assets. If you are an estate planning attorney,
your conversations with your clients are covered by attorney-client
privilege. However, financial advisors enjoy no such protection.
The court will be interested to hear from those
people who knew the wishes of the deceased, including attorneys,
accountants and financial planners. Such professionals work with
clients who readily express concerns about heirs and their ability to
handle large sums of inherited money.
If your client's estate is in dispute, chances are
you might know what your client thought of various family members. As a
financial advisor, you are aware of clients' estate plans-information
reachable by the courts through subpoena. You cannot refuse to talk
without risking contempt of court.
Financial advisors may be compelled to testify to
conversations with the deceased. A common question might be: "What
heirs did he say he intended to keep out of the will and why?" Even if
you didn't know what was in the deceased's estate plan, you might know
your client's thoughts about specific beneficiaries or heirs.
If you've heard comments such as, "This child wastes
every penny I've ever given him," you could very well be compelled to
testify to that in court.
Note Taking And Will Contests
There are two schools of thought regarding note
taking when a financial advisor meets with clients, and the use of
those notes in a will contest. Either you put everything concisely in
writing with the understanding that your notes may be used in court
some day, or you do not put anything in writing because, if there are
no written notes, you can never be asked to explain in court what you
wrote.
Advisors must use their own discretion. If a client
is disclosing something out of the ordinary, then note taking might be
warranted. If your client, for example, tells you, "My wife thinks she
is getting it all but I'm giving it all to my daughter from my first
marriage," you may wish to document this statement.
If you do keep notes, they must be accurate and
clear because those notes may ultimately be the primary source of facts
for the parties debating the intentions of a deceased person.
Remaining Neutral
Because high-net-worth people often travel in small
and closely knit social circles, will contests can present financial
advisors with some dilemmas: Will disputes may require you to provide
testimony for one side of the fight. You may, through your testimony,
hurt the interests of some of your clients or someone who knows many of
your clients or other referral sources. For this reason, financial
advisors may wish to avoid involvement in such disputes whenever
possible.
Furthermore, executors of an estate are required to
remain neutral in a will contest because they are not supposed to have
any opinion about who gets the assets from that estate. Also, executors
are precluded from taking any action that benefits one side over the
other. Such neutrality is going to be impossible for the advisor who
actually drafted the will in the first place. Such advisors are usually
substantially involved in a will contest, whether they want to be or
not.
Emotional Situations
Most will-contest attorneys will advise clients not
to challenge a will if the potential return outweighs the legal costs
that will be incurred in the battle. Will contests are a very emotional
area of law; sometimes evolving into a very expensive rehash of old
battles between family members and, say, a deceased's second wife. As a
result, return on investment is often not the primary concern. Clients
may be willing to initiate a will contest out of resentment toward the
deceased, sibling rivalry or old wounds from second families.
The challenge for financial advisors is to avoid
getting drawn into a family conflict. Given that circles of
high-net-worth people are often very small, you can lose a great deal
of business if you are an advisor who becomes actively involved in a
situation that is poorly resolved or combative. Given the constraints
of conflict of interest and attorney-client privilege that may preclude
you from solving this problem for your clients, the next best thing you
can do for your high-net-worth clients is to refer them to someone who
can competently handle will contests and thereby minimize your role in
these potentially volatile family dramas.
Charles Avalli heads the Estates and
Trust Group at the Pittsburgh law firm of Goldberg, Gruener, Gentile,
Horoho & Avalli, PC, which concentrates in divorce and family law
and estate planning, including will contests and trust disputes. For
more information, please call 412-261-9900.