Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

My law partner Merritt Yoelin recently pointed out an article in the Wall Street Journal entitled The 25 Documents You Need Before You Die. In discussing the article, Merritt explained “many of our clients have asked us for this type of information so that they may organize their affairs. This is the best I have seen in my many years of practice.”

In the article, Saabira Chaudhuri discusses a number of documents that each of us should compile. The article provides an excellent framework to think about the estate planning process. The articles main points can be summarized as follows:

     1.         Know what your assets are and how you own them. We often discuss with our clients the importance of understanding what your assets are, what they’re worth, and how they are titled. For example, for planning purposes, the home you own with your spouse, your interests in a retirement plan or IRA, or investments you own with an unrelated business partner, will all be treated in very different ways at your death. It’s essential to understand these intricacies and possibly take appropriate actions in the estate planning process. For example, many clients with whom I meet are surprised to learn that their will or trust will generally not control what happens to their retirement accounts or IRA when they die. Rather, it’s the beneficiary designations that are typically signed when a person first opens such accounts.

     2.         Plan carefully, and prepare legal documents that reflect that plan. While that might sound like a platitude, many individuals simply have not prepared an estate plan that meets the specific needs of their family. Rather, they see the process as just “completing the right forms.” However, every family has a unique set of assets and family dynamics. It’s entirely common for children in a family to have very different personalities, needs, and challenges. By candidly discussing these issues with an experienced estate planning attorney, these issues can be addressed, while at the same time navigating the ever-changing tax issues that impact the estate planning process.

     3.         Communicate! Another key point set forth in Ms. Chaudhuri’s article is the importance of communicating information about your planning to your family, your executor, and/or your trustee. If these key people don’t have the appropriate information relating to your assets and the planning steps that you’ve taken, their job in taking care of your estate will be much more difficult. I made a similar point in my WLB article last year entitled “Estate Planning and ‘Virtual Assets’”. In that article, I discussed the “VAIL” or “Virtual Asset Instruction Letter,” which is similar a tool to list your electronic or digital assets (which we call “virtual assets). The VAIL is an instruction letter about these kinds of assets that is directed to your executor or trustee to ease the burden of administering these assets after your death.

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We are pleased to announce a new seminar series that will keep our clients and colleagues informed on recent developments and industry best practices. The seminars take place in our beautiful, state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary and include a boxed lunch.

To register, contact events@samuelslaw.com or call us at 503-226-2966. Seating is limited, so be sure to contact us soon!

 ESTATE PLANNING IN
THE BRAVE NEW WORLD OF ELECTRONIC ASSETS
THIS THURSDAY
JULY 21, 2011, 12 NOON - 1:30 P.M.

 
Presented by Victoria Blachly and Michael Walker

Do you access or store important financial or family information online in an electronic format? 

Most of us do. These “virtual assets” include emails, digital images, electronic financial statements, social media accounts, web sites, and e‐banking related accounts, among others. Many of these assets are generally transferred through a client’s will or trust.

As more of our population goes online, we've seen a rising number of cases surrounding the use (and abuse) of these assets. In this seminar we’ll discuss how the growing prevalence of electronic or internet based assets has changed the way we approach the estate planning process, and how estates and trusts are administered after someone dies. We will conclude by talking about the pros and cons of some of the different “online vaults” that are available to clients.

To register for this seminar, contact events@samuelslaw.com or call us at 503-226-2966.
 

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From time to time we publish interesting trust and estate cases: 

Citigroup Smith Barney v. Henderson, Oregon Court of Appeals

Decedent opened up an IRA with Citigroup Smith Barney, and under the terms of the IRA agreement, the decedent agreed that all claims “arising from the business of [Citigroup] or otherwise” would be subject to arbitration and that New York law would govern and construe the IRA agreement.

The decedent then completed two forms to designate the beneficiaries of the IRA: the first form designated his personal trust – of which his second wife was the successor trustee – as the beneficiary, and the second form designated the children of the decedent’s first marriage as the beneficiaries. The second form, however, was not dated.

Upon the decedent’s death, Citigroup discovered the conflicting forms and recommended that the beneficiaries resolve the matter among themselves. When the beneficiaries were unable to resolve their competing claims to the IRA, Citigroup moved to deposit the proceeds of the IRA with the court, and moved to obtain an order relieving it of any further liability for the IRA. The trial court granted Citigroup’s motion to interplead the IRA funds, denied its motion to be dismissed, and ordered that the conflicting beneficiaries interplead and litigate any claims in the action.

The decedent’s wife filed an answer and counterclaim, alleging that Citigroup had breached its fiduciary duties to her when it accepted contradictory beneficiary designation. Likewise, the decedent’s children filed an answer and counterclaim alleging that Citigroup had breached its contract to the decedent by failing to properly manage his file and that the children were the intended beneficiaries.

In response, Citigroup filed a motion to compel arbitration of the counterclaims brought by the conflicting beneficiaries, contending that the counterclaims were subject to the arbitration clause in the IRA agreement. The decedent’s wife, in turn, argued that the arbitration clause required arbitration of all claims, including Citigroup’s interpleader action, and thus Citigroup had waived its right to arbitrate when it filed the interpleader action.  The children agreed with the wife’s argument, and in addition claimed that they could not be compelled to arbitrate because they had never agreed to do so. The trial court denied Citigroup’s motion to compel arbitration.

On appeal, Citigroup assigned error to the trial court’s denial of its motion to compel arbitration, arguing that all of the beneficiaries were subject to the arbitration clause and that it did not waive its right to arbitrate upon filing the interpleader action.

Upon recognizing that New York law applied to the IRA agreement pursuant to the Federal Arbitration Act ("FAA"), the court next addressed the issue of whether the children, as third-party beneficiaries, were bound by the arbitration clause in the IRA agreement. Under New York law, a party who has not signed an agreement containing an arbitration clause can be compelled to arbitrate if such party has derived a benefit from the contract or relied upon the contract in asserting a claim. As a result, the children’s claims were subject to the arbitration clause.

Next, the court considered whether the trial court had correctly determined that Citigroup had waived its right to arbitrate. The issue in this case, the court stated, was not how the issue should be resolved, but instead who should decide whether Citigroup had waived its right to arbitrate: an arbitrator or a court. Under the FAA, the issue of which forum should decide a question is a matter of contract interpretation under state law. Where the arbitration agreement is silent as to who should decide issues of waiver, and where the parties’ intent cannot be discerned, the default rule under the FAA is to presume that waiver issues are to be decided by the arbitrator. Moreover, the Supreme Court has recognized that it is presumed that an arbitrator will decide “procedural questions which grow out of the dispute and bear on its final disposition.” 

Here, the IRA agreement provided that it “shall be governed and construed in accordance with the laws of the State of New York.” Under New York law, choice of law provisions that select New York law to govern the enforcement of a contract are distinguished from those that select New York law to govern the contract. That is, a contract that is to be governed by New York law does not express an agreement to have New York law govern the enforcement of the agreement. Here, the IRA agreement did not include the language “shall be enforced,” and thus the parties had not intended that a court decide the issue of waiver. Likewise, because the IRA agreement was silent as to which forum should decide issues of waiver of the arbitration agreement, the court applied the presumption that waiver is an issue of procedural arbitrability that is for the arbitrator, and not the court, to decide. 

In conclusion, the court held that the children’s rights under the agreement were subject to the same limitations as were included in the wife’s IRA agreement, and thus the children were bound by the arbitration clause. Additionally, because waiver is an issue of procedural arbitrability, the issue of whether Citigroup had waived its right to arbitrate was to be left to an arbitrator. 

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From time to time we publish summaries of interesting trust and estate related cases:

McIntire v. Lang, Oregon Court of Appeals, March 16, 2011

Prior to her death, McIntire and her ex-husband entered into a stipulated dissolution judgment, the terms of which stated each party must immediately purchase a life insurance policy on his or her life in the amount of $250,000 and name the other party as trustee for the benefit of their child and for the purpose of securing the payment of their support obligations. The judgment further stated that, in the event that either party violated the insurance provision, a constructive trust would be imposed over that party’s estate. McIntire obtained an insurance policy shortly after the judgment; however, she later allowed the policy to lapse. McIntire died without a will, and under the laws of intestate succession, her surviving husband was to inherit 50% of her estate, and her two children were each to inherit 25%.

The respondent, McIntire’s ex-husband, notified McIntire’s personal representative that he had a $250,000 claim against the estate based upon the dissolution judgment. The petitioner, McIntire’s surviving husband, objected to the respondent’s claim, arguing that under the terms of the dissolution judgment, McIntire was required to buy life insurance only “for the purpose of securing the payment of support obligations.” Because the judgment did not provide for child or spousal support, he asserted that there were no support obligations to secure, and thus McIntire was not required to obtain the insurance. The lower court issued a limited judgment in favor of the respondent and imposed a constructive trust over the assets of McIntire’s estate in order to secure payment of the life insurance obligation.

On appeal, the petitioner assigned error to the probate court’s imposition of a constructive trust on the basis that the respondent lacked a property interest in McIntire’s estate because the dissolution judgment did not require McIntire to obtain life insurance. The court began by recognizing that, when a constructive trust is imposed, the doctrine of unjust enrichment governs the rights of the parties, and order to prevail on this type of claim, a party seeking a constructive trust must show that: 1) a property interest rightfully belonging to him was taken by someone else under circumstances that were wrongful or inequitable, 2) the person who now possesses the property is not a bona fide purchaser for value without notice of the claimant’s interest in the property, and 3) the property in the hands of the person is the very property that belongs to the claimant or is a substitute for that property.

The first issue the court considered was whether the respondent had a property interest in McIntire’s estate. Prior case law had already established that, when a settlement agreement incorporated in a dissolution judgment provides for a constructive trust in the event that one of the parties fails to abide by an obligation to maintain life insurance naming the other party as the beneficiary, the agreement vests a property interest in the object of the constructive trust to the other party. Based on this prior ruling, McIntire’s estate was one of the objects of the constructive trust.

The remaining issue was whether the dissolution judgment obligated McIntire to obtain life insurance. According to the court, the insurance requirement was not intended to secure support obligations imposed in the dissolution judgment, but rather to secure the general obligation that all parents have to their children. In support of this determination was the fact that the judgment specifically provided that neither party would pay child or spousal support, and thus the insurance provision would have no effect if interpreted to secure only payment of support ordered in the judgment.

Finally, the petitioner argued that the respondent had failed to protect his rights, as he did not comply with the terms of the dissolution judgment, which required that he deliver a copy of the judgment to the insurance company that issued McIntyre’s policy. The court determined that, while “equity does not favor those who sleep on their rights,” this equitable defense did not apply, as it was contrary to public policy. That is, Oregon law furthers a policy of ensuring that divorced parents provide financial support for their minor children. It would be contrary to public policy to refuse to enforce a dissolution judgment in this circumstance.
 

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