Articles Posted in Trusts & Estates

Robert died in July 2015, owing a mortgage amount of $113,358.12 on his Detroit home; the monthly mortgage payments. For five months following his death, the mortgage went unpaid. Bayview Loan Servicing sent a delinquency notice to the home in December 2015, showing an unpaid balance of $5,813.95. In November 2016, Bayview foreclosed and purchased the home by sheriff’s deed at public auction. Bayview sold the home to Tran. In May 2017, Robert’s estate filed a complaint, alleging four causes of action against Bayview, including lack of standing to foreclose under the Garn-St. Germain Depository Institutions Act of 1982, 12 U.S.C. 1701j-3 and MICH. COMP. LAWS 445.1626. The district court held that the Garn-St. Germain Act does not authorize a private right of action and did not apply to the’ claims. The Sixth Circuit vacated, concluding that the district court lacked jurisdiction to hear the case because the federal statute does not create a cause of action, and the federal issue nested inside the state law cause of action is not substantial. View "Estate of Cornell v. Bayview Loan Servicing, LLC" on Justia Law

In September 2005, the government assessed Chicorel $140,903.52 in income tax for the 2002 tax year. Chicorel died in 2006 having not paid the assessed taxes. On May 4, 2007, Behar, the estate’s personal representative, published a notice to creditors of the four-month deadline for presenting claims, but he did not mail the notice to the government despite it being a known creditor of the estate. In January 2009, the government filed a proof of claim in the probate proceeding concerning the tax assessment. Behar has not responded to the proof of claim; probate is ongoing. The government filed this collections proceeding in March 2016, seeking judgment on the 2005 tax assessment, which is the subject of the proof of claim. The district court granted the government summary judgment. The Sixth Circuit affirmed, holding that the government’s 2009 proof of claim filing tolled the statute of limitations, 26 U.S.C. 6502(a), which provides that, after the government assesses a tax, “such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun—(1) within 10 years after the assessment of the tax.” View "United States v. Estate of Chicorel" on Justia Law

McKnight, a bartender, became friends with Fewlas. McKnight rented an apartment in his duplex. For 17 years, McKnight lived in this upstairs apartment with her boyfriend, Kurt. Fewlas and McKnight did not always get along. Fewlas disliked Kurt. Fewlas died, having accumulated more than $2.2 million. McKnight went on a spending spree. She withdrew over $600,000 in 171 different transactions—all in amounts less than $10,000. This suspicious conduct got the IRS’s attention; the IRS suspected that Fewlas had not left his estate to McKnight. Kurt confessed that he had forged Fewlas’s signature on a fake will, prepared by attorney Pioch. His confession resulted in multiple convictions. The Sixth Circuit affirmed in part, rejecting a Confrontation Clause claim based on the admission of Kurt’s videotaped deposition testimony. Kurt was 76 years old, in poor health, and unable to travel at the time of trial. The court also upheld the admission of testimony concerning handwriting analysis. The court remanded for reconsideration of a motion for a new trial because the court conflated the rules, repeatedly characterizing its task as evaluating the sufficiency of the evidence, rather than weighing the evidence for itself. The court vacated the sentences: the court enhanced sentencing ranges after concluding that the defendants caused financial hardship to the putative beneficiary of Fewlas’s estate but the Guidelines did not contain that enhancement at the time of the misconduct. View "United States v. Pioch" on Justia Law

John L. Griffin, a long-deceased Kentucky businessman, and his wife, Rosellen, had 12 children. Plaintiffs are four of their daughters. Defendants are two of their sons, the Griffin estate, the Griffin trust, plus an entity they created called Martom Properties. The sisters learned of self-dealing by their brothers and believed that they had been cheated out of stock and real estate that they should have inherited. Plaintiffs filed suit. The district court ordered Defendants to pay roughly $584 million in wrongful profits disgorgement and prejudgment interest to the Plaintiffs. The Sixth Circuit affirmed, first finding that it had subject matter jurisdiction. The probate exception does not apply because Plaintiffs sought an in personam judgment against Defendants, not the probate or annulment of a will and did not “seek to reach a res in the custody of a state court.” Defendants’ conduct in managing the family business and their parents’ estates and trusts violated their fiduciary duties to Plaintiffs under Kentucky law. View "Holt v. Griffin" on Justia Law

In 2011, Mr. Nichols was admitted to the Richmond, Kentucky, Kenwood Nursing & Rehabilitation Center. He signed an agreement that states that it applies to “any and all disputes arising out of or in any way relating to this Agreement” including “wrongful death.” It is governed by “The Kentucky Uniform Arbitration Act. . . . If for any reason there is a finding that Kentucky law cannot support the enforcement of this Agreement, then the Parties agree to resolve their disputes by arbitration . . . pursuant to the [FAA].” It binds Nichols and all persons with claims through or on behalf of him. After Nichols dies, his estate sued, asserting wrongful death and other state law claims. The district court declined to compel arbitration of the wrongful-death claim, but stayed the case until arbitration of the other claims was complete. The Sixth Circuit affirmed, relying on state law precedent, not preempted by the Federal Arbitration Act, that a wrongful-death claim is “independent” of any claims held by a decedent and constitutes a “distinct interest in a property right that belongs only to the statutorily-designated beneficiaries.” Decedents have no “cognizable legal rights” in that claim. View "Richmond Health Facilities v. Nichols" on Justia Law

During the course of their marriage, Caroline, a citizen of Canada, made more than $75,000 in loans to Kimberly, of Ohio, which were never repaid. A federal district court dismissed Caroline’s contract and tort lawsuit. While appeal was pending, Kimberly died and Caroline substituted the Estate as the real party in interest. The Sixth Circuit reversed the dismissal, finding that neither the domestic relations exception nor the probate exception to federal diversity under 28 U.S.C. 1332(a) applied. Because a court in Canada had dismissed divorce proceedings upon notice of Caroline’s death, there was no risk of a decision incompatible with a divorce decree, and, at the time Caroline filed the federal complaint, the property that she sought was not “in the custody of a state probate court.” View "Chevalier v. Barnhart" on Justia Law

Plaintiffs filed a pro se complaint on behalf of two estates, claiming that financial institutions fraudulently transferred real estate in Shelby County, Tennessee, and failed to follow proper procedures for selling properties encumbered by outstanding liens. The district court dismissed on the ground that a non-attorney cannot appear in court on behalf of an artificial entity such as an estate, even though plaintiffs claimed that they were the sole beneficiaries of their respective estates. Each signed the notice of appeal as the “Authorized Representative” of the estates. Federal law allows parties to “plead and conduct their own cases personally or by counsel,” 28 U.S.C. 1654. The Sixth Circuit denied a motion to dismiss the appeal, holding that the sole beneficiary of an estate without creditors may represent the estate pro se. The purpose of protecting third parties is not implicated when the only person affected by a nonattorney’s representation is the nonattorney herself. The tradition that “a corporation can only appear by attorney,” has not been extended to estates. View "Bass v. Leatherwood" on Justia Law

Trusts established by James Cartwright before his death have resulted in litigation in several jurisdictions involving his adopted children and others. The cases involve spendthrift trusts, Crummey Trusts, limited partnerships, and other entities, and tort claims of conversion, conspiracy, self-dealing, and manipulation of trust fund assets. The federal district court held that it lacked jurisdiction, reasoning that both state and federal court actions alleged claims involving administration of the trusts and were quasi in rem and that the Tennessee state court first asserted jurisdiction over the property at issue. The Sixth Circuit affirmed. View "Cartwright v. Garner" on Justia Law

A nursing home resident and her community spouse (husband) were penalized based on husband’s purchase of an annuity for himself using funds from his IRA. The district court granted summary judgment in favor of the director of the Ohio Department of Job and Family Services, holding that 42 U.S.C. 1396r-5(f)(1) precluded the transfer of assets because it exceeded husband’s community spouse resource allowance. Section 1396p(c) requires a state to impose a transfer penalty (a period of restricted coverage) if either spouse disposed of assets for less than fair market value during the look-back period. The Sixth Circuit reversed, reasoning that the transfer occurred before the Ohio agency determined that wife was eligible for Medicaid coverage and section 1396p(c)(2)(B)(i) permits an unlimited transfer of assets “to another for the sole benefit of the individual’s spouse.” View "Hughes v. Colbert" on Justia Law

Debtor was married to Plaintiff’s son, John. Plaintiff and John had an extensive model train collection. After John died, Plaintiff sued, seeking $25,000 for Debtor’s alleged conversion of the collection. Debtor was appointed administratrix of John’s probate estate. After completion of an inventory, Plaintiff and Debtor, individually and as administratrix, entered into a settlement resolving the state court litigation and matters in Probate Court, identifying parts of the collection as belonging to Plaintiff and requiring Debtor to surrender possession of those parts. The remainder of the collection was to be sold at auction and the proceeds were to be split. The court subsequently entered multiple orders directing Debtor to turn over certain trains and accessories to Plaintiff and imposed penalty of $100.00 per day. Finally, the court entered judgment in the amount of $32,186.90 plus interest based on Debtor’s “willful contempt.” Debtor then filed a bankruptcy petition and Plaintiff sought to except from discharge the entire debt owed to him pursuant to 11 U.S.C. 523(a)(2)(A) and (a)(7). The bankruptcy court held that the entire amount ($32,186), not just $9,386.90, was nondischargeable under 523(a)(2)(A). The bankruptcy appellate panel affirmed. View "In re: Nicodemus" on Justia Law