Who should be appointed as administrator of a decedent’s Mississippi estate?  The answer is usually straightforward, but can be complicated if there are unresolved issues regarding a deceased person’s marital status.

The Mississippi Court of Appeals recently decided Lowndes County probate case involving a medical malpractice suit against Dr. Emad H. Mohamed.  The wrongful death suit was brought by the decedent’s husband, who had been appointed as the administrator of the decedent’s Mississippi estate.  It turns out that the decedent had been previously married and that her divorce had never been finalized.  Based on this prior marriage, Dr. Mohamed argued that the chancery court had appointed an improper person requested that the decedent’s second husband be removed as the Mississippi estate administrator.

The rule for determining whether there has been a divorce or annulment is well-established:  You show what county each party to the prior marriage resided at the time of the second marriage, then get a certificate of search from the county clerk in each county to show that there has been no divorce or annulment granted by the court of that county.  In this case, however, no county certificates were produced to establish that the parties have not been divorced.

But here’s the bigger issue:  What does the decedent’s prior marital status or the appointment of her Mississippi estate administrator have to do with a doctor’s liability for medical malpractice?  Even if we assume that the decedent failed to get a proper divorce from her first husband, should that allow Dr. Mohamed to challenge the appointment of the administrator of the decedent’s estate?  The court said no, holding that the alleged medical negligence was an independent matter of the probate action.  The good doctor’s desire to get rid of the malpractice suit did not give him standing to interfere with the estate administration.

Even if the doctor did have standing, though, the result would have probably been the same.  The court felt that there was no cause to remove the second husband as the administrator of the decedent’s estate.  Because there wasn’t any evidence that the second husband was not the decedent’s legal husband, there were no grounds to remove the second husband from his position as administrator of the decedent’s estate.  The Court of Appeals remanded the case to the Lowndes County Chancery Court for an order reinstating the second husband as the Mississippi estate administrator.

Estate of Wallace v. Mohamed, 2008-CA-01344-COA

Mississippi probate is often intertwined with issues involving real estate law.  The Mississippi probate proceeding itself is often brought when the heirs or beneficiaries of a decedent’s estate want to clear title to real estate.

Probate clears title in at least two ways.  First, it provides a judicial determination of the people who are entitled to the deceased person’s property.  This judicial determination allows third parties (buyers, sellers, lenders, tenants, etc.) to rest assured that they are dealing with all of the people who have a genuine interest in the property.

The second way that probate clears title is by resolving outstanding creditor issues.  If creditors are properly notified, all outstanding debts are resolved in the probate proceeding.  This provides third parties (particularly buyers) with comfort that no creditor will come out of the woodwork with a claim against the property at a later date.

But what if the decedent owned real estate that was subject to a mortgage?  Must the heirs or beneficiaries continue to pay notes on the property to prevent foreclosure?  The answer is yes, as seen in a recent Marion County, Mississippi, probate case.

The case involved a decedent who had purchased land in 2000 and died in 2002.  The land that he purchased was secured by a mortgage (called a “deed of trust” in Mississippi).  After his death, the deed of trust went into default and the lender foreclosed on the property.  The lender then sold the property to a third party.

The administrator of the decedent’s estate challenged the foreclosure sale, claiming that the lender had not properly notified the heirs of the decedent’s estate.  Unfortunately for the administrator, there is no requirement that interested parties be notified of the foreclosure proceeding.  The presumed rational behind this rule is that the interested parties should know that they are at risk of foreclosure, since they have stopped paying the mortgage payments.

In any event, the Marion County probate court found that the lender had no obligation to do more than what Mississippi law requires.  Since Mississippi law did not require the heirs of the estate to be notified of the foreclosure, the lender did not act improperly by failing to notify them.

In re Estate of May, 2009-CA-0442-COA (March 2, 2010)

Undue influence formed the basis for a will contest in a recent Perry County probate case involving a chicken farmer named Bobby Ray and his three children: Jessie, Kenneth, and Sandra.  A tractor had fallen on Bobby Ray in the 1980s, leaving him permanently injured and unable to run his chicken farm on his own.  Bobby Ray’s wife, Avis, helped him run the chicken farm until she died in 2001.  After Avis died, Jessie quit the trucking business and he and his wife moved in with Bobby Ray.

Shortly after Avis died, Bobby Ray deeded 70 acres, the family home, and the chicken farm to Jessie.  A few months later, Bobby Ray deeded a separate 57 acre tract to his other son, Kenneth.  About a year later, Bobby Ray died, leaving Kenneth and Jessie more/less the same property that he had already transferred to them, leaving his daughter, Sandra, $20,000.00, and leaving about  $15,000 in specific bequests to other individuals.

Two of Bobby Ray’s children, Sandra and Kenneth, did not like the fact that Bobby Ray had given so much to their trucker-turned-caregiver brother, Jessie.  So they challenged the will, claiming that it was the result of undue influence.  Sandra and Kenneth also claimed that Bobby Ray lacked mental capacity to execute a valid Mississippi Last Will and Testament.  The Perry County probate (chancery) court had two issues to decide: (1) were Bobby Ray’s gifts to Jessie the product of undue influence and (2) did Bobby Ray have the testamentary capacity to make a valid Last Will and Testament.

Mississippi’s law regarding undue influence is well established.  If there is a confidential relationship, the court presumes that there has been undue influence.  This means that, by default, gifts made to a person in a confidential relationship with the gift-giver are invalid.  To overcome this default invalidity, the person receiving the gift must show good faith of the recipient, full knowledge and deliberation by the giver, and independent consent and action by the giver.

These principles apply regardless of whether a gift is made during life (inter vivos) or at death (testamentary).  But there is a distinction between inter vivos and testamentary gifts.  If the gift was made during lifetime (inter vivos), there is an automatic presumption of undue influence regardless of whether the confidential relationship was abused.  If the gift was made at death (testamentary), the gift is presumptively invalid if there has been an abuse of the confidential relationship.

Because these rules stand or fall on the existence of a confidential relationship, this is where the real battles are often fought.  The existence of a confidential relationship depends on several factors, including (1) whether the person has to be taken care of by others; (2) whether the person maintains a close relationship with another; (3) whether the person is provided transportation and has medical care provided by another; (4) whether the person maintains joint accounts with another; (5) whether the person is physically or mentally weak; (6) whether the person is of advanced age or poor health; and (7)whether there is a power of attorney between the person and another.

As applied to this case, the rules mean that if there was a confidential relationship between Bobby Ray and Jessie, the inter vivos gifts were presumptively invalid.  Period.  The testamentary gifts would be invalid only if Jessie abused the confidential relationship.

At trial, testimony was presented that, although Bobby Ray had some physical issues, he was a shrewd businessman who negotiated contracts and managed his own affairs and was able to drive to town and to his hunting camp.  Several witnesses testified that Bobby was strong-minded (not easily influenced), always making up his own mind about things and doing what was right.

Based on this evidence, the Perry County probate (chancery) court believed that there was no confidential relationship between Bobby Ray and Jessie.  However, the chancellor appeared to misstate the rules regarding undue influence, improperly placing the burden of proof on the opponents of the will to establish lack of capacity and undue influence. Sandra and Kenneth appealed the Perry County chancery court’s decision.

Over a dissenting opinion, the majority of the Mississippi Court of Appeals upheld the chancery court’s opinion in spite of the misstatement of the chancellor.  The Court of Appeals called this language a “slip of the tongue” and felt that the rest of the chancellor’s opinion demonstrated that the chancellor knew and rightly applied the rules.  The Court of Appeals upheld the Perry County probate (chancery) court’s opinion, finding that Sandra and Kenneth had filed to establish the existence of a confidential relationship between Jessie and Bobby Ray.  The Court of Appeals affirmed the decision of the Perry County chancery court.

In re Estate of Finley, 2008-CA-01289-COA (February 23, 2010)

The Mississippi Business Journal reported on January 4, 2010, that the Mississippi Bar Association had created a task force to deal with the unauthorized practice of law in Mississippi.  The unauthorized practice of law in Mississippi is a misdemeanor, allowing the Bar to pursue criminal charges against non-attorneys who give legal advice or prepare legal documents.

The article notes that the task force is needed due to the harm created by wannabe attorneys who prepare documents and give legal advice about issues that they do not understand. Part of the task force’s goal is to shut down document preparation services for wills and divorces.  People use these services, thinking that they will save money.  As the article notes, in the long run, people “ultimately wind up having to shell out even more money when they discover an attorney is needed.”

Adam Kilgore, the Mississippi bar’s general counsel, is quoted extensively in the article, noting that many problems have arisen due to the “do-it-yourself culture” and the recent recession.  As Kilgore notes, judges see a lot of the problems that unauthorized practice of law creates when the problems surface courtrooms across Mississippi.  Attorneys are often needed to clean up the mess, costing the client more in legal fees than if they had simply hired an attorney to do it right the first time.

We see the beefing up of oversight in this area as a welcome development.  In the probate and estate planning area, we often run across problems that were created by incompetent “estate planners,” many of which are hucksters that sell a prepackaged set of boilerplate documents to anyone they can convince to buy them.  These forms often do not take into account the full intricacies of Mississippi law or federal tax law.  The clients are promised big probate savings in exchange for a smaller up-front expense of setting up the plan.  But because the estate plan is not properly designed or carried out, the clients often get hit with a double-whammy: they pay for an expensive “estate plan” and their heirs end up paying for probate anyway.

Sadly, the client often never learns of problems with defective estate plans since most of them arise after the client’s death.  It is the heirs who are left with a mess to sort out, including issues such as dealing with spousal rights, family disputes, and probate issues caused by improperly funded revocable trusts.  Because our firm is often called on to sort out this mess, we have witnessed first-hand the havoc that unauthorized practice of law can create.  This task force is needed to help protect the general public against unscrupulous and incompetent document preparation services.

Domestic Asset Protection Trusts (DAPTs) were first recognized in 1997 when Alaska enacted the first DAPT statute.  Until then, asset protection trusts were only available in foreign jurisdictions, where they attracted American dollars.  Once Alaska took the first step, other states quickly followed suit.  In just 10 short years, ten other states had enacted some form of DAPT.  States with some form of DAPT now include Alaska (1997), Delaware (1997), Nevada (1999), New Hampshire (2009), Rhode Island (1999), Utah (2003), Missouri (2004), Oklahoma (2004), South Dakota (2005), Tennessee (2007), and Wyoming (2007).

It has long been recognized that a person is free to include a spendthrift clause in a trust instrument that prohibits the beneficiary from transferring, assigning, or otherwise alienating his or her right to future payments of income or principal. This means that if the beneficiary is unable to pay a debt, the creditor will be unable to access trust assets to satisfy the debt (or even to collect upon a judgment) until those assets are paid to the beneficiary.

But this general rule assumes that the person who established the trust (the settlor) is not also the beneficiary.  In other words, the asset protection works only if the beneficiary is someone other than the trust creator.  DAPTs are a departure from this traditional rule in that they allow the trust creator to fund a trust for his or her own benefit and still shield the trust assets from creditors.

DAPTs are typically subject to exceptions to protect against situations that would violate public policy. For example, many DAPT statutes provide exceptions for transfers to DAPTs that are made in anticipation of insolvency or otherwise to defraud creditors (usually as determined under the Uniform Fraudulent Transfers Act).  Other common exceptions include domestic claims such as alimony or child support and, less commonly, tort claims.

Fortenberry will work with the other members of the Asset Protection Sub-Group to review legislation from other jurisdictions and make policy recommendations regarding Mississippi’s adoption of DAPT legislation.

The Trust Laws Study Group will work under the guidance of the Policy & Research Division is responsible for reviewing and updating Mississippi’s business laws, as well as other laws related to the Secretary of State’s mission. The Trust Laws Study Group is composed of business professionals, attorneys, CPAs and members of the state legislature and judiciary, among others.

The purpose of the Trust Law Study Group is to study the area of Trust law and make recommendations on various policy proposals to the Mississippi legislature.  The Secretary of State’s Policy & Research Division will then prepare proposed legislation based on the Trust Law Study Group’s recommendations and meet with state legislators to educate them on the proposals, with a goal of adopting the proposals as Mississippi law.

The Alabama legislature recently made a few much-needed changes to the Summary Distribution of Small Estates provisions of the Alabama Probate Code.  Summary Distribution is designed to allow for quick and easy distribution of small estates, without the need for a full probate proceeding.

The problem with the old Small Estates procedure was that small meant small.  As in very small.  The procedure was only available for estates with a value of less than $3,000.00.  This low value requirement made the provision virtually useless since the vast majority of estates are worth more than $3,000.00.

The old law also required notice to be published once a week for three consecutive weeks.  The surviving spouse (or other claimants) had to wait 45 days from the date the Petition for Summary Distribution was filed and at least 21 days from the date that notice was first published. These requirements added administrative complexity to what was presumably intended to be a simple proceeding.

On May 7, 2009, the Alabama legislature addressed some of the deficiencies in the Summary Distribution of Small Estates law. As amended, the dollar threshold for small estates has been raised from $3,000.00 to $25,000.00.  The $25,000 threshold is now indexed for inflation.

The 2009 amendment also streamlines the procedural requirements.  The 45/21 day notice has been replaced by a simple 30 day notice from the date that the notice of the Petition for Summary Distribution is first published.  And instead of having to publish notice in the news paper for three consecutive weeks, one publication will now suffice.

These amendments should make the Summary Distribution of Small Estates procedure more useful to Alabama probate attorneys who are seeking quick and cost-efficient probates for their clients.

The case involved the estate of Hubert Carson, who died in 2002. One of his sons, Douglas, was appointed as executor of his estate. Martha, one of Hubert’s daughter-in-laws, felt that Douglas had breached his fiduciary duties to Hubert’s estate and had taken advantage of their confidential relationship. She filed several motions to disqualify Douglas as executor, challenged his final accounting, and tried to set aside several transfers that Hubert had made to Douglas and his wife prior to Hubert’s death.

The chancery court eventually ruled against Martha and approved an award of $10,000 in attorneys’ fees to Douglas’ attorney. Martha appealed, raising the issues of (a) whether the transfers that Hubert made during his life were proper, (b) whether the chancellor should have required Douglas to pay a bond, and (c) whether the fees paid to Douglas’ attorney were excessive.

On the first issue, the court agreed with the chancellor in the lower court that the proper method to challenge the lifetime transfers to Douglas and his wife was through a separate action. The chancellor had correctly explained this in the lower court proceeding. Because a separate action was not filed, the chancellor’s refusal to grant Martha’s motion to set aside the transfers was proper.

The court also upheld the lower court’s decision to not require Douglas to post a bond. The will contained a provision waiving bond, and there was no evidence that Douglas acted improperly in the administration of the estate. Thus, the chancellor’s decision not to require bond was proper.

Finally, the court held that the award of $10,000 in attorney’s fees to the estate attorney was not an abuse of the chancellor’s discretion in approving attorney’s fees (in Mississippi, all attorney’s fees are subject to court review and approval). The estate attorney had spent a significant amount of time on the case and submitted a detailed billing statement describing the time and work involved. Furthermore, the chancellor had reduced the attorney’s fees from what the attorney had initially requested. Because of these factors, the court felt that the award of $10,000 attorney’s fees was proper.

In re Estate of Carson, 2006-CA-02006-COA (July 22, 2008)