Leave Your IRA to a Special Needs Trust

In a private letter ruling recently, the IRS addressed the issue of transferring an inherited IRA into a Special Needs Trust. The law around taxation of inherited IRAs and the interaction with trusts has been unpredictable and fast-moving for several years now.
Fortunately, this private letter ruling indicates the direction the IRS is headed on two important questions:
First, the transfer to the SNT was not a taxable transfer for estate and gift tax purposes. That's great! It means that if a person with special needs inherits an IRA, we can still do some limited planning without immediate tax consequences.
Second, the trustee was able to stretch out the distributions from the IRA (and therefore stretch out the tax deferral benefits) over the life expectancy of the beneficiary. Another positive result.
Of course, the best result would have been achieved if the decedent had made the IRA payable to the SNT directly. That way, court costs, private letter ruling costs, anxiety, and a "pay back to the state" provision all could have been avoided.

Contesting a Will: Protect Your Parents From Undue Influence

Contesting a Will: Protect Your Parents From Undue Influence

Ways to Avoid Will Contests and Estate Litigation


In our estate litigation practice, inquiries from persons seeking to contest a decedent’s last will and testament are on the rise. Often the inquiry comes as the result of a parent having made an unequal distribution among his or her children, favoring one child and excluding other children as beneficiaries.


There are two grounds for contesting a last will and testament: lack of capacity and undue influence. Lack of testamentary capacity means that the decedent was not of sound mind when he or she made the will. To have testamentary capacity, a person must know in general terms what s/he has and who the natural objects of his bounty are. This is not a high standard, and challenges to a will based on lack of testamentary capacity are usually difficult to win in the absence of good medical evidence that the decedent was mentally incompetent.


More and more, our estate litigation attorneys receive calls from people who claim that the person who made the will was coerced into doing so by someone else, often a child or relative who lived near or with the decedent. Medical advances have resulted in the populace becoming much older. The care and burden of the elderly tends to fall on the shoulders of a child. Even though we like to believe that our parents will always be a great strength and knowledge in our lives, there comes a time when the roles are reversed and the child must take on responsibility for his or her parent. Such responsibilities might include the child taking on the role of caretaker.


In some families one sibling takes on a greater burden of the care of the ill and dependent parent than the other siblings. We have seen many examples where the child who takes on these responsibilities during the parent’s final years, months or even days becomes the sole heir of the parent’s estate. Sometimes, this is the bona fide choice of the parent who feels indebted to the child as a result of the care, and all the siblings are made aware of this arrangement and are in agreement.


Sometimes the arrangement is kept secret, however, and this is when problems arise. When an aged parent suffers from mental or physical infirmity that makes him or her dependent on a child caretaker, the potential for undue influence is present. The phrase undue influence with respect to the making of a will means that a person exerted influence over another such that it destroyed the free agency of the person whose will it is. In cases that we have handled one sibling has had the burden of the care of the parent, while other siblings have had minimal communications with the parent.


There is no way to prevent a sibling from taking an elderly parent to an attorneys’ office and inducing the parent to execute a new will, but some preventive measures can be taken to assure that the elderly parent is not subject to undue influence by the caretaker child.


First, have a family meeting and come to some type of financial arrangement to assist the sibling who has taken on the care of the parent. Memorialize the arrangement in writing. Second, confirm that the parent has a will and discuss the will together as a family. Third, videotape the parent explaining his/her testamentary intent and make sure the parent understands the terms of the will. Fourth, keep the lines of communication with all the siblings and the parent open.


Unfortunately, if undue influence occurs it can be difficult to prove. Because the parent has died, it becomes a situation where the only evidence is circumstantial rather than direct. Some of the circumstantial evidence a Court would find relevant would include: (1) the health of the person at the time s/he signed the will; (2) the observations and factual commentary of the attorney who prepared the will; (3) did the favored child contact the attorney; (4) was this a sudden change in disposition of the estate of the parent; (5) was the favored child at the attorney’s office when the will was signed; (6) did the favored child keep possession of the will; and (7) did the favored child keep the will a secret from the other siblings.


If you have any questions about the last will and testament of someone you know, please do not hesitate to call us.

Administrator of a Probate Estate: Duties and Responsibilities

The procedures in an estate administration may take from six months to several years, and a client’s patience may be sorely tried during this time. However, it has been our experience that clients who are forewarned have a much higher tolerance level for the slowly turning wheels of justice.

The following is a portion of the duties of an administrator:

Some of the Duties of the Administrator in Probate Estate Administration
Conduct a thorough search of the decedent’s personal papers and effects for any evidence that might point you in the direction of a potential creditor;
Carefully examine the decedent’s checkbook and check register for recurring payments, as these may indicate an existing debt;
Contact the issuer of each credit card that the decedent had in his or her possession at the time of his or her death;
Contact all parties who provided medical care, treatment, or assistance to the decedent prior to his or her death;
The attorney for the administrator will not be able to file any estate or inheritance tax return until it is clear as to the amounts of the medical bills. Medical expenses can be deducted in determining the amount of any inheritance tax.

In a Supreme Court case, Tulsa Professional Collection Services, Inc., v. Joanne Pope, Executrix of the Estate of H. Everett Pope, Jr., Deceased, the court held that the administrator/personal representative in every estate is personally responsible to provide actual notice to all known or “readily ascertainable” creditors of the decedent. This means that it is the administrator’s responsibility to diligently search for any “readily ascertainable” creditors.

Other Duties of the Administrator
In General
The administrator’s job is to (1) administer the estate—i.e., collect and manage assets, file tax returns and pay taxes and debts—and (2) distribute any assets or make any distributions of bequests, whether personal or charitable in nature, as the deceased directed (under the provisions of the will). Let’s take a look at some of the specific steps involved and what these responsibilities can mean. Chronological order of the various duties may vary.

Probate
The administrator must “probate” the will. Probate is a process by which a will is admitted. This means that the will is given legal effect by the court. The court’s decision that the will was validly executed under state law gives the administrator the power to perform his or her duties under the provisions of the will.

An employer identification number (EIN) must be obtained for the estate; this number must be included on all returns and other tax documents having to do with the estate. The administrator should also file a written notice with the IRS that he or she is serving as the fiduciary of the estate. This gives the administrator the authority to deal with the IRS on the estate’s behalf.

Pay the Debts
The claims of the estate’s creditors must be paid. Sometimes a claim must be litigated to determine if it is valid. All estate administration expenses, such as attorneys’, accountants’, and appraisers’ fees, must also be paid.

Manage the Estate
The administrator takes legal title to the assets in the probate estate. The probate court will sometimes require a public accounting of the estate assets. The assets of the estate must be found and may have to be collected. As part of the asset management function, the administrator may have to liquidate or run a business or manage a securities portfolio. To sell marketable securities or real estate, the administrator will have to obtain stock power, tax waivers, file affidavits, and so on as the case may be.

Take Care of Tax Matters
The administrator is legally responsible for filing necessary income and estate-tax returns (federal and state) and for paying all death taxes (i.e., estate and inheritance). The administrator can, in some cases, be held personally liable for unpaid taxes of the estate. Tax returns that will need to be filed can include the estate’s income tax return (both federal and state), the federal estate-tax return, the state death tax return (estate and inheritance), and the deceased’s final income tax return (federal and state). Taxes usually must be paid before other debts. In many instances, federal estate-tax returns are not needed as the size of the estate will be under the amount for which a federal estate-tax return is required.

Often it is necessary to hire an appraiser to value certain assets of the estate, such as a business, pension, or real estate, because estate taxes are based on the “fair market” value of the assets. After the filing of the returns and payment of taxes, the Internal Revenue Service will generally send some type of estate closing letter accepting the return. Occasionally, the return will be audited.

Distribute the Assets
After all debts and expenses have been paid, the administrator will distribute the assets. Frequently, beneficiaries can receive partial distributions of their inheritance without having to wait for the closing of the estate.

Under increasingly complex laws and rulings, particularly with respect to taxes, in larger estates an administrator can be in charge for two or three years before the estate administration is completed. If the job is to be done without unnecessary cost and without causing undue hardship and delay for the beneficiaries of the estate, the administrator should have an understanding of the many problems involved and an organization created for settling estates. In short, an administrator should have experience.

At some point in time, you may be asked to serve as the administrator of the estate of a relative or friend, or you may ask someone to serve as your administrator. An administrator’s job comes with many legal obligations. Under certain circumstances, an administrator can even be held personally liable for unpaid estate taxes. Review the major duties involved before you accept such a responsibility.

By Kenneth A. Vercammen

Kenneth A. Vercammen is a Middlesex County, New Jersey, trial attorney who has published 125 articles in national and New Jersey publications on probate and litigation topics. He is chair of the ABA General Practice, Solo & Small Firm Division's Estate Planning, Probate & Trust Committee.

Deficient Nursing Homes Listed

The federal Centers for Medicare & Medicaid Services (CMS) has released the complete list of U.S. nursing homes that have failed to meet safety and quality standards for care.
The list, which identifies 131 "Special Focus Facilities" that require additional oversight, follows the release in November 2007 of a list of 54 such facilities. At that time, CMS came under intense criticism for making public only a partial list of Special Focus Facilities while sharing the full list with three associations representing the nursing home industry. (See "Feds Publish List of 54 Poorest-Performing Nursing Homes.")

CMS created the Special Focus Facility initiative in 1998 in response to the number of facilities that were consistently providing poor quality of care. Those facilities were periodically instituting enough improvement so that they would pass one survey, only to fail the next for many of the same problems as before. Facilities with this compliance history rarely addressed underlying systemic problems that were giving rise to repeated cycles of serious deficiencies.
Serious deficiencies include such things as failing to give residents their medications in the correct dose at the correct time, not taking steps to prevent abuse or neglect, inappropriate use of restraints and failure to prevent or properly treat bed sores.

Once a facility is selected as a Special Focus Facility, state survey agencies are responsible for conducting twice the number of standard surveys and, according to CMS, will apply progressive enforcement until the nursing home either significantly improves and is no longer identified as a Special Focus Facility, is granted additional time due to promising developments, or is terminated from Medicare and/or Medicaid.

Angela Brice-Smith, Deputy Director the Survey and Certification Group at CMS, told the National Citizens' Coalition for Nursing Home Reform that the list will be updated on a quarterly basis, and that names of the Special Focus Facilities will be kept on the CMS Web site for six months indicating their status. CMS is working on a modification to its Nursing Home Compare site that will link users to the list from a Special Focus Facility's site. Brice-Smith said there are no plans to release the larger list of facilities whose names are provided to states as candidates for the Special Focus Facility status.

CMS seems to suddenly be on a crusade to identify suspect nursing homes. It recently released the names of thousands of nursing homes across the country that don't meet federal standards in rates of using patient restraints or preventing bedsores.

Living Wills in New Jersey

Living Wills in New Jersey

Anyone who cares about the feelings of their family members, or their own final health care treatment, should consider executing a Living Will. It has become an essential element in the practice of Estate Planning Attorneys.

Why? A Living Will permits the patient to communicate, in advance, the medical care decisions he or she would make if rendered incapacitated, so that their family won’t be put in the difficult position of having to do so for them.


The recent nationwide controversy caused by the unfortunate situation of a woman in Florida, who did not possess a Living Will, has demonstrated the family pain created by this issue and sparked renewed public interest in the Living Will. Clients from California to New Jersey have contacted Estate Planning Attorneys to learn more about them.


The Basics:

The legal name for a Living Will is an Advanced Directive, a document codified nearly 15 years ago by The New Jersey Advanced Directives for Health Care Act.


In New Jersey, according to the law, an Advanced Directive, or Living Will, in and of itself, is a simple document needing only to be in writing, signed and dated in the presence of two subscribing adult witnesses who must attest to the fact that the person is of sound mind and free from duress and undue influence. Alternatively, it simply may be signed, dated and acknowledged before a notary public, an attorney or other person authorized in New Jersey to administer oaths.


The Advanced Directive becomes operative when it is transmitted to the attending physician who has determined that the patient lacks the capacity to make a particular health care decision.


Once made, the patient may revoke the Advanced Directive either by oral or written notification of the revocation to the “Health Care Representative”, physician, nurse or other health care professional, or by any other act evidencing an intent to revoke the document. In other words, the patient can change his or her mind, at any time, simply by saying so.


What It Does:

Consistent with the terms of an Advance Directive, life-sustaining treatment may be withheld or withdrawn from a patient if the life-sustaining treatment is:


· Experimental and not proven therapy, or is likely to be ineffective or futile in prolonging life, or is likely to merely prolong an imminent dying process;


· The patient is permanently unconscious, as determined by the attending physician and confirmed by a second qualified physician;


· The patient is in a terminal condition as determined by the attending physician and confirmed by a second qualified physician, or


· The patient has a serious irreversible illness or condition, and the likely risks and burdens associated with the medial intervention to be withheld or withdrawn may be reasonably judged to outweigh the likely benefits to the patients from such intervention or imposition on an unwilling patient would be inhumane.


The law allows the attending physician, consistent with the terms of the Advance Directive, to issue a “Do Not Resuscitate” Order.


Two Types -- Instruction and Proxy:

There are two types of New Jersey Advanced Directive, or Living Will: An Instruction Directive and a Proxy Directive. You may choose to create either one or both.


The first type, an Instructive Directive is what clients usually mean when referring to a Living Will. It provides instructions and directions regarding health care in the event that the patient subsequently lacks such decision-making capacity. The Instruction Directive may state the person’s general treatment philosophy and objections together with the person’s specific wishes regarding the provision, withholding or withdrawal of any form of health care, including life-sustaining treatment.


The second type, the Proxy Directive is more similar to a Power of Attorney because it appoints a “Health Care Representative” to make health care decisions in the event the patient subsequently loses the capacity to make such decisions.


A person may appoint as his “Health Care Representative” any competent adult, including a family member, a friend or a religious adviser. Once the person’s attending physician determines that a person lacks decision- making capacity (along with confirmation of another physician, unless that person’s lack of decision-making capacity is clearly apparent), the “Health Care Representative” has the authority to make health care decisions on behalf of the patient. The “Health Care Representative” is to make all health care decisions the patient would have made had he or she possessed decision-making capacity, or where the patient’s wishes cannot be determined adequately, to make a decision in the best interest of the patient.


In carrying out the person’s wishes, the “Health Care Representative” is to give priority to that patient’s Instruction Directive, if one exists. Also, a Proxy Directive can be written in New Jersey so as to place specific limitations upon the authority of the “Health Care Representative”.


Also important to note, the Living Will statute in New Jersey covering Proxy Directives specifically protects the patient’s “Health Care Representative” from liability. The law states that the “Health Care Representative” is not imposed with any liability for any portion of the person’s health care costs, not subject to criminal or civil liability for any action performed in good faith and in accordance with the provisions of the act to carry out the terms of the Advance Directive.


Physician and Hospital Responsibilities:

Interestingly, the law requires the attending physician to make affirmative inquiry of the patient, his family or others as appropriate under the circumstances, concerning the existence of an Advance Directive. In other words, the attending physician must initiate the question of a Living Will. The attending physician is required to note in the patient’s medical records whether an Advance Directive exists and the name of the patient’s “Health Care Representative”, if any. If an Advance Directive exists, a copy must be attached to the patient’s medial records.


Health care institutions including hospitals, nursing homes, home health care agencies and hospice programs are required to adopt policies and practices that are necessary to provide for routine inquiry at the time of admission and other appropriate times concerning the existence and location of an Advance Directive. Moreover, health care institutions must adopt policies and practices necessary to provide appropriate informational materials concerning Advance Directive to all interested patients, their families and their “Health Care Representatives”, and to assist those patients in discussing the executing an Advance Directive.


These health care institutions will also be required to adopt policies and practices necessary to educate patients, their families and “Health Care Representatives” about the availability, benefits and burdens of rehabilitative treatment, therapy and services, included but not limited to family and social services, self-help and advocacy services, employment and community living, and the use of assisting devices. Health care institutions must establish procedures and practices for resolution of the disputes among the patient, and “Health Care Representative” and attending physician in the event there is disagreement concerning the patient’s decision making capacity or in the interpretation of the Advance Directive concerning the patient’s course of treatment.


The New Jersey law on Living Wills expressly states that it should not be interpreted to impair the obligations of health care professionals to provide for the care and comfort of the patient and to alleviate pain, in accordance with accepted medical and nursing standards.


The patient’s family, “Health Care Representative”, and appropriate others should be informed that if a person has appointed a “Health Care Representative” and subsequently lacks decisions-making capacity concerning a particular health care decision, the attending physician must obtain the informed consent for, or refusal of, health care from the “Health Care Representative” after discussing the nature and the consequences of the person’s medical condition, and the risks, benefits and burdens of the proposed health care and its alternatives. However, if the patient is subsequently found to possess adequate decision-making capacity, the patient shall retain legal authority to make the health care decision.


Moreover, even if the patient lacks decision-making capacity, but nonetheless clearly expresses the wish that medically appropriate measures be utilized to sustain life, that wish shall take precedence over any contrary decision of the “Health Care Representative” and over any contrary statement in the patient’s Instructive Directive.


Conclusion:

The services of an Estate Planning Attorney are not necessarily required in New Jersey to execute a Living Will – just as they are not required to execute a Real Estate Contract or a Last Will & Testament – provided the document is in the proper form, correctly drafted, signed and witnessed. However to be sure that a Living Will conforms to New Jersey legal guidelines and that the patient’s wishes in the event of incapacity are clearly expressed – so as to be understood and followed – it may be prudent to consult a lawyer experienced in Estate Planning before the occasion arises in which the Living Will is needed.

Recent Case Allows Special Needs Trust After Death

A New York trial court recently approved a trustee's petition to reform his deceased father's trust in order to protect his disabled sister's Medicaid benefits. In Matter of Newman (2008 NY Slip Op 50127, Jan. 22, 2008).

When he died in 1988, William Newman established a trust in his will for his disabled daughter. The will required the trustee to use the trust income for the daughter's benefit and gave the trustee discretion to spend the trust principal for her support and maintenance. Mr. Newman's daughter lived on her own until 2006, when she moved into an adult care facility and qualified for Medicaid. In order to maintain her eligibility, her brother, the trustee, then petitioned the court to reform the trust to make it a Supplemental Needs Trust. The guardian ad litem opposed the petition, arguing that the trustee, who was also a remainderman, had a conflict of interest.
The court approved the petition, finding that the trust meets all of the statutory conditions for reformation. Specifically, the court determined: 1. that the beneficiary is disabled; 2. that the intent of the donor was to supplement her benefits; 3. that the trust prohibits the trustee from using the assets to jeopardize her benefits; and 4. that the beneficiary cannot compel distributions from the trust. Finally, the court dismissed the guardian ad litem's argument regarding the conflict of interest, calling the analysis "restrictive" and contrary to the intent of the donor.

New guidance on fixing a botched IRA stretch after it's "too late"

To preserve the ability to stretch IRA distributions for a beneficiary, that individual must start taking withdrawals based on his/her life expectancy in the year after death. If those required withdrawals don't start on time, can you still rectify the situation to preserve the tax deferral? A recent private letter ruling procured our by our law firm indicates the answer is "yes."

In the recently released Private Letter Ruling 200811028, an IRA owner died in 2002 and the beneficiary failed to take any distributions from the account until 2005. In 2005, the beneficiary took all of the make-up distributions from the RMDs that were not taken in 2003 and 2004 (in addition to taking the 2005 amount), and paid the 50% excise penalty for the insufficient RMDs for 2003 and 2004, but in return the IRS allowed the beneficiary to subsequently continue RMDs based on the beneficiary's life expectancy, preserving a significant amount of tax deferral for the bulk of the IRA.

Normally, to preserve the ability to stretch over the beneficiary's life expectancy, distributions should have commenced by December 31, 2003, as required by Treas. Reg. 1.401(a)(9)-3, Q&A-3 and IRC Section 401(a)(9)(B)(iii). However, the Service acknowledges that the "default" rule for post-death distributions is to apply the life expectancy rule (as supported in Treas. Reg. 1.401(a)(9)-3, Q&A-4); thus, in essence the Service's view was not that the beneficiary had made an election to take distributions out more rapidly (e.g., under the 5-year rule since the decedent died prior to his/her required beginning date), but simply that the beneficiary had failed to take withdrawals according to the default rule. Thus, the beneficiary could come back into conformance with the life expectancy stretch rules by simply making up the missed RMDs, paying the associated penalty, and then proceeding forward with the stretch from that point on.

Although this PLR is only that - a private letter ruling, and not necessarily binding on the IRS - the logic in the ruling is fairly straightforward, and some IRA experts have suggested for many years that this should be an available (albeit untested) remedy. Whether it is appealing in any particular situation, though, will still depend on the facts and circumstances of the situation. The cost for fixing a botched RMD situation is not cheap - aside from the potential concentrated income (and thus higher marginal tax rates) on several years of RMDs lumped into a single year, the beneficiary must still pay the whopping 50% excise tax on the amounts that were not appropriately withdrawn. If it's only one year's worth of RMDs, and the beneficairy is young and may stretch the IRA for 4-6+ decades, this is probably still a very good deal. On the other hand, if there are more years of failed RMDs and associated penalties, or if there's a high risk the beneficiary will withdraw the funds more rapidly anyway, and/or if the beneficiary is older and doesn't have as long of a life expectancy, this remedy may not be as appealing. And of course, because this is only guidance via a PLR, some beneficiaries may ultimately wish (or find it necessary as a mandate from the IRA custodian) to get their own ruling to secure their particular situation (which has its own associated cost).

Nonetheless, the fact that the strategy has now worked at least once in a direct ruling from the IRS is promising, and provides a better roadmap for how other beneficiaries that have botched IRA RMDs or a failed stretch may be able to remedy their own situation in the future!

Living Trusts Are Revocable And Not An Asset Protection Tool

This great post comes from Jennifer N. Sawday of The California Estate Planning Blog.

Her post is titled: Living Trusts Are Revocable And Not An Asset Protection Tool and describes a fundamental (and often misunderstood) aspect of asset protection planning - if you have relatively unfettered access to your money, so do your creditors. It comes up all the time, she writes.

A call comes in from a potential client: “I need to set up a living trust now to protect my assets.”
Generally, if the person (called the settlor) who created the living trust and transfers property to this living trust has retained the right to revoke the living trust then he also retains an interest in the trust assets. There is no protection from outside entities or creditors regarding what has been transferred into the living trust.

In other words, a living trust is known as a revocable trust. As such, living trusts are not considered a vehicle for asset protection. A living trust is used mainly to allow assets to transfer at death without going through probate or to allow a co-trustee or successor trustee manage assets in the event of incapacity of the settlor of the trust.

Mediating Probate Disputes

A lawyer involved in a probate dispute must be able to advise his or her client both about the client's legal rights and remedies and about the client's options for resolving the dispute. If the lawyer advises the client only about the costs and chances for successfully litigating the dispute, the lawyer will not have served the client well. The lawyer should be able to discuss knowledgeably the alternative forms of dispute resolution available to the client and to advise the client on which approach is most appropriate.

Mediation has played a role in dispute resolution for centuries in legal systems as diverse as those of China and various American Indian groups. In the United States, interest in mediation has grown dramatically since the 1970s. One area of the law in which mediation plays an increasingly important role is family law, where parties routinely use mediation to resolve divorce and custody disputes. Surprisingly, in probate, another area of the law in which family issues predominate, mediation is still in its infancy. Although mediation will not be appropriate for all probate disputes, in many cases mediation may allow parties to reach agreements preferable to the decision a court would reach and may promote healing of strained family relationships. This article examines the potential uses of mediation in probate proceedings.

Nature of Probate Disputes
Disputes arise in probate for a variety of reasons. Conflict may occur over the disposition of a decedent's property because relatives are dissatisfied with the decedent's estate plan. Grief associated with the death of a loved one creates tensions, and lawsuits may follow from misdirected anger over the death. Death may cause dormant family disputes to resurface and a dispute nominally over property may in fact be a dispute over family relationships.

Disputes may arise because family members have different views of a fair distribution of a decedent's property. For example, one of a decedent's children may regard equal distribution among all the children as fair, while another child may believe that he or she should have received more because of care given an older or incapacitated parent. A dispute may arise between children of one marriage and the surviving spouse of a later marriage. The decedent's children may view the decedent's property as theirs, while the surviving spouse may feel a right to a sizable portion of the property. Litigated solutions to these problems ignore the complex emotional issues that may underlie the dispute.

Probate courts are also the forum for conservatorship and guardianship proceedings. Disputes may arise in these proceedings if the proposed protected person contests the guardianship or if family members disagree among themselves over the appropriate approach for their older relative. Disputes may develop between a care facility and family members. These disputes all involve emotional issues.

Finally, disputes may arise between beneficiaries of a trust or estate and a fiduciary. The family may disagree over who should act as fiduciary, or the beneficiaries may be concerned about investment decisions or property management issues under the fiduciary's control. If the fiduciary is also a beneficiary, the other beneficiaries may perceive inequities or conflicts of interest, whether real or imagined.

Benefits of Mediation
Family members involved in a dispute often resolve their differences without seeking assistance outside the family. Even after one party contacts a lawyer, a negotiated settlement may be possible. For some families, however, a more formal dispute resolution process becomes necessary. Some benefits of using mediation instead of litigation to resolve disputes are of particular interest in the probate context.

Confidentiality. Mediation allows parties to a dispute to air their grievances in a private setting. Although the level of confidentiality depends on agreement between the parties and varies depending on state law, the parties may keep much of what they discuss out of the public record. The mediator usually asks the parties to sign an agreement not to disclose information conveyed during the mediation. In addition, state law generally limits the disclosure of information obtained in settlement discussions and extends that protection to mediation. Some states grant additional evidentiary privileges for mediation, but many states also impose a duty to report specified information, such as disclosures of abuse or threats of harm.

If a family involved in a will contest is airing "dirty laundry" or if information about an older person's eccentric behavior is relevant to a guardianship proceeding, the family will benefit from privacy if they mediate the dispute. If the parties agree not to disclose information revealed during the mediation, they might speak more freely and address messy relationship issues in crafting solutions to their dispute. Both sides may be more open, and that willingness to discuss difficult issues may lead to a better understanding between the parties.

Emotional benefits. The emotional benefits of mediation can be significant. Mediation gives parties a chance to be heard. For some family members, being able to air grievances and receiving an apology or explanation for troubling behavior may be more important than receiving a property settlement. In addition, giving parties more control over the outcome may increase psychological well-being.

In a guardianship proceeding, mediation involves the older adult in the process, giving that person a voice and helping him or her listen to the concerns of other family members. Mediation may leave the person less angry and confused than a more formal court proceeding.

Mediation also helps families avoid some of the emotional costs of litigation. Mediation may be less stressful and traumatic than litigation because litigation pits parties against each other and tends to escalate the conflict. Mediation may even have emotional benefits when compared with disputes that remain unresolved. If a family member knows that he or she will not likely prevail in a lawsuit, that person may not pursue a legal remedy. Although no lawsuit ensues, the conflict within the family may persist. Anger and estrangement between family members may continue for years.

Improved ongoing relationships. Mediation can repair, maintain or improve ongoing relationships. Probate disputes involve family members. In most cases, continuing the relationships among the various family members will benefit the family. Because the parties must work together during the mediation to develop a solution to their conflict, they may acquire communication and problem solving skills that will aid them in the future. Mediation is less likely than litigation to drive family members farther apart.

Unique solutions. Mediation allows the parties to forge their own solution to a dispute. There are limited remedies available to a judge to resolve a dispute over property. Mediation allows the parties to take nonlegal as well as legal interests into consideration. Parties may best handle the division of property with sentimental value in this way. For example, if two siblings who are to receive the decedent's tangible personal property work together to divide the property, they will likely achieve a better result for both of them than they would if a court divided the property to reach a financially equal result.

In guardianship proceedings in most states, the court faces an all or nothing choice--the court can either appoint a guardian and deprive the protected person of all rights or decide not to appoint a guardian and leave the person on his or her own. Through mediation, the older person, family members and others can develop less intrusive solutions that will protect the older person while minimizing the loss of rights. The mediated solutions can also take into account the interests of family members who are concerned about the care of the older person.

Cost-effectiveness. Mediation may also be more cost-effective than litigation. Particularly in small estates, litigation costs may be disproportionate to the amount at issue. More parties may be able to protect their interests if a less expensive alternative is available.

Potential Problems with Mediation
Although mediation is appropriate in many situations, some characteristics of probate disputes may make mediation difficult or even inappropriate.

Grief. If the dispute involves a decedent's estate, the family may still be grieving over the death of a loved one. Grief may be a factor in the dispute itself because one family member may blame another for the death. If, for example, parents of a decedent have not accepted the fact that the decedent is homosexual, they may misdirect their grief over the death as anger at the decedent's domestic partner who is the primary beneficiary under the decedent's will. Grief may also affect the parties' ability to mediate. Delay may be necessary to allow the parties to progress through the grieving process.

Power imbalance. Power imbalances are always a concern in mediation, but may be of particular concern in probate disputes. In a guardianship proceeding, if the older person contests the guardianship, mediation will be appropriate only if he or she can participate effectively. An advocate can assist the older person, not by taking the older person's place but by facilitating the older person's expression of his or her concerns. If the older person cannot participate, even with assistance, mediation is inappropriate.

Power imbalances may also exist in disputes between family members over a guardianship for a relative or in disputes over property. An older surviving spouse may be intimidated by younger family members, or preexisting power imbalances between siblings may adversely affect the mediation. If minors are involved, it may be necessary to arrange for one or more advocates to represent their interests. A skilled mediator should be aware of potential power imbalances and manage them during the mediation so that all parties are protected. In some situations, however, the power imbalance may be too great for mediation to be appropriate.

Long-term dispute. Although triggered by a family death, some probate disputes may grow out of a longstanding family feud. If parties have become entrenched in their positions after years of animosity, mediation may not be appropriate.

Need for a precedent. In some situations, litigation may be appropriate to create a precedent for use in subsequent cases. This situation is less likely to occur in the probate context than in other areas of the law, such as racial discrimination cases. If, however, the situation is one for which establishing a precedent is important, that will be a factor in weighing the merits of litigation versus mediation.

Guidelines for Using Mediation
In considering mediation to resolve probate disputes, a lawyer should evaluate a number of factors. The presence of some factors makes mediation more appropriate, while other factors may mean that the lawyer should recommend against the use of mediation. Each case is unique, and a lawyer should evaluate each case individually. The guidelines that follow may help to determine whether a lawyer should recommend mediation.

Ongoing relationship. If the parties would benefit from an ongoing relationship--the case with most family relationships--mediation may help. Further, if the parties express concern about maintaining an ongoing relationship, they are likely to work together constructively in mediation. Parties may be more concerned with rebuilding or preserving a family relationship among siblings than one between a stepparent and stepchildren. Even in the latter situation, though, a family relationship may be important, if only out of respect for the decedent.

Willing parties. Mediation works best if all parties want to participate. If the parties come to mediation willingly, they are more likely to work together to resolve their dispute. Mandatory mediation has been criticized and is inappropriate in probate. If the parties have entrenched positions due to a longstanding dispute or moral or religious beliefs, then a negotiated or litigated resolution of their dispute will be more appropriate than mediation.

Competent parties. All parties must be able to participate effectively. The mediator may need to make accommodations for older persons who may have restricted mobility, may have difficulty hearing or may be confused by new settings. Arranging the mediation to take personal concerns into consideration and allowing an advocate to participate when necessary may make mediation possible. If any party is mentally incapacitated, so overcome by grief that he or she cannot function or physically unable to attend the mediation, the lawyer should not recommend mediation.

Nonlegal issues. If a dispute involves nonlegal issues, mediation may benefit the parties. Mediation permits parties to create their own solution to the dispute and allows them to address both nonlegal and legal issues in reaching that solution. Mediation also allows parties to express their personal concerns, anger or grief. Being heard by other family members may be part of what some disputants want or need.

Confidentiality. If parties want confidentiality because of the sensitive nature of the dispute, mediation will provide greater privacy than litigation. In family disputes, minimizing the public record may benefit the parties. If one of the disputants is a public figure, this factor may be of particular importance. If the dispute involves relationships outside of society's accepted norms, the privacy associated with mediation may also be desirable.

Minimal power imbalances. A lawyer recommending mediation should consider whether power imbalances might adversely affect the mediation. Although a skilled mediator can manage some power imbalances, and although power imbalances can affect litigation as well as mediation, effective participation remains an important factor. An older person with weakened physical or mental abilities may not be able to participate adequately. If there is a history of dominance in the family, between either generations, spouses or siblings, the power imbalances may be too great to overcome. If there is an indication of physical or mental abuse, mediation will be inappropriate. In addition, if an entity such as a hospital or nursing home is on one side of the dispute and an older person or the person's family is on the other side, the individual or family may feel intimidated by the institution. Mediation may not adequately protect the rights of someone who feels overwhelmed by the other party.

Example
A probate dispute has legal issues that a court can resolve. A litigated outcome will likely mean that one party "wins" and the other party "loses," based on legal rules. A dispute, however, may also involve a number of emotional issues. For example, parties may disagree on what would be a "fair" distribution of the decedent's estate. The court can determine whether the will was valid but will not be able to address the underlying family issues. In contrast, parties who mediate their dispute may construct a solution that allows both sides to win.

To demonstrate a situation for which mediation would be appropriate, consider a family consisting of a mother, a father and their two adult daughters, Alice and Barbara. After the father died, the mother moved in with Alice and lived with her for eight years until the mother died. In the last two years before her death, the mother was bedridden, and Alice cared for her at home. Barbara lived in another state. She called frequently but was unable to visit much or to help with the care of her mother. On the mother's death, the mother's will left her entire estate to Alice. A prior will that the mother executed before the father's death gave the estate to the father, or if he predeceased the mother, divided the estate equally between the two daughters.

Alice thinks that the result under the will is fair because she cared for her mother for many years. Alice thinks that Barbara does not need the money and that Barbara does not deserve a share of the estate. Barbara is hurt by her mother's will. She thinks that if her mother loved the daughters equally, she would have divided the estate equally. She thinks Alice convinced her mother to leave the estate to Alice.

Barbara talks to a lawyer about what she can do. The lawyer first considers the legal issues around whether the will disinheriting Barbara is valid. The lawyer looks for evidence of undue influence and lack of mental capacity. Several facts raise suspicions about the will and about whether Alice unduly influenced her mother to execute a new will. The mother was in declining health, she lived with Alice, and Alice had both the motive and opportunity to influence her mother. Other factors, such as when the mother executed the will, whether the mother was under medication and whether witnesses can speak about the mother's mental capacity, could be important. After gathering this information, the lawyer might be able to put together a case of undue influence by Alice and lack of the mother's testamentary capacity. The facts, however, may be difficult to establish. Alice may have neighbors who can testify that the mother told them repeatedly that she was thankful for Alice's care and that she would reward Alice in her will. The will does not give property outside the family and could be viewed as rewarding Alice. The evidence will likely go both ways, and it will be difficult to predict the outcome in court.

If Alice and Barbara litigate the case, one of them will win and the other will lose. In addition, they will lose their relationship with each other, at a time when they have lost their mother and would otherwise benefit from family connections. They will also face legal bills and the emotional strains of litigation.

After reviewing the facts, weighing the legal arguments and considering the potential benefits of mediation for these particular parties--repairing the sibling relationship and addressing the emotional issues involved in this dispute--Barbara's lawyer might suggest mediation. Even if Alice thinks that she would win in a lawsuit, she may be willing to mediate to avoid the litigation and because she cannot be sure of the outcome in court. Barbara may be willing to mediate for the same reasons.

Assuming Alice and Barbara agree to mediate, they will meet with the mediator, either with or without their lawyers present. If the lawyers are not present at the mediation, the parties most likely will agree to have their lawyers review any agreement that they reach before they sign it. The mediation process may benefit the sisters in a number of ways. During the mediation each sister will have a chance to tell her story and will listen to her sibling's story. Barbara may be able to understand the sacrifices that Alice has made and the toll that the years of caring for their mother took. Alice may be able to understand Barbara's hurt feelings and her distress over feeling that their mother did not love her. Alice may even be able to soothe those hurt feelings by telling Barbara that their mother did love both daughters but changed her will in gratitude for the care Alice provided and not because she loved Barbara less. The daughters may be able to reach an agreement on dividing the property, for example, by agreeing that Barbara will take some sentimental items or a small share of the estate. In addition to whatever Alice and Barbara agree to do with the property in the estate, they will have opened channels of communication and may be able to build a better sibling relationship. The result may well be a "win" for both of them.

Although this example provides a best case scenario for mediation, the example is not unrealistic. Many probate conflicts could benefit from mediation rather than litigation.

Conclusion
Mediation will not be desirable in every case, but the personal and family aspects of probate make this area of the law particularly appropriate for mediation. Lawyers practicing in this area should familiarize themselves with the benefits of mediation and be able to recommend it to their clients when appropriate.

By Susan N. Gary

Copr. (C) 2005 West, a Thomson business. No claim to orig. U.S. govt. works. This article is reprinted with permission from West, a primary sponsor of the General Practice, Solo and Small Firm Section