Category Archives: Non-Probate Transfers

Factual Background:

Beneficiary of two certificates of deposit (CDs) purchased by decedent before her death brought action against decedent’s attorney-in-fact to impose a constructive trust on the proceeds of the CDs, which, prior to decedent’s death, attorney-in-fact had transferred to an account to which she was a joint tenant with a right of survivorship.

Held:

The Circuit Court, Jasper County, Jon A. Dermott, J., entered summary judgment in favor of beneficiary. Attorney-in-fact appealed.

On Appeal:

Reversed and Remanded.  The Court of Appeals, Nancy Steffen Rahmeyer, P.J., held that a triable issue existed as to whether attorney-in-fact withdrew funds from principal’s certificates of deposit (CDs) for an appropriate purpose.  The trial court erred in granting summary judgment on the basis that Appellant did not have the right to withdraw the funds from the CDs. An issue of fact remains whether the funds were withdrawn for the benefit of Ms. Walker.  A genuine issue of material fact existed as to whether attorney-in-fact withdrew funds from principal’s certificates of deposit (CDs) for an appropriate purpose, such as to benefit principal.  V.A.M.S. §§ 404.710(6), 461.035.

The court engaged in a two-part analysis. Keeping in mind that this was a summary judgment, and not a trial on the merits, the court found that the trial court erred in finding as a matter of law that Appellant did not have the right to withdraw the funds from the two CDs on the basis that there was no written authorization within the power of attorney to do so. The critical second question of the analysis-for what purpose were the funds withdrawn-was not ripe for a summary judgment.

Factual Background:

Brother sued sister alleging she breached her fiduciary duty under power of attorney for mother by naming herself as transfer-on-death (TOD) beneficiary of mother’s assets.

Held:

On competing motions for summary judgment, the Circuit Court, St. Louis County, Colleen Dolan, J., entered judgment for brother, awarding him half of assets of mother’s estate, but denied his motion for attorney fees. Sister appealed.

On Appeal:

The Court of Appeals, Cohen, J., held that: (1) naming herself as beneficiary of mother’s assets was a breach of sister’s fiduciary duty, and (2) brother was not entitled to attorney fee award in absence of bad faith showing. Affirmed. Attorney-in-fact’s designation of herself as the transfer-on-death (TOD) beneficiary of her mother’s assets was a breach of fiduciary duty, given that durable power of attorney designating daughter as attorney-in-fact did not specifically authorize daughter to name herself as a beneficiary to receive her mother’s property after death. V.A.M.S. § 404.710(6).

The court held that the brother failed to prove that his sister, acting as their mother’s attorney-in-fact pursuant to a durable power of attorney, acted in bad faith in naming herself as the transfer-on-death (TOD) beneficiary of mother’s assets. This bad-faith showing was required for an award of reasonable attorney fees to the brother who prevailed on a claim for one-half of assets of mother, who died intestate. V.A.M.S. § 404.717(5).

Factual Background:

On June 11, 1979 Leonilda Hayden executed a Quit Claim Deed conveying real property in Maryland Heights to herself “for and during her natural life, with full power in her to sell, mortgage or lease the fee simple title, but with remainder as to any part undisposed of to Suazanne Kateman, Phyliss Audrain, Mary Ann Prueitt and Kenneth Hayden, and to the heirs and assigns of said remaindermen forever.”  From 2003 to 2005 Leonilda Hayden applied for and received Medicaid through the Department of Social Services.  In 2005 Leonilda Hayden died without having exercised her power of sale under the 1979 deed.  After her death the Department of Social Services filed a petition for issuance of letters testamentary or of administration, as well as a claim against the estate for all Medicaid benefits paid by the Department to the decedent.  The appointed personal representative of the estate filed a petition seeking to take charge and sell the Maryland Heights property and an action in accounting to take all proceeds therefrom and bring it into the estate to satisfy the Department’s claim.  Drumm Jr., J., granted the personal representative’s petition to sell the property, holding that the transfer of the property to the remaindermen was a recoverable transfer which could be brought back into the decedent’s estate.  The remaindermen appealed.

On Appeal:

Where a decedent holds a life estate with the power to revoke, the life estate is subject to satisfaction of the decedent’s debts immediately prior to death, and therefore constitutes a transfer which may be recovered to satisfy creditors claims.  However, a life estate with mere power of disposition is not so subject to revocation.

Rationale:

RSMo. §461.300.1 provides that a transfers of a decedent’s property may be recovered by the personal representative of the estate to the extent necessary to discharge claims remaining unpaid after application of the decedent’s estate.  This is a “recoverable transfer”.  RSMo. §461.300.10(4) defines a “recoverable transfer” as a non-probate transfer of a decedent’s property and any other transfer of a decedent’s property other than the administration of the decedent’s probate estate that was subject to satisfaction of the decedent’s debts immediately prior to death.  As a result, a “recoverable transfer” is not limited to non-probate transfer listed in RSMo. §461.300.8 or by the exclusions to non-probate transfers listed under RSMo. §461.005(7).  Therefore, a recoverable transfer includes both non-probate transfers, as well as those transfers which were subject to satisfaction of the decedent’s debts.  The grant of a remainder to a remainderman constitutes a “transfer” and is therefore subject to the revocable transfer statute, additionally, the form of life estate granted here constitutes a valuable interest in property which is subject to seizure by creditors.  By granting herself a life estate with the power of disposition, the decedent provided her remaindermen with a vested defeasible remainder which could be destroyed by any sale, either voluntary or involuntary, during the decedent’s life.  Therefore, decedent’s life estate was subject to satisfaction of her debts immediately prior to her death, and therefore meets the definition of “revocable transfer” in §461.300.10(4).

Factual Background:

Edwin and Karl Hardt are executors of the estate of Selma J. Hartke.  Ms. Hartke’s will gave the executors discretion to distribute the remainder of her estate to charitable organizations of their choosing.  The Hardts determined to use a large portion of the estate to support the pro-life cause.  In 2001, the Hardts met with representatives from Vitae, a non-profit charitable corporation describing itself as an advertising campaign for the pro-life cause.  Vitae presented a grant proposal, stating that the funds would be used to expand Vitae’s media campaigns to ten new markets and that the gift would be a “matching gift,” to be spent in equal proportions to funds raised by Vitae in each of the ten markets.  By using the funds as a “matching gift,” Vitae said the grant would entice other donations in the markets to ensure a lasting donor base for future campaigns.  Following the meeting, the Hardts gave Vitae $4,242,000, accompanied by a letter of intent detailing the grant was to be used as a matching gift to permit development of the new markets.  In 2002, the Hardts gave an additional $3,000,000 to be used as a matching gift.

In 2003, the former National Project Director of Vitae contacted the Hardts’ counsel and informed him that portions of their gift was not being used in accordance with the conditions placed on the gift, but were instead being expended for administrative expenses and without the receipt of matching funds.  The Hardts requested an accounting of their gift from Vitae, and they were then informed of the different development strategy implemented subsequent to their gift.  The Hardts claimed that the last accounting provided to them by Vitae in 2005 shows extensive misuse of the 2001 gift.  On August 6, 2008, the Hardts filed a petition seeking detailed accountings of both gifts, the restoration of any part of the gifts spent in contravention of the conditions, an injunction preventing any future misuse of the gifts, or in the alternative, the transfer of the 2001 gift to another organization of their choosing.  On September 22, 2008, Vitae filed a motion to dismiss the petition.

Held:   

The Circuit Court of Cole County granted Vitae’s motion to dismiss, stating that the Hardts lacked standing to enforce the conditions on their charitable gift.  The Hardts appealed.

On Appeal:

Affirmed.  Donors of charitable gifts do not have standing to enforce the conditions of their charitable gifts.  According to common law charitable trust principles, and by the newly-adopted Uniform Prudent Management of Institutional Funds Act (UPMIFA), only the Attorney General has the ability to enforce restrictions on charitable gifts.

Rationale:

The Missouri Uniform Trust Code specifically grants settlers of charitable trusts the ability to enforce the trust.  RSMo. §456.4-405.3.  This law applies only to trusts, not to charitable gifts.  Though common law charitable trust principles have often applied to charitable corporations, that is not enough to authorize an extension of the MUTC—a statute that, on its face, only applies to trusts—to gifts made outright to charitable corporations.  Moreover, Missouri adopted the UPMIFA this year, and the prefatory note of the UPMIFA explicitly acknowledges that the Attorney General “continues to be the protector both of the donor’s intent and of the public’s interest in charitable funds.”  Prefatory Note, Uniform Prudent Management of Institutional Funds Act, at 4 (2006).  And, while there may be times when the Attorney General does not sufficiently represent a donor’s interest, such an argument cannot even be attempted when the Attorney General was never involved at all.

The doctrine of cy pres can act to amend a charitable gift to prevent the gift from failing, usually when a donee ceases to exist.  Where, however, the gift was completed to the organization of the donor’s choosing but the donor simply feels that the organization is not using the gift pursuant to the restrictions imposed upon it, cy pres is not applicable.  Even if cy pres was applicable, a donor of a charitable gift still faces the standing challenge.

Factual Background:

Decedent died on November 9, 2003.  During his lifetime, he received Medicaid benefits from the State.  When the decedent died, his home passed to his children, Violet J. Knight and Tommy Jones, through a beneficiary deed he had filed on January 7, 2000.  Because his home was his only asset, no estate was opened initially.  After the State filed a writ of mandamus with the Court of Appeals, the Court ruled that an estate had to be opened to determine whether there were assets subject to administration.  The State requested that Knight, the personal representative, initiate an action for accounting under RSMo. §461.300, but she refused to do so.  The State then filed a petition for accounting with the probate court on November 10, 2005, seeking recovery of Medicaid benefits paid on behalf of the decedent.  Knight and Jones sought to dismiss the petition, arguing that the definition of “estate” in RSMo. §§473.398 and 473.399 did not include nonprobate transfers; the State was not a creditor under RSMo. §461.300; and even if it was a creditor, it was required to amend its Medicaid State Plan or promulgate a rule regarding its interpretation of RSMo. §461.300, and it failed to notify the decedent that it would pursue nonprobate assets outside the definition of “estate” in RSMo. §473.398.

Held:

The Circuit Court of Boone County entered judgment allowing the State’s petition for accounting, stating that Knight and Jones were liable to the estate.  Knight and Jones appealed.

On Appeal:

Affirmed.  The State of Missouri is a proper creditor of an estate under RSMo. §461.300 and therefore may bring an action for accounting in the context of Medicaid estate recovery.

The State’s action under RSMo. §461.300 does not seek to bring nonprobate assets into the estate; rather, it allows the State to recover the value of Medicaid benefits in the form of a monetary judgment from the estate.  Therefore, the other three points regarding the expansion of the definition of “estate” were denied.

Rationale:

Though RSMo. §461.300 is not specifically mentioned as part of the probate code, which allows collections under RSMo. §473.398, Missouri’s other appellate courts have both allowed petitions for accounting brought by the State under RSMo. §461.300, and the state legislature has deemed a RSMo. §461.300 proceeding to be a proceeding under the probate code in RSMo. §461.300.7.  Because RSMo. §461.300 is considered part of the probate code, RSMo. §473.398 does not preclude an accounting action under RSMo. §461.300 to recover Medicaid benefits from a decedent’s estate.

RSMo. §461.300.1 provides:  “Each recipient of a recoverable transfer of a decedent’s property shall be liable to account for a pro rata share of the value of all such property received, to the extent necessary to discharge … claims remaining unpaid after application of the decedent’s estate.”  A “qualified claimant” may bring an action for accounting to enforce the recipients’ obligation.  RSMo. §461.300.2.  A “qualified claimant” includes a “creditor,” which is “any person to whom the decedent is liable, which liability survives whether arising in contract, tort, or otherwise….”  RSMo. §461.300.10(1), (3).  A “recoverable transfer” includes a “nonprobate transfer of a decedent’s property under sections 461.003 to 461.081” RSMo. §461.300.10(4).

Though Medicaid benefits received are only recoverable by the State upon death, the debt is one created during life by the payment of benefits and one that survives the death of the decedent by allowance of recovery from the estate.  Therefore, it is a debt that qualifies the State as a “creditor” under RSMo. §461.300.2.  The transfer of the home by beneficiary deed qualifies as a “recoverable transfer” because beneficiary deeds are governed by RSMo. §461.025.

Factual Background:

Decedent executed a power of attorney, giving her nephew’s wife, Anna, and another individual (who is not a party to the appeal) authority to make certain decisions on Decedent’s behalf, including the power to establish accounts and make inter vivos gifts of property to lineal descendants, including her attorneys-in-fact.  Pursuant to this power of attorney, the attorneys-in-fact opened two bank accounts, which they co-owned with Decedent.  Both of the accounts included rights of survivorship.  Decedent died intestate, and at the time of her death these accounts totaled $129,134.46.  The other attorney-in-fact told Anna that she did not want the money and that Anna could keep all of the money in the accounts.  Anna then withdrew the money and closed the accounts, and she proceeded to dispose of the entire balance.

Decedent’s sister was appointed Personal Representative of the estate and filed a Petition for Discovery of Assets against Anna and her husband, in which four of Decedent’s siblings joined as plaintiffs.  The petition asked the court to determine the title and right of possession to the proceeds of the two accounts and ultimately asked the court to order the proceeds to be transferred from Anna to Decedent’s estate.   A jury trial was held, but a mistrial was declared.  The matter was reset for trial.  On the morning the second trial was to commence, the plaintiffs filed a “Motion for Judgment as a Matter of Law and/or Motion for Judgment on the Pleadings at the Close of All Evidence.”  The court then sent the jury home, and it held a hearing regarding the motion.  No evidence was submitted.

Ripley County Circuit Court, J. Clarkson, Held:

The circuit court granted the motion and entered judgment in Plaintiffs’ favor and against Anna and her husband in the amount of $118,134.46.  Anna and her husband appealed.

Court of Appeals, J. Francis Jr., Held:

Reversed and remanded.  First, the nature of the motion on which the trial court ruled is unclear, but it appears that the court considered the motion as a motion for summary judgment since it looked at matters outside the pleadings, though there was no compliance with Rule 74.04.

Appellants assert that the trial court erred in sustaining the motion because section 362.471.1 created a presumption that the money in the joint bank accounts became the sole property of Anna and the other attorney-in-fact upon Decedent’s death and that Respondents not only failed to present any evidence to rebut this presumption, there was an issue of fact presented as to Decedent’s intent in the Power of Attorney describing inter vivos gifts.  There was no evidence before the court when the motion was presented and considered.  Nevertheless, the motion itself concedes some issues of fact.  In the motion, the Respondents acknowledge that the intent of the Power of Attorney was at issue.  The court also remarked that it was taking the Power of Attorney to be ambiguous.  The trial court then took it upon itself to determine the Decedent’s intent with respect to any gift to Anna.  The Decedent’s intent is a question of fact to be determined by the trier of fact.  Therefore, it was error for the court to enter judgment when the pleadings and the Respondents’ own motion indicated there were issues of fact.

Factual Background:

In 1998, Rakestraw’s mother-in-law gifted Rakestraw’s husband 80 acres to be solely his property.  Rakestraw and her husband immediately executed and recorded a beneficiary deed that conveyed title to two of the husband’s children, but the deed stated it was not effective until both the grantors died.  When Rakestraw’s husband died intestate in 2001, a partition suit was filed in 2003, and the case was tried in 2008.          

Douglas County Circuit Court, J. Justus, Held: 

The trial court ruled the 1998 beneficiary deed was valid and conveyed husband’s property that he solely-owned to his children upon his death.  Rakestraw appealed.

Court of Appeals, C.J. Scott, Held:

Reversed and Remanded.  The trial court erred in finding the deed was valid.      Contrary to common law, Missouri does authorize beneficiary deeds by statute if the properly recorded deed expressly states it does not take effect until the owner’s death.  Section 461.025.1.

Considerable attention was given to the 2004 case of Pippin v. Pippin.  In Pippin, whose facts were similar to this case, the beneficiary deed would not take effect until both the owner and non-owner died. The Court found this was not valid as a beneficiary deed because it was executed, in part, by a non-owner.

In this case, the parties on appeal agreed that Pippin supports reversal unless the post-Pippin 2005 statutory amendment, which adds text to the definition of “owner” to include joint owners, demanded a different result.  The Court found it does not.  The amendment does not expand, contract or otherwise change who is owner by statute—it merely serves as a confirmation of what is already true.  A non-owner, such as Rakestraw, is not a joint owner, and therefore, cannot execute a deed.

Court of Appeals, J. Francis, Concurring Opinion:

Agreeing with the principal, he urged that neither Pippin nor this case should be read as condemnation of beneficiary deeds.

Factual Background:

Before Husband’s death in 2006, Husband and Wife named Patrick Farnen as their attorney in fact.  Husband died that year.  In 2009, Wife’s health failed and she was admitted to the hospital.  Farnen began exercising his powers of attorney during the hospitalization.  A few weeks after she was admitted, Wife’s niece and nephew caused her to execute a new durable power of attorney naming themselves as attorneys-in-fact.
Wife died a few months later and Respondent was appointed as personal representative of the estate.  Appellant filed a petition for a discovery of assets of decedent’s estate, believing Niece and Nephew used an invalid power of attorney to move assets out of the estate.  Niece, Nephew, and Farnen moved to dismiss the petition.

Audrain County Circuit Court, Broniec, J., Held:

The court granted Respondents’ motion to dismiss the petition.  Appellant appealed.

Court of Appeals, P.J. Ahrens, P.J., Held:

Reversed and remanded.  The probate division possessed the statutory authority, under Section 473.340, to entertain the petition for discovery of assets.  The court rejected Respondent’s argument that the petition was really a claim of breach of fiduciary duty belonging in the circuit court.  While breach of fiduciary duty is implicated, discovery of assets was the primary thrust of the petition; Appellant sought restoration of the missing assets, not damages for violation of Respondents’ fiduciary duties.

Further, Appellant stated a valid claim by pleading all requisite elements of Section 473.340.  The statute does not require him to identify specific estate property that was wrongly withheld, only known property that was wrongly withheld.  Finally, the court erred by considering evidence outside the pleadings when granting the motion to dismiss.  While a motion to dismiss can be treated as a motion for summary judgment (where evidence outside the pleadings is allowed), the court must notify the parties of this intent and allow them a reasonable opportunity to present all pertinent materials.