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Trusts and Estates
University of North Carolina School of Law
Brophy, Alfred L.

Trusts and Estates Outline

Alfred Brophy

Spring 2014

Planning for Death: Living Wills and Durable Powers of Attorney

A. Planning for Incapacity

Cruzan

o Petitioner Nancy Beth Cruzan was rendered incompetent and in a persistent vegetative state (though not terminally ill) as a result of severe injuries sustained during an automobile accident.

o Nancy expressed thoughts at age 25 in somewhat serious conversation with a housemate friend that if sick or injured she would not wish to continue her life unless she could live at least halfway normally

o Co-petitioners Lester and Joyce Cruzan, Nancy’s parents and co-guardians, sought a court order directing the withdrawal of their daughter’s artificial feeding and hydration equipment after it became apparent that she had virtually no chance of recovering her cognitive faculties.

o The MO Supreme Court held that because there was no C&C evidence of Nancy’s desire to have life-sustaining treatment withdrawn under such circumstances, her parents lacked authority to effectuate such a request

o Held: While the Constitution grants a competent person a constitutionally protected right to refuse lifesaving hydration and nutrition, Missouri’s requirement that evidence of the incompetent’s wishes as to the withdrawal of treatment be proved by C&C evidence is constitutional.

In re Guardian of Schiavo

o Appeal of TC’s order to discontinue artificial life support of parent’s adult daughter

o Appeals court affirmed TC – competent, substantial evidence and correctly applies the law

o Theresa suffered cardiac arrest and never regained consciousness

o Lives in nursing home with constant care

o In a persistent, vegetative state, not a coma

o Could remain like this many years, will NEVER recover

o Medical Malpractice Fund of $$

o If she dies while husband still married – he gets all

o If he divorces before she dies – under laws of intestacy, parents get all

o Husband and parents can’t agree on what to do

o Parents 3 legal issues

o 1. Because Schiavo was guardian of Thersea, had TC serve as surrogate decision-maker

§ he presented this ? to court for resolution

§ court affirms TC’s decision to proceed without a guardian ad litem

§ parents had contended that TC was required to appoint a guardian ad litem because Michael stands to inherit under laws of intestacy

o 2. Parents argue TC should not have heard evidence from exec. Director of Georgia Health Decisions

§ court did not give undue weight to this evidence and court made a proper surrogate decision rather than a BI decision

o 3. Parents argue evidence was insufficient to support TC’s by C + C evidence

§ Very high standard

§ Browning – err on the side of life

· Must assume patient would choose to defend life

§ Today – reconfirm court’s default position must favor life

· Make a decision for her

§ Statements made to friends were sufficient basis to make a decision for her

o Its been 10 years in vegetative state

§ No hope of a cure, recovery

§ Probably would want a NATURAL death and for her loved ones to be free to continue their lives

o Notes

o 1. No advance directive, no durable power of attorney

§ court appointed husband as guardian to make decision for her

· patient’s spouse before parents in Fla. Statute

o 2. Husband provided evidence that his wife wanted a natural death BUT if no such evidence, he could have argued it was in her best interest

o Next…

§ Florida legislature gave the Governor the power to stop husband’s decision

· Husband challenged this statute and Fla. SC struck it down.

Bush v. Schiavo

o Schiavo’s husband (appointed by the court as her guardian, rather than her parents) petitioned the court to allow removal of the life support, which it granted, and affirmed on appeal

o Then, legislature adopted act, and governor stayed removal

o Held: Fla chapter 2003-418, which authorized the governor to stay the removal of nutrition and hydration on facts that matched the Schiavo case, is not constitutional, under separation of powers

1. Durable Power of Attorney

o Distinction between agent making a will versus making a revocable trust and transferring property to it

o Majority view: an agent acting under a POA cannot make, amend, or revoke P’s will, but agent may create, modify, or revoke a trust if the power to do so is expressly granted in the POA instrument

o In some states, a guardian or conservator appointed by the court may not only make, amend, or revoke a trust for the ward, but do the same for the will

o Whether an agent under a POA may make gifts raises particular difficulties

o Many courts require the power to make gifts to be explicit, and subject exercise of such power in favor of the agent to close fiduciary scrutiny, requiring the gift to be clearly in P’s best interests

UPC Article 5B – Uniform Power of Attorney Act

o Under 2006 Uniform POA Act, the clumsy term attorney-in-fact is replaced with the more intuitive term agent, and all POAs presumed to be durable unless the instrument states otherwise…

o p. 313 et seq.

UPC 5B-114 – Agent’s Duties

o (a) Notwithstanding provisions in the power of attorney, an agent that has accepted appointment shall:

o act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest;

o act in good faith; and

o act only within the scope of authority granted in the power of attorney.

o (b) Except as otherwise provided in the power of attorney, an agent that has accepted appt shall:

o act loyally for the principal’s benefit;

o act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;

o act with the care, competence and diligence ordinarily exercised by agents in similar circumstances;

o keep a record of all receipts, disbursements and transactions made on behalf of the principal;

o cooperate with a person that has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations to the extent actually known by the agent and otherwise act in the principal’s best interest; and

o attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors, including:

§ the value and nature of the principal’s property;

§ the principal’s foreseeable obligations and need for maintenance;

§ minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes; and

§ eligibility for a benefit, a program or assistance under a statute or regulation.

o (c) An agent that acts in g/f is not liable to any beneficiary of the principal’s estate plan for failure to preserve the plan.

o (d) An agent that acts with care, competence and diligence for the best interest of the principal is not liable solely because the agent also benefits from the act or has an individual or conflicting interest in relation to the property or affairs of the principal.

o (e) If an agent is selected by the principal because of special skills or expertise possessed by the agent or in reliance on the agent’s representation that the agent has special skills or expertise, the special skills or expertise must be considered in determining whether the agent has acted with care, competence and diligence under the circumstances.

o (f) Absent a breach of duty to the principal, an agent is not liable if the value of the principal’s property declines.

o (g) An agent that exercises authority to delegate to another person the authority granted by the principal or that engages another person on behalf of the principal is not liable for an act, error of judgment or default of that person if the agent exercises care, competence and diligence in selecting and monitoring the person.

o (h) Except as otherwise provided in the power of attorney, an agent is not required to disclose receipts, disbursements or transactions conducted on behalf of the principal unless ordered by a court or requested by the principal, a guardian, a conservator, another fiduciary acting for the principal, a governmental agency having authority to protect the welfare of the principal or, upon the death of the principal, by the personal representative or successor in interest of the principal’s estate. If so requested, and unless a shorter period of time is required by a law other than the Uniform Power of Attorney Act, within 30 days the agent shall comply with the request or provide a writing or other record substantiating why additional time is needed and shall comply with the request within an additional 30 days.

3. Directives regarding health-care – Uniform Health Care Decisions Act

a. Advance Directives: Living Wills, Health Care Proxies, and Hybrids

o Cruzan: each person has a constitutional right to make healthcare decisions for himself, including the right to refuse medical treatment, as long as intent is clear and state law reqs are met

o Three basic types of advance directives:

o Instrumental directives (e.g. living will) specify how one wants to be treated in end-of-life situations or in the event of incompetence

o Proxy directives (e.g. health care proxy or DPOA for healthcare) designate an agent to make healthcare decisions for the pat

the extent the lawyer reasonably believes necessary “to rectify the consequences of a client’s criminal, illegal, or fraudulent act in furtherance of which the lawyer’s services had been used”

o Restatement: a lawyer’s disclosure of confidential info communicated by one spouse is appropriate only if the other spouse’s failure to learn of the info would be materially detrimental to that other spouse or frustrate the spouse’s intended testamentary arrangement

Rationale

o Exceptions in 1.6(b) don’t apply here; possibility of bastard inheritance is too remote to bring the “substantial injury to financial interest” exception into play

o Interpret “fraud” expansively –husband’s deliberate omission of the existence of his illegitimate child constitutes a fraud on his wife

o Husband and wife had signed CofI waivers

o Wife’s need for the info and the firm’s right to disclose it, the disclosure of the child’s existence to the wife constitutes an exceptional case with “compelling reason clearly and convincingly shown”

Hotz v. Minyard

Facts:

– Daughter thought she was to inherit the dads business. However, Dad drew up a second will knew that gave business to son. Dad told attorney not to tell daughter about the second will. Daughter sued attorney and claimed that he breached his fiduciary duty to her by misrepresenting the dad’s will [first will (left her with the impression that she would get the business) had been revoked but attorney held it out as if it was still good]. D argued that attorney owed daughter no duty since he was acting as Dads attorney in connection with the will. Court disagrees as attorney had an attorney/client relationship with the daughter also (did her will and taxes).

Holding:

– Although the attorney represented the decedent and not the appellant, he did have an on-going attorney/client relationship with Appellant and there’s evidence that Appellant had a special confidence in him. Although the attorney owed no duty to disclose the existence of decedent’s second will, he owed Appellant the duty to deal with her in good faith and not actively misrepresent the first will.

Rule:

– A fiduciary relationship exists when one has a special confidence in another so that the latter, in equity and good conscience, is bound to act in good faith.

Simpson v. Calivas

Facts

o Alleged intended beneficiary brought suit in negligence and as third-party beneficiary in contract against attorney who drafted testator’s will

o Claim is that D lawyer failed to draft a will in which he incorporated the actual intent of the decedent, P’s father, to leave all his land to P in fee simple

o Will left all real estate to P except for a life estate in Dover homestead, left to deceased’s second wife/P’s stepmother

o In different proceeding, probate court found “homestead” ambiguous as to just the house or the house + 100 acres and other buildings, let in extrinsic evidence, but not notes taken by D during consultations with decedent that read “house to wife as LE remainder to son; remaining land to son”

Holding

o An attorney who drafts a testator’s will owes a duty of reasonable care to intended beneficiaries

Rule

o An overwhelming majority of courts that have considered this issue have found that a duty runs from an attorney to an intended beneficiary of a will

o an intended beneficiary states a cause of action simply by pleading sufficient facts to establish that an attorney has negligently failed to effectuate the testator’s intent as expressed to the attorney.

o The general rule that a nonparty to a K has no remedy for breach is s/t an exception for third-party beneficiaries, where the K is so expressed as to give the promisor reason to know that a benefit to a third party is contemplated by the promisee as one of the motivating causes of his making the K