This is a case of a well-intentioned person not following through on a significant change to his estate—the sale of a property, handling of the proceeds from the sale and granting power of attorney to his current wife—that completely undid what his stated wishes were for his heirs.
A recent decision from the Delaware Supreme Court serves as an excellent example of how the best estate plan is one that is reviewed every year and every time a large event occurs. Otherwise, there is no way to ensure that what you wish to occur will take place. Estate plan procrastinators, pay attention!
The Delaware Supreme Court’s August 2017 decision in the case, “In the Matter of the Estate of Edward J. Burke,” ruled that the decedent should have made better plans to ensure that his wishes were effected upon his death.
Edward named his wife of then 13 years, Mildred, as his Power of Attorney on March 17, 1998. On the same date, he executed his will. In the will, he left his Virginia property to the Trustee of the Trust that was created in his will. Edward instructed the Trustee to let his daughter live on the property for three years and then sell it. The proceeds from the sale were to go to Mildred for life and after her death; the remaining sum was to be distributed to his four children. Edward left the residue of his estate to Mildred.
However, in 2012, Edward sold the Virginia property for $150,000 and deposited the proceeds into a separate and new bank account in just his name. His son Kevin said that Edward had repeatedly told his children these funds were being held for them in accordance with the 1998 will. Testimony was given to show that Edward had repeatedly denied Mildred’s request to gain access to this account, because he wanted the funds to go to his children.
Edward became sick and Mildred added her name as a joint owner to the account, using the Durable Power of Attorney, which Kevin said was done without Edward’s knowledge or consent. Edward died in 2013, and was survived by Mildred and his four children from his first marriage, including Kevin.
There was nothing left in Edward’s name alone when he died, so Mildred didn’t probate his estate and—because she retitled Edward’s account (which held the proceeds from the sale of the Virginia property)—the Virginia sale proceeds passed to Mildred.
Kevin sued Mildred, claiming that Edward had purposefully divided the proceeds from the sale of the Virginia property with the desire to preserve the funds for his children. Mildred responded that Edward changed his testamentary plan when he sold the Virginia property under the doctrine of ademption. That means the failure of a bequest from a will, because the property is no longer in the estate.
The Court also held that even if Edward hadn’t known about or approved of Mildred’s adding herself to the account, and even if the Court held that Mildred had to return the money from the account to the estate, the money would have still flowed under the Will into the residuary clause and ended up in Mildred’s hands anyway, because she was the sole remainder beneficiary.
The Court quoted the Hobson decision that held that “in Delaware the rule of ademption is not dependent on the apparent intention of the testator. In fact, the application of the rule may, in many instances, defeat the intention of the testator.”
Therefore, even if Kevin could have shown that his father intended to leave this money to his children, it wouldn’t have been enough for the children to inherit the sales proceeds because Edward’s Durable Personal Power of Attorney was broad enough to let Mildred to retitle the funds jointly, thereby defeating Edward’s intent. In addition, Edward didn’t change his will after the sale of the Virginia property. Since his wife was the residuary beneficiary, the money from the sale would’ve flowed through to the residue to her, not to the children.
If Edward wanted this money to go to his children, he should have modified his will after the sale of the Virginia property and left the proceeds from the sale to his children. He should have also revised his Durable Power of Attorney to stop Mildred’s right to add her name to this account.
This case presents an excellent example of how powerful a Durable Power of Attorney is, and how it can be used to circumvent the original intent of an estate plan. A regular review of estate planning documents when life events or large transactions take place, is advised to ensure that your wishes are carried out successfully.
Reference: Delaware Supreme Court (August 24, 2017) “In the Matter of the Estate of Edward J. Burke”