Source: https://deathandtaxeslaw.com/
Timestamp: 2019-04-19 20:16:27+00:00

Document:
In December 1997, a Minnesota couple, Kaye Melin and Mark Sveen, got married. Sveen bought a life insurance policy naming Melin as beneficiary, with his adult children from a former marriage as contingent beneficiaries. Then the Minnesota legislature amended the probate code, providing that a divorce decree automatically revoked the beneficiary status of the former spouse, unless (among other exceptions) the parties’ divorce decree provided otherwise. See Minn. Stat. § 524.2-804.
In 2007, Sveen and Melin divorced; their divorce decree said nothing about the insurance policy. When Sveen died in 2011, Melin was still named as beneficiary. An insurance interpleader action followed. Melin and Sveen’s children each claimed the insurance proceeds. Sveen’s children argued that Minnesota’s automatic-revocation-on-divorce statute applied to bar Melin’s claim; Melin argued that she and her ex-husband had orally agreed to maintain the beneficiary designation, and so the statute unconstitutionally impaired her rights in the policy.
In early 2016, the Honorable Paul A. Magnuson granted summary judgment for the Sveen children, holding that Minnesota Statute § 524.2-804 was constitutional because there was no substantial impairment of Melin’s contractual rights. Melin appealed to the United States Court of Appeals for the Eighth Circuit. The Eighth Circuit reversed, following circuit precedent in Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1324 (8th Cir. 1991), on the theory that it was Mark Sveen’s contractual rights that had been impaired when the Minnesota legislature changed the law, and that the law could not apply retroactively. The Sveen children appealed to the United States Supreme Court.
In June 2018, the Supreme Court reversed 8-1. Justice Kagan, writing for the majority, framed Minnesota’s statute as a default rule used “to resolve estate litigation in a way that conforms to decedents’ presumed intent.” Sveen v. Melin, 138 S. Ct. 1815, 1818 (2018). The majority noted that as divorce rates increased, almost all states adopted revocation-on-divorce statutes, presuming “that the average Joe does not want his ex inheriting what he leaves behind.” Id. at 1819.
Turning to the constitutional challenge, the majority acknowledged that the “threshold issue is whether the state law has operated as a substantial impairment of a contractual relationship”—that is, “the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights.” Id. at 1821-22.
As had the district court, the Supreme Court majority concluded that Melin’s constitutional challenge failed because (1) the statute was designed to reflect, not thwart, a policyholder’s presumed intent; (2) given divorce courts’ power to change beneficiary designations, a policyholder could not reasonably expect a beneficiary designation to survive divorce; and (3) if the policyholder didn’t like it, he could have it addressed in the divorce decree or by submitting a post-divorce change-of-beneficiary form. In Justice Kagan’s words, “the statute this reduces to a paperwork requirement (and a fairly painless one, at that): File a form and the statutory default rule gives way to the original beneficiary designation.” Justice Gorsuch, in his first solo dissent, would have held that the statute “substantially impairs contracts by displacing the term that is the ‘whole point’ of the contract”—the beneficiary designation. Id. at 1829-30.
Takeaways: the Supreme Court doesn’t consider a “minimal paperwork burden” such as filing a fresh beneficiary designation form to be a “substantial impairment” of contract. If a divorcing couple can be bothered to mention the snowmobiles in their divorce decree, but not the life insurance, that’s on them. And lawyers in Minnesota can go back to advising our divorced and divorcing clients to check their insurance paperwork and be sure it does what they want it to.
The Court of Appeals issued the long awaited Lund appeal which addressed several issues but this review only touches on 3 issues. The first issue is the right of a trustee to have its attorney fees paid from the trust. The district court found that Minn. Stat. § 501C.1004 supersedes common law and denied the trustee attorney fees but the court of appeals reversed. The common law provides that “a trustee is entitled to reasonable attorneys’ fees, to be paid out of the trust estate, incurred in good faith in defending his administration of the trust.” In re Freeman’s Trust, 75 N.W.2d 906, 907 (Minn. 1956). The court of appeals found that Minn. Stat. § 501C.0709 authorizing a trustee to pay attorney fees from the trust leaves the common law on this point undisturbed. The ability to pay attorney fees to “any party” under Minn. Stat. § 501C.1004 did not alter the common law or section 0709. So trustees can still pay attorney fees from the trust incurred in good faith, and “any party” may also have fees paid from the trust under Minn. Stat. § 501C.1004. The next issue is proving a breach of fiduciary duty. In this case the party asserting the breach of fiduciary duty failed to prove the last element in a breach case, damages. The person asserting a breach must prove duty, breach, causation and damages. But the party bringing the claim failed to prove damages in their brief. Apparently they tried to argue damages in the response brief but that is not allowed. Because one of the elements of breach of duty was not proven the claim fails. The third issue is removal of trustees. Minn. Stat. § 501C.0706 allows removal of trustees for a substantial change in circumstances. That was apparently found for one trustee but the court also seemed to say that such trustee’s removal was by the consent of all qualified beneficiaries, served the beneficiaries best interests and was not inconsistent with the material purpose of the trust. Since all beneficiaries requested the removal, a substantial change of circumstances ruling was not needed. Another trustee was not removed because there was no substantial change in circumstances.
Excluded spouse under slayer statute can still have standing in probate, 524.1-201(33), 2-803(a), (f).
In re: Estate of Sandra Sandland, Deceased, A17-2016; Filed December 10, 2018. In this case the husband killed his wife. Under the Minnesota slayer statute Minn. Stat. § 524.5-803 the husband is no longer an heir of the estate. When a joint tenant owner kills the other owner the joint tenancy is severed and becomes a tenant in common interest. Johnson v. Gray, 533 N.W.2d 57 (Minn. App. 1995). A tenant in common owner can’t exclude a co-tenant in common owner. Petraborg v. Zontelli, 15 N.W.2d 174 (Minn. 1944). The husband was in prison and created a power of attorney to have a person act on his behalf. The POA wanted access to the house but the special administrator of the estate denied access arguing lack of standing for the POA. At issue is whether the POA has the right to enforce property interests for the surviving spouse when that surviving spouse was removed as an heir due to the slayer statute Minn. Stat. § 524.5-803. In this case the court of appeals found that although the husband was removed as an heir, he still had an interest in the estate because he was a co-tenant in common owner of the real estate and could sue the estate to protect his own personal rights of his property. The court also looked to Minn. Stat. § 524.1-201(33) to find that the husband remained an interested person in the estate because he is still a “spouse” under the statute and was included among “any others having a property right.” The POA is allowed to inspect the property and obtain the husband’s property.
Guardians have the power to bring a harassment restraining order for a ward.
In the case of Thompson v. Thompson, A18-0309, Filed November 26, 2018 the guardian for a ward sought a harassment restraining order (Minn. Stat. 609.748, subd. 5(b)(3)) on behalf of the ward against the former step-parent/former co-guardian. The court granted a 2 year order. One of the issues raised on appeal was standing. Appellant challenged the guardian’s ability to seek an HRO for a ward. The court noted that guardians have broad powers under Minn. Stat. § 524.5-313(c) and citing to State v. Nodes, 538 N.W.2d 158, 161 (Minn. App. 1995) to find that guardian powers include the power to bring an HRO. In this case the district court had given the guardian all powers under Minn. Stat. § 524.5-313(c) and therefore held that the guardian had power to bring the HRO. The court of appeals upheld the guardian’s standing to bring an HRO.
In the case of In the Matter of the Trust Created by Eileen Carlson Kasell dated September 10, 2013, as amended, filed November 13, 2018, A18-0340, the mother created a revocable trust. The mother entered into an agreement that the trust would not be amended without a court order but it seems it was amended on August 11, 2017 without a court order. That amendment disinherited one of two sons. When the trust was before the court on an unrelated issue the amendment was brought up and in September she sought approval of the amendment. The disinherited son objected. The disinherited son, however, did not produce evidence showing incapacity or undue influence. Standing was not ever raised or discussed. He expressed opinions but he did not present facts and did not have medical facts. The court found that the standards for capacity and undue influence for a will were the same as for the revocable trust citing Minn. Stat. § 501C.0601 and Norwest Bank Minn. NA v. Beckler, 663 N.W.2d 571, 579 (Minn.App. 2003).
Settlement Agreement is enforced even when formal agreement is not finalized.
Settlement Agreement and Memorandum of Understanding is an Enforceable Agreement, Minn. Stat. § 572.35 Subd. (1)1, and Personal Representative could settle the claim under Minn. Stat. § 524.3-715(27) without satisfying Minn. Stat. § 524.3-912 even when settlement altered distributions of estate. Estate of: Steven C. Kukowski, Decedent, A18-0217 August 27, 2018. Mom died and her estate was opened. After mom died, her son, Steven died. Mom’s estate sought to recover about $200,000 from Steven’s estate. It alleges Steven took many guns, a boat, motor, diamond ring, Indian Artifacts and other items from their mother before she died. The mother’s estate and Steven’s estate entered into a mediated settlement agreement. The agreement explicitly laid out several binding points in the memorandum of understanding and specifically said the agreement was binding although it did acknowledge that other details would be finalized in a separate agreement. The parties could not get to a final separate agreement. Steven’s estate returned much of the property but did not complete all terms of the contract. Steven’s estate sued to enforce the agreement. First, the court noted that this is a valid agreement under Minn. Stat. § 572.35 Subd. (1)1. The terms of the memorandum of understanding were sufficient enough to be enforceable. One of the heirs to the mother’s estate continued to object arguing that she was not a party to the settlement agreement so it is not enforceable under Minn. Stat. § 524.3-912. The court noted that this was an agreement between the two estates and not an agreement between the heirs. The personal representative had authority to “settle matters for the estate and its heirs” under 3-715(27) and whether that settlement affects the ultimate distribution of the mother’s estate is not before the court at this time. If the heirs try to settle the estate that is governed by 3-912, but when a PR settles a claim that is governed by 3-715 even if part of the settlement alters distribution of the estate.

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