Cases of Interest for Bequest Managers: Part 2

Reopening Estate Administration

One of the major purposes of active bequest management is to catch and prevent mistakes or malfeasance that seriously impair or even eliminate a testamentary gift. While such situations do not occur in every case, they are sufficiently common to warrant careful oversight of all pending bequests. Not surprisingly, the “mistakes” seem frequently to arise when there is a great deal of money at stake.

Although it is theoretically possible to “reopen” estate administration to rectify errors, such a remedy is not a substitute for prudent management. For one thing, reopening (also called “subsequent administration”) is at the discretion of the court. In addition, later proceedings may not fix the damage. Bluntly, the money may be gone.

Long Delay Bars Reopening

In Estate of Kaiser, 13 N.W.3d 251 (Wi.App. 2024), the issue concerned an estate that closed in 2005. During probate, the estate transferred land restricted to use for single-family homes. The land was resold during the ensuing years with the same restriction. In 2019, Townline (a company that was not involved with the original probate) purchased the property with full knowledge of the restriction. It then sought to reopen probate (15 years later) to eliminate the deed restriction. Townline won the first round at the circuit court. Various interested parties appealed the ruling, and the appellate court reversed, citing the passage of time and Townline’s complete lack of involvement in the original matter.

Beneficiary’s Second Thoughts Not Enough for Reopening

In Succession of Barbier, 395 So.3d 357 (La.App. 2024), Ms. Caballero was one of several beneficiaries entitled to an equal share of a business interest owned by the decedent. The shares of the business were valued at about $1 million each and recipients had a share-or cash option. Cabellero took the share.

Three years later, Caballero had a severe case of beneficiary’s remorse. She wished she had taken the cash and sought to reopen the estate to fix the matter, punctuating her petition with allegations that the executor had hoodwinked her.

The court did not agree. It declined to reopen the estate administration, finding that Ms. Caballero’s allegations against the executor were vague and unsubstantiated. The decision pointed out – more than once – that she had “acquiesced” in the valuation when she accepted her bequest.

Genuine Injustice and Prompt Action Support Reopening

 Udell v. Udell, 397 So.3d 1050 (Fla.App. 2024). Joel Udell’s wife was murdered by a delivery man. The executor of her estate filed a wrongful death action against the companies that recruited and employed the perpetrator. The case settled for $8 million.

The executor failed to inform Joel that the bulk of the recovery belonged to him and had him sign a waiver of his rights. Probate closed shortly thereafter. When Joel found out that he had been misled, he immediately sought to reopen probate to pursue his claims, and his money. Although the original probate court denied reopening, an appellate court saw the matter differently and proceedings are now ongoing.

CCK COMMENT FOR CHARITIES: The cases discussed above confirm that reopening of estates to fix matters is by no means guaranteed. A charity’s ongoing management of all active bequest cases is far more prudent than trying to play catch-up after a late discovery that something has gone seriously amiss. Franklin’s famous adage that “an ounce of prevention is worth a pound of cure” certainly applies.

Two other considerations are worth mentioning. First, courts are not inclined to engage in subsequent administration because of the ripple effect of adjusting distributions after the fact. For example, had the petitioner in Barbier prevailed in her effort to exchange her stock shares for cash, the court would likely have needed to recompute, and even reduce, a $2 million residuary charitable bequest that was paid in the same estate. Fairness to other beneficiaries requires that such after-the-fact adjustments be limited to instances of true necessity.

Second, it does appear that beneficiaries that prevail in challenging completed distributions either late in probate, or after it closes, are frequently required to appeal initial adverse rulings. Appellate proceedings are expensive and usually lengthy. Ongoing bequest management in “real time” could obviate the need for much of that litigation.

Attorneys

Attorneys play a significant role in estate administration, and rightly so. Closing an estate is a legal process. While the “legalities” may be more evident when the administration involves controversies, a charity can benefit from sound legal knowledge and judgment in any estate matter. The “hidden” role that attorneys can play is identifying and avoiding issues before they mature into protracted, and costly, litigation.

Every year, there are cases where attorney-executors have gone off the track and, whether through negligence or malice, put their own interests before those of the estate and its beneficiaries. These cases hardly represent the typical barrister. This year, we are pleased to present some diverse types of cases that describe the expectations that clients and non-clients should have of attorneys participating in the estate settlement process.

Duties to Nonclients

The general rule is that lawyers do not have duties to non-clients. In nearly all cases, this pertains to estate matters as well. For example, in Waterbury v. Nelson, 557 P.3d 96 (N.M. 2024), Attorney Nelson was working with John Emry (the testator) to prepare Emry’s estate plan. Emry decided to name Waterbury as the POD of a $2 million bank account.

Waterbury himself signed Emry’s name to a “change of beneficiary” form. He had Emry’s consent to do this, as well as a power of attorney. Waterbury asked Attorney Nelson to confirm that the change would be effective. Nelson did not respond. When Emry died, the changed POD was deemed ineffective, and Waterbury lost his $2 million. Predictably, he sued Nelson.

The New Mexico Supreme Court ruled that Nelson had no duty to advise Waterbury, a non-client. This is consistent with most cases involving similar factual situations. For example, in Studer v. Bresler, 2025 WL 424785 (Cal.App.2025), a law firm represented a recently widowed man. He instructed the firm to file his wife’s will for probate. The will left sums to the widower and to other relatives.

The law firm failed to file the will, and the case proceeded as an intestate administration. The widower lost nothing (he received more than the will would have provided) but the other relatives named in the will took nothing. They sued the law firm for failing to offer the will for probate, but their lawsuit failed because the firm did not represent the other relatives and thus had no duty to them.

An Outlier Case

In a case similar to Waterbury, the Connecticut Supreme Court issued a decision that should be jarring to estate planning attorneys. Testator retained Attorney to prepare an estate plan. He told Attorney to draft a will that would leave a $1 million Ameritrade account to five specified persons. Attorney did so, but did not advise Testator that the POD designations on the account would need to be changed (as it stood, the account was designated in full to one of the five persons). Predictably, when Testator died, the single beneficiary received all the funds. The four disappointed recipients were permitted to pursue a professional negligence claim against the Attorney even though they were not his clients. This is an unusual ruling and one that undermines the principle that an attorney has a sole and undivided duty of loyalty to his clients. Wisniewski v. Palermino, 330 A.3d 857 (Conn. 2025).

Contingent Fees and the Seinfeld Syndrome

Some years back, Jerry Seinfeld had a hilarious but accurate bit about how restaurant customers view menu prices before and after a meal. Starting out, they are hungry and willing to order everything in sight. Price is no object. At meal’s end, they question why they should pay for anything, since they are not even hungry anymore.

This mirrors the psychological journey of some that engage litigators on a contingent fee, get the desired result, and then wonder why the lawyers are getting what may appear to be an outsize payoff.

In Levenfeld and Associates v. O’Brien, 248 N.E.3d 1053 (Ill. 2024), estate beneficiaries had reached a dead end in trying to recover their $15 to $20 million share of a large estate. Having no funds to hire “hourly” lawyers, they engaged new lawyers (the plaintiffs) on a sliding-scale contingent fee arrangement of 15% on the first $10 million and 10% on amounts over that. The lawyers spent thousands of hours on the project and appeared in multiple courts. The attorneys’ efforts resulted in the beneficiaries’ receipt of settlement offers in the $15 million range. While final negotiations were proceeding, the beneficiaries suddenly fired the lawyers and hired a new firm to finalize a $16 million settlement. The clients paid the new firm a fee of $500,000.

The Levenfeld lawyers sued to recover the approximately $1.7 million in fees they had earned. Although the beneficiaries opposed the claim, the trial and appellate courts both ruled that the Levenfeld attorneys had conferred substantial benefits on their clients and had indeed earned the agreed-upon fee.

CCK COMMENT FOR CHARITIES: It is always dangerous to rely on another charity’s lawyer and to act on advice intended for another organization. We are NOT referring to the more common situation in which a firm undertakes to represent multiple charitable beneficiaries with aligned, identical interests. When that happens, the lawyers assume a duty of loyalty to each one of their clients, all of whom are aware that they are “sharing” an attorney and have consented to the arrangement. Such a situation is usually economically beneficial to the clients and has the advantage of presenting a “united front” to opposing parties. However, getting a “free ride” by simply following what other charities are doing can wind up being very costly. There is no substitute for the watchful management of estate administration proceedings by a qualified professional responsible for protecting the charity’s interests.

Contingent fee arrangements for bequest litigation can remove the economic risks for charities. It is a way to shift the risk to the law firm. Firms that specialize in this type of litigation do tend to charge higher percentages to offset the fact that they simply cannot win every case. Although the good firms – such as the Levenfeld firm appears to be – are adept at predicting the outcome of cases, crystal balls are not perfect.

Remote Contingent Interests

The holder of a remote contingent interest receives an inheritance if there are no more primary beneficiaries left to take remaining estate property. Many people name charities to occupy this role and, frankly, few of these interests materialize. These bequests rarely raise interesting legal questions, but two recent cases are worth noting. They both involve efforts by other beneficiaries to extinguish large charitable remainders.

Charitable Beneficiaries Lose Out on Real Estate

Paul Reed was the trustee and sole beneficiary of his mother Carolyn’s estate. Following her death, he liquidated and took ownership of her cash and investments, but did not immediately title her real estate in his name. Tragically, he died in a motorcycle accident several months after his mother’s passing.

Carolyn’s trust named three charities as remote contingent beneficiaries. One of them, Christian Broadcasting Network (CBN), sought a judgment awarding it (and the other charities) the real estate, still in Carolyn’s name. Paul had done nothing to indicate any interest in the property and had not even paid the taxes.

CBN’s suit was unsuccessful. At the urging of Paul’s executor, the court ruled that the realty had passed to Paul immediately upon his mother’s death and (therefore) now to his estate. Sweem v. Christian Broadcasting Network, 2024 WL 4540201 (Ca.App.).

Eliminating a Charitable Beneficiary

Barry Tarlow, a well-known California attorney, left $40 million in a testamentary trust for his two siblings, Barbara and Gerald. Gerald was to receive his share outright, while Barbara’s share was in a managed spendthrift trust. If Barbara died before Gerald, he would get her money. If she outlived him, her remaining inheritance would pass to Fidelity Charitable (a donor-advised fund) to support law school criminal procedure programs.

Barbara chafed at the spendthrift restriction. Neither sibling relished the idea of a windfall for a charitable beneficiary. They developed an ingenious plan to fix the problem. First, Barbara induced Fidelity to sell its contingent interest to her for $100,000 (a 99.5% discount). Since Fidelity had no idea of the siblings’ endgame, it doubtless followed the “something is better than nothing” principle.

Next, Barbara and Gerald made various legal moves to terminate the testamentary trust, freeing the $40 million to pass to them free of any restrictions and without the risk of a large remainder winding up in the coffers of Fidelity Charitable.

The original trustee (David Simon) saw that this arrangement contravened the testator’s intent. He initiated collateral litigation to “undo” the sale of the Fidelity interest and to restore Tarlow’s estate plan. Simon has succeeded in having the case sent back to the lower court for further review. Estate of Tarlow, 2025 WL 634703 (Cal.App. 2025); Simon v Tarlow, 2025 WL 559615 (Cal.App. 2025).

CCK COMMENT FOR CHARITIES: The Sweem case should unnerve some charities. CBN argued that Paul did not own the real estate because he had not “accepted” it by transferring title. (In addition, he had failed to pay property taxes.) The court disagreed, stating that Paul had become the full owner once his mother died. Is it possible for real estate title to pass without any formal process? Normally, there is no change of ownership without issuance of a deed, but this case could make things a bit murkier for charities that avoid real estate bequests.

Both the Sweem and Tarlow cases show that soon-to-mature remote charitable interests may become a target for beneficiaries that see dollars slipping through their fingers. While the parties in the referenced cases operated within the bounds of the law, the testator’s charitable wishes were not uppermost in their minds. The lesson for charities? Pay some attention to “remote” interests in bequests. Sometimes they do materialize, and in a big way.

Receipts and Releases

Few topics are of greater importance in bequest management than careful review of receipts and releases that emerge during estate administration. Valuable rights can be waived and gigantic liabilities assumed by charities executing these innocent-looking documents without sufficient legal analysis of the key provisions.

In Udell v. Udell, 397 So.3d 1050 (Fla.App. 2024), mentioned above in connection with the reopening of estate administration, the beneficiary signed a release waiving his rights to an $8 million-dollar personal injury settlement for the death of the decedent. The release was prepared (or at least reviewed) by the attorney-executor who had a competing interest in the windfall. (The beneficiary and attorney were father and son, respectively.) The appellate court invalidated the waiver only because it did not specifically mention “fraud” among the causes of action that the release encompassed. Absent that very technical error, the beneficiary that signed the document would have made an expensive mistake.

CCK COMMENT FOR CHARITIES: Although the receipt issue in Udell is narrow, it does raise the general question whether attorneys serving as trustees (and as executors) have a special duty of fairness to beneficiaries, charitable or otherwise. A recent thought-provoking article (Article)^[1] raises this issue specifically with respect to the so-called “exculpatory” clauses that are almost routine in receipts and releases related to bequests.

Exculpatory provisions are those that relieve a trustee from liability for a breach of duty. Sometimes, they relieve a trustee of responsibility for negligence (or even recklessness) in the administration of an estate. The Article argues persuasively that exculpatory provisions may hold an attorney-trustee to a lower standard than that prescribed by lawyers’ ethical standards. Such a situation is suboptimal, to say the least.

Although the Article is not the law, it is a thoughtful reflection on the legality of a frequent practice. Certainly, no charity should reject a release on this basis without a careful analysis of state trust law and rules for attorney conduct. Nonetheless, in a case where a release is onerous and a lawyer-trustee particularly unbending, a request to include language negating a release to the extent that it is inconsistent relevant bar rules might spark an interesting discussion, to say the least.

See CCK Bequest’s published e-book about receipts and releases in bequest administration here.

[1] O’Neill, Too Cozy?  The Ethical Case Against Allowing Attorney-Trustees to Shield Themselves from Personal Liability Through Blanket Exculpatory Clauses, 59 Real Prop. Tr. & Est. L.J. 67 (2024).  Attorneys not only have specific obligations to their clients, but also to the legal system and society at large.  It is the latter class of duties that the Article refers.