[WSBAPT] Power of Executor - beneficiary dealing with addiction

Wed Oct 11 15:01:39 PDT 2023

Just to follow up - I like Bruce's suggestion as a viable alternative to mine as is involved a bit less of a commitment to one course of action.  One of the things you might consider doing in your petition for instructions, is ask the court to appoint a probate GAL to investigate the allegations of incapacity. See RCW 11.76.080.

Regards,

Mark

Mark C. Vohr, J.D. CPGC
Ohana Fiduciary Corporation
A Washington Trust Company
155 NE 100th St., Suite 209
Seattle, WA  98125
Telephone:  (206) 782-1189

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Bruce Moen
Sent: Wednesday, October 11, 2023 2:03 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Power of Executor - beneficiary dealing with addiction

Hi Mark and all,

Here are my thoughts which come from a self-interest viewpoint:  Namely, not getting sued to recover the amount of funds (out of my pocket) distributed to a known junkie who forthwith totally blows the entire inheritance.

The scenario is that I am serving as a successor PR in a messy estate.  The time comes for distribution and one of the distributees is homeless, an addict, aberrational behavior from alleged (but undiagnosed) mental illness, whatever.

My view is that a negligence action may lie against the now discharged PR a year or two later by either the distributee or their conservator and at anytime within the Statue of Limitations. That action would be a plenary civil action against the former PR in their personal capacity.   I think that notice of the discharge may not apply to a de facto incapacitated person on due process grounds. I am not sure whether the defense of such an action would be covered by my E&O carrier. The coverage does include serving as a fiduciary and other hats worn by court appointments, but I have always been a little uneasy whether the company would accept the tender of the defense of a negligent distribution.  Hence, what to do?

Here is what I have done several times over the past 30 years.

I petition the court for instructions. The Petition alleges on information and belief that a potential issue exists as to fitness to receive the funds.  I may not spell out all of the allegations and may or may or may not attribute the sources of the allegations. This is discretionary depending upon the facts, the family dynamics, and the wishes of the family members reporting the allegations to me. But regardless of what I put in the petition, I maintain careful documentation within my file.  I also prepare that documentation with an eye to be admissible evidence in a later potential lawsuit.  My file documents are created and maintained in a manner that complies with the foundation requirements for a potential offer in evidence in the event of a future lawsuit.

The petition will candidly confess that it may, in hindsight, be considered negligence to distribute funds to such a person. This is delicate for two reasons: 1) you do not want your language to be construed against you in a later potential lawsuit and 2) there is often some miscreant remainderman distributee who brings a petition to disallow your fees on the basis that these fees were incurred by acting in your own self-interest. (I see no real issue with this later point because of what I call "permissible conflicts" within fiduciary work.)

I also call upon the court to use its discretion and the petition makes only suggestions of how to instruct me at the hearing on the petition. I include among the suggestions the inherent power of the court to sua sponte order any other instruction that the court deems reasonable.  The suggestions include such actions as appointing a lawyer to investigate the allegations against the distributee, interview the distributee, etc.

There are two reasons that I have only suggestions and invite the court to use the court's own discretion: 1) I do not want any responsibility to be laid at my feet for whatever the court instructs me and 2) I do not want the court to look at me, blink, furrow the court's brow, and ask "What do you want me to do about it?"

Be prepared for serious blowback from the bench at the hearing.  I've been challenged from the bench that the court has no such jurisdiction (wrong, but bone up on 11.96A.020-.040), that the court has insufficient facts to rule upon the petition (draft carefully), the court trying to pass the buck back to the PR (stand firm that you need the instruction) or anything else.

An important secondary purpose of the petition is to use the petition and order in the defense of any future action that may be brought.  Essentially, the petition and order are an Exhibit A to the Answer that would be filed.  You want the Exhibit A to say: "Hey, I saw the issue and I took reasonable steps prior to the distribution.  I followed the court's instruction and I am not negligent."

Thankfully, I have never be sued.  But I have occasions to  distribute funds  to persons about whom I had my doubts.

And to anyone thinking of asking whether I have any forms, the answer is No.  Such a petition should be unique to the facts.

Any comments or suggestions are welcome.  The issue is serious and I agree with Mark's post above.

  Bruce Moen

________________________________
From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> on behalf of Mark Vohr <mcv at ohanafc.com<mailto:mcv at ohanafc.com>>
Sent: Wednesday, October 11, 2023 11:08 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Power of Executor - beneficiary dealing with addiction

Brent -

            In our experience, the short answer is no - the executor does not have the option to convey under alternative means.  However (and there is often a however) there is always the possibility of getting the beneficiary to agree to have their distribution put into trust.  We have had happen on occasion simply by agreement when the beneficiary has some clarity of insight into their own situation.  If the beneficiary is not agreeable, then a little more effort is involved as you are going to have to engage the conservator statutes to get there.  Under the former guardianship statutes, addiction was a basis for a finding of incapacity.  It is not expressly stated in the UGA, but the substantial risk of harm because of addiction is still the route one goes to get there.

            What your client is going to need is clear and convincing evidence of substantial risk or harm due to addiction. This is important both because it is the required burden of proof and one does not want to risk a finding that the petition was filed in bad faith.  So, solid investigation is essential, and one needs to have clear and convincing evidence to support a substantial risk of harm.  Under this plan, you may not end up with a conservatorship as a trust is a perfectly suitable less restrictive alternative provided the beneficiary can execute one and agrees to a trust as an alternative to a conservatorship.  Under that scenario the court would dismiss the conservatorship petition for the less restrictive alternative.

            Hope that helps.  Always curious to know what others think of this dilemma.

Regards,

Mark

Mark C. Vohr, J.D. CPGC

Ohana Fiduciary Corporation

A Washington Trust Company

155 NE 100th St., Suite 209

Seattle, WA  98125

Telephone:  (206) 782-1189

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Brent Williams-Ruth
Sent: Wednesday, October 11, 2023 10:23 AM
To: WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com<mailto:WSBAPT at lists.wsbarppt.com>>
Subject: [WSBAPT] Power of Executor - beneficiary dealing with addiction

Greetings List Member -

I was looking through 11.48 et seq and not finding what I was hoping for......hoping someone may be able to assist with some directional guidance.

Have a simple estate, everything is going great, except one of the beneficiaries is in the midst of a substance abuse battle and they are not winning (currently). The Executor is concerned about giving this person approximately $300k in the form of a cashier's check.

The Will was one created by a low-cost provider and gives no express powers or authorization to make any adjustments to how an inheritance should be conveyed.

Short of going to court and establishing a conservatorship-style situation. Is there statutory authority for an Executor to convey through alternate means?

Appreciate any guidance!

Brent

Brent Williams-Ruth (pronouns: he/him)
Attorney-At-Law

Law Offices of Brent Williams-Ruth, a division of BWR Consulting, PLLC

Physical Address: 500 S 336th Street, Suite 214; Federal Way, WA 98003

**EFFECTIVE IMMEDIATELY** All mail sent through the USPS should be sent to the following address: PO BOX 3319; Federal Way, WA 98063

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