Patricia Hardy Johnson was the mother of three daughters: Kathy Wolens, Deirdre Mistri, and Carol Alexander. Prior to her death, Patricia Johnson maintained several investment accounts with Citibank worth nearly $850,000 that were managed by Morgan Stanley Smith Barney (MSSB).
Ten years ago when she fell ill, Ms. Johnson sent a typewritten letter to her account manager at MSSB requesting that they change her individual accounts to joint accounts with her daughter, Deirdre. Consequently, upon Patricia Johnson’s death four months later, Deirdre had the right of survivorship in the funds.
Upon her mother’s death, Kathy filed a lawsuit against both MSSB, and her mother’s account manager, William Gibson, claiming that the defendants owed a duty to her, even though she was not a customer of the financial institution. She alleged that the defendants improperly converted her mother’s account to joint accounts based solely on a letter addressed to Gibson. Kathy claimed that the authenticity of the letter was questionable, and she argued that it did not explicitly state that a right of survivorship would be conveyed to her sister.
The account manager testified that it was MSSB’s usual protocol, when a customer asks to create a joint account, to contact and obtain the signatures of both parties on the new account agreement. Mr. Gibson did not have a recollection as to whether such an agreement was signed by the parties in this matter. In presenting her case, Kathy’s entire assertion rested on the fact that MSSB deviated from its own internal policies and procedures.
Kathy Lost the Case: How the Whole Thing Could Have Been Avoided
The trial court determined that Kathy had not established a viable legal basis for her claims, because she was not a customer of MSSB and the bank had not established any contractual or special relationship with her. The Court emphasized that even if there had been wrongdoing on the part of Deirdre Mistri, that it would merely provide a possible cause of action against her in connection with the estate, not MSSB.
The whole situation could have been avoided if proper estate planning was in place, and if establishing a joint account was avoided.
Beneficiary designations and joint ownership are things that generally should be avoided in estate planning. They can destroy the effect and intent of properly-drafted comprehensive estate planning which uses a living trust, the only safe tool to truly avoid probate. Joint ownership and beneficiary designations, when used as a way to avoid probate in lieu of a living trust, are often simply recipes for disaster when it comes to leaving money to children.
Here’s why:
• Death or incapacity of a joint owner: What if one of the joint owners dies or becomes disabled prior to the death of a parent? What if one of the named beneficiaries dies or becomes incapacitated prior to the death of the account owner? In either of these cases, probate is typically NOT avoided, and if money winds up going through a beneficiary designation to a disabled beneficiary, it can knock that disabled beneficiary off of vital public benefits such as Medicaid and SSI.
• Healthy Beneficiaries might not stay healthy: The problem with parents using beneficiary designations, even when all of their beneficiaries are healthy, is they never know when a child might become disabled or suffer an accidental death before the parent. It could happen a week or month before the death of the parent and the parent has no chance to change all of his beneficiary designations in part because he is reeling in shock from the untimely death of his child.
• Family Unrest: As with the family in the lawsuit described above, putting one adult child as a joint account owner or beneficiary is almost never good for the relationship of the siblings.
The moral of the story is to make sure your estate planning documents are in place and are done by an experienced estate planning attorney, such as those at the Farr Law Firm. And, again, to avoid lots of problems in the future, don’t put one of your children as a joint owner or beneficiary. If you want an adult child to be on your account to be able to write checks and help you pay bills and manage investments, the right way to do that is through use of a properly-drafted power of attorney, which you register with each financial institution. The Power of attorney allows your child to handle your financial affairs at each financial institution.
Another Issue: Was Patricia Johnson Influenced by Her Daughter, Deirdre Mistri?
Another issue in the case described above is whether or not Ms. Johnson was influenced by her daughter, Deirdre Mistri. Did Patricia Johnson really decide on her own that it was a good idea to send a letter to MSSB four months prior to her death, naming one of her daughters as a joint account owner? We may never know. Regardless, this type of issue can be resolved even before it happens. Here’s how: At the Farr Law Firm, our attorneys always must meet with the parent alone to determine the parent’s wishes in estate planning and to ascertain that the parent is not being unduly influenced by a child.
Why We Meet With Parents Alone
An adult child may have assisted his or her parents with making an appointment and transportation to our office. But when one of our attorneys directs the parents to his or her office, the adult child is asked to wait in the waiting room until the parents are finished, or to leave the office once it becomes time to discuss the detailed wishes of the parent’s.
The parents may want the child in the room for moral support and to help answer questions, but ethically we cannot allow this.
The adult children may feel hurt, angry, or annoyed that he or she is not included in the conversation. However, the adult child should not feel hurt, but rather feel relief that he or she has chosen an ethical attorney to meet with their parents.
There are several reasons why our attorneys need to meet with parents alone. Attorneys are bound by certain ethical guidelines that make it difficult for non-clients (including family members) to be present during portions of the consultation, as follows:
The 4 C’s of Elder Law Ethics
1. Client Identification: All lawyers have an ethical obligation to make it very clear who their client is. The client is the person whose interests are most at stake in the legal planning or legal problem. The client is the one – the only one – to whom the lawyer has professional duties of competence, diligence, loyalty, and confidentiality. This is especially important in estate planning and elder law, because family members may be very involved in the legal concerns of the older person, and may even have a stake in the outcome.
2. Conflicts of Interest: Lawyers must avoid conflicts of interest, which means that in an estate planning and elder law situation, a lawyer will only represent one individual or one married couple. For example, when legal planning involves property, such as a family home in which several people have an interest, these interests may be conflicting. Sometimes, joint representation is possible, even with potential conflicts of interests, but it is more likely that we will be representing only the older person whose interests are at stake.
3. Confidentiality: Lawyers must keep information and communications between clients and the lawyers confidential unless the client waves that right to confidentiality after meeting privately with the attorney. In other words, lawyers cannot share client information with other family members without the client’s approval. Some clients want all information shared and family members involved in discussion. Some merely want family members to be given general updates. Others want complete confidentiality. In all cases, we strive to keep our clients – and whomever they choose to involve – fully informed of the issues, options, consequences, and costs relevant to their concerns, and to be responsive to their goals and objectives.
4. Competency: Lawyers have ethical obligations when working with clients whose capacity for making decisions may be diminished. They must treat the impaired person with the same attention and respect to which every client is entitled, which includes meeting with them privately and giving the client enough time to explain what he or she wants. This means meeting privately with the client and giving him or her enough time to explain what he or she wants. Assessing a client’s capacity to make decisions is part of our getting to know the client. While most clients can explain a problem and what it is they want, there will be some clients who cannot. Speaking privately allows us to find this out. When family members answer all the questions, it makes it difficult for us to determine our client’s level of understanding.
Avoid Issues in Advance: Get Your Estate Planning in Place the Right Way at the Farr Law Firm.
We here at the Farr Law Firm have strategies in place to help families plan for themselves and their loved ones. With advance planning, each person, regardless of their family situation, can retain the income and assets it has taken a lifetime to accumulate and the peace of mind that their child(ren)’s needs will be adequately and properly addressed. If you or members of you family have not done Incapacity Planning or Estate Planning, or if a loved one needs long-term care or will in the near future, please contact us as soon as possible to make an appointment for a consultation:
Estate Planning Fairfax: 703-691-1888
Estate Planning Fredericksburg: 540-479-1435
Estate Planning Rockville: 301-519-8041
Estate Planning Washington, D.C.: 202-587-2797
About Evan H Farr, CELA, CAP
