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A Better Partnership
June 08, 2021

Be Careful Using that Flowchart to Explain Your Client's Estate Plan

It is not uncommon for an estate-planning attorney to use a flowchart to explain the operation of the estate plan to the client, particularly where the plan is complex. However, if such flowchart omits a key element of the plan, there may be unintended legal consequences, as shown by In re December 23, 2002 Restatement of the Vivian Stolaruk Living Trust, Docket No 352064, 2021 Westlaw 1597085 (Mich Ct App Apr 22 2021) (unpublished).
 
In 2002, Vivian created a trust which provided for her husband, Steve, her son and daughter, and other beneficiaries. Vivian’s son attended the meeting where her estate-planning attorney explained the trust. The attorney worked from a flowchart rather than the trust document. The flowchart showed that if Vivian was survived by her husband, Steve, then Steve had a testamentary power to appoint assets among Vivian’s children and grandchildren, and that any assets not so appointed would pass according to the terms of the trust agreement which included substantial gifts for the son and daughter. Vivian’s son and daughter were provided with a copy of the trust agreement.
 
In fact, Vivian’s trust agreement provided that her husband had the power to appoint trust assets to children, grandchildren or a charity. The flowchart did not mention the possibility of appointing assets to a charity.
 
Vivian died before Steve. Many years later, Steve amended his estate plan to appoint all assets of Vivian’s trust to a charity, disinheriting the children and grandchildren. In 2019, after Steve died, the children petitioned the Oakland County probate court to reform Vivian’s trust agreement to delete the husband’s power to appoint in favor of a charity, on the grounds that such provision was not explained to Vivian and that its inclusion in the trust agreement was a mistake unintended by Vivian.
 
The trustee moved to dismiss the children’s petition based on the doctrine of laches, which bars a petitioner’s claim for equitable relief where there has been an unreasonable delay in filing suit and where the respondent would be prejudiced if the suit were allowed to proceed. The probate court found the children’s 2019 lawsuit was barred by laches because they had possessed a copy of Vivian’s trust agreement since 2003; therefore, the probate court dismissed the children’s petition.
 
The children appealed. A divided panel of the Michigan Court of Appeals reversed the probate court’s dismissal of the reformation petition. The appellate court found that the children’s delay might have been reasonable, given the circumstances of the flowchart. “To be sure, the flowchart is not a legal, binding document. Nevertheless, [the attorney’s] repeated use of the flowchart to represent how the estate plan operated, and the fact that nothing on the flowchart indicated that the surviving spouse could exercise [his] testamentary [power of appointment] to appoint [all of the trust assets] to a charitable organization of that spouse’s choosing, [could] reasonably support the conclusion that, at least in 2003, due diligence did not call for [the children] to scrutinize the actual terms of the [trust agreement].” 2021 Westlaw 1597085 at *6.
 
Material discrepancies between a flowchart and the estate-planning documents could be raised in litigation over a deceased client’s testamentary intent. If the client only reviewed the flowchart and not the trust agreement, and if the flowchart omitted key provisions of the trust agreement, then a contestant could argue that the client did not accurately or fully understand the terms of the trust agreement. Care should be taken not only to prepare a flowchart carefully, but also to review both the trust agreement and the flowchart with the client.
 
If you need assistance with a probate court matter, please contact Warner attorneys David Skidmore (dskidmore@wnj.com) or Laura Morris (lmorris@wnj.com).

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