Providing for the distribution of your assets upon death is one way to ensure that your loved ones are provided for. Sometimes, however, unique circumstances lead to ambiguity as to certain assets.
Such was the case in Grey v. Grey, a November 2013 decision by the Appeals Court of Massachusetts. The dispute arose upon the death of a man, at which time, his wife and his children from a previous marriage argued over the way his assets were to be divided. At the time of his death, an action for divorce was pending in court between the man and his wife. He passed away before it was finalized. When the man died, his assets were substantial. Due to the pending divorce action, the parties were disputing how the estate assets would be divided.
About a year and one-half after the man’s death, the parties attempted to settle their dispute, and executed three documents explaining their agreement regarding the distribution of the man’s assets. However, right before the official decree was entered, another dispute arose, over the distribution of just over $97,000 in tax refunds.
The wife claimed she was entitled to a 66.9 percent share of the money, and the children should get 33.1 percent, pursuant to the residual clause in the settlement agreement. However, the children believed they were entitled to 100 percent of the funds, and petitioned the court to find in their favor. In the meantime, the remainder of the estate that was not disputed was divided pursuant to the settlement, and paid to the wife and children.
The Appeals Court of Massachusetts considered the three documents that were part of the settlement, in their determination regarding the tax refunds. The documents included a “Will Settlement,” an additional “Letter” and an “Estate Administration Agreement.” Upon reading them, the court determined that the Will Settlement and the Letter both were silent as to how the tax refund money would be treated, and divided.
Particularly, according to the Will Agreement, the wife was entitled to $7,936,678, tax-free, and the children would each take $1,962,887 after the taxes were paid on the estate. It further indicated that the children would bear the sole responsibility for all tax liability. The Letter indicated that $3 million dollars would be placed in an escrow account to “settle claims from a separate lawsuit and ‘to satisfy the obligations of the Children in the event of any increase in the estate tax’.”
The Estate Administration Agreement provided some additional insight as to how discrepancies should be handled, and it was this document that the court considered in making its decision. The Agreement specifically indicated that it would control in the event of a conflict, and further provided that if there was an increase or decrease in the estate taxes when finally calculated, “any increase or decrease therein shall be to the benefit or detriment of the Children[.]”
The court determined that the document clearly indicated that the children would benefit from tax increases or decreases, and that the residuary clause would not control. The court found in favor of the children, and provided attorneys’ fees to them as well.
Disputes over estate administration can be very complicated. If you are in the process of planning for the administration of your estate, or if you are someone who needs assistance distributing or obtaining estate assets, the assistance of an experienced estate attorney can help provide you with the best possible advice for your estate planning needs.
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