Wills, Trusts, Guardianships, and Fiduciary Administration - Mary F. Radford

• Publication year: 2008

Wills, Trusts, Guardianships, and

Fiduciary Administrationby Mary F. Radford^*

This Article describes selected cases and significant legislation from the period of June 1, 2007 through May 31, 2008 that pertain to Georgia fiduciary law and estate planning.

I. Georgia Cases

A. Undue Influence

In May 2008, the Georgia Supreme Court and the Georgia Court of Appeals each decided cases that clarified the burden of proof and the role of presumptions in an undue influence case.¹ In Horton v. Hendrix,² the daughter of the settlor of a trust asserted that the settlor's son had exercised undue influence over their mother. The daughter offered evidence that was sufficient to raise a rebuttable presumption that the son had exercised this influence.³ The daughter then objected when the court instructed the jury that she still maintained the ultimate burden of persuasion.⁴ The court of appeals held that the jury was given a proper instruction.⁵ The court of appeals pointed out that when the plaintiff offers evidence that is sufficient to raise a rebuttable presumption of undue influence, the burden of going forward with the evidence then shifts to the defendant.⁶ However, the ultimate burden of persuasion always remains with the person who is asserting undue influence.⁷

In Bean v. Wilson,⁸ the supreme court examined what happens when a person who challenges a will based on undue influence offers evidence sufficient to raise a presumption of undue influence and the presumption is then rebutted.⁹ The supreme court affirmed that even though the presumption is rebutted, it does not "vanish" in the face of this contrary evidence.¹⁰ The presumption alone may remain a sufficient ground for a jury to find that undue influence was exercised.¹¹ Thus, the fact that the presumption has been rebutted does not mean that the person accused of exercising the influence is entitled to a directed verdict.¹²

B. Probate Practice and Procedure

Two cases decided during the reporting period addressed issues that have arisen as a result ofamendments to statutes that relate to practice and procedure in the probate courts.¹³ The first case involved the right to jury trials in appeals from probate courts and the second involved the right to open default judgments in the probate courts.¹⁴

The court of appeals opinion in Montgomery v. Montgomery¹⁵ answered questions surrounding the right to a jury trial in an appeal from a probate court to a superior court.¹⁶ The questions arose as a result of a 1998 amendment to section 5-3-30 of the Official Code of Georgia Annotated (O.C.G.A.).¹⁷ Prior to the amendment, that code section provided that all appeals to the superior court or state court would be tried by a jury at the first term after the appeal unless the parties waived trial by jury by consent.¹⁸ In 1998 the code section was amended to provide that any appeal from a magistrate court would be placed on the superior court's calendar for a nonjury trial unless either party filed a demand for a jury trial within thirty days of the filing of the appeal.¹⁹ No mention of an appeal from a probate court was made in this new section. In Montgomery the child of the decedent argued that this amendment meant there was no longer a right to a trial by jury in an appeal from a probate court to a superior court.²⁰ The superior court disagreed. It found that the right to a trial by jury existed, but the surviving spouse in this case had waived her right by not filing her demand within thirty days of the appeal, as required by amended O.C.G.A. Sec. 5-3-30.²¹ The court of appeals, however, decided that amended O.C.G.A. Sec. 5-3-30 simply did not apply to appeals from the probate court.²² The court then went on to determine what rules do apply to the availability of a jury trial in superior court on appeal from a probate court.²³ The court determined that "in repealing former OCGA Sec. 5-3-30 the legislature intended that appeals from the probate court to the superior court would continue without special limitations on the right to a jury trial."²⁴

In the case of In re Estate of Ehlers,²⁵ the court of appeals addressed whether O.C.G.A. Sec. 9-11-55(a),²⁶ which allows parties who are in default to open the default as a matter of right within fifteen days,²⁷ applies to default judgments in the probate court.²⁸ In this case, a petition for year's support was filed pursuant to O.C.G.A. Sec. 53-3-5,²⁹ and the court mailed a copy of the petition to the representative of the decedent's son.³⁰ The court received a signed return receipt from the son's representative, which was dated November 7, 2005, on November 9, 2005. From this return receipt, in accordance with O.C.G.A. Sec. 53-11-10(a),³¹ the probate court determined that any objection to the amended petition had to be filed no later than ten days from the receipt, thus by November 17, 2005. When no objection was filed by that date, the probate court determined that the proceeding was automatically in default.³² The son's representative then sought to open the default, but the probate court refused to do so.³³ The court of appeals determined that the son's representative had the right to open the default, citing Greene v. Woodard,³⁴ a 1991 case in which it had reached this same conclusion.³⁵ The court noted that even though O.C.G.A. Sec. 15-9-47,³⁶ which seems to grant to the probate judge the discretion to open a default judgment in probate court, had been enacted after the decision in Greene, nothing in the new statute conflicted with the right granted under O.C.G.A. Sec. 9-11-55(a) to open a default judgment within fifteen days and upon the payment of costs.³⁷

C. Compensation of Conservators and Personal Representatives

In Georgia, personal representatives and conservators³⁸ are entitled to compensation for their work in the administration of the estate or the management of the ward's assets.³⁹ Subject to some other agreement for determining compensation, the method of calculating the compensation of these fiduciaries is set out in the O.C.G.A.⁴⁰ A component of this statutory compensation is that the fiduciary is entitled to receive a "[t]wo and one-half percent commission on all sums of money" received by the fiduciary and a similar commission on sums paid out.⁴¹

In In re Estate of Miraglia,⁴² an individual who was appointed conservator of an adult calculated his commission as two and one-half percent of the value of the stocks and bonds that he had managed.⁴³ In determining whether these items of property constituted "sums of money," as described in the conservatorship statute,⁴⁴ the court of appeals pointed out that the same wording, as it appeared in the statute relating to personal representatives,⁴⁵ had been strictly construed in Walton v. Gairdner.⁴⁶ In that case, the term "sums of money" did not include stocks and bonds.⁴⁷ The court of appeals also noted that it would reach the same conclusion even without Walton because the ordinary meaning of the term "money" did not include stocks and bonds.⁴⁸

II. Georgia Legislation in 2008

A. Uniform Prudent Management of Institutional Funds Act

In 2008 the Georgia General Assembly enacted the Georgia Uniform Prudent Management of Institutional Funds Act (UPMIFA).⁴⁹ The act, which replaces the Georgia Uniform Management of Institutional Funds Act,⁵⁰ is modeled after, but does not replicate in its entirety, the uniform act that was promulgated by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 2006.⁵¹ UPMIFA applies to trusts and other entities or institutions that operate solely for charitable purposes.⁵² The act provides updated guidance for the management and investment of these institutional funds.⁵³

UPMIFA strengthens the protection of donor intent by requiring the charity to follow the intent of the donor, whether expressed in the gift instrument itself or in an express written agreement between the donor and the charity.⁵⁴ UPMIFA adopts an investment standard that requires the person responsible for managing and investing the funds to "manage and invest such fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances, considering the purposes, terms, distribution requirements, and other circumstances of the institutional fund."⁵⁵ With regard to endowment spending, UPMIFA eliminates the concept of tying endowment spending to "historic dollar value."⁵⁶ The former act permitted the expenditure of appreciation of an endowment fund to the extent of the fund's appreciation above its historic dollar value.⁵⁷ Historic dollar value was the value of the contribution at the time it was made.⁵⁸ The new act directs the institution to determine spending based on the total assets of the endowment fund, with a focus on the uses, benefits, purposes, and duration of the endowment fund.⁵⁹

The Georgia version of UPMIFA contains a variation from the uniform act on the rule relating to diversification of trust funds.⁶⁰ The uniform act adopts this rule: "An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification."⁶¹

The Georgia version of UPMIFA replaces that language with the following:

An institution shall reasonably manage the risk of concentrated holdings of assets by diversifying the investments of the institutional fund or by using some other appropriate mechanism, except as provided in this paragraph, as follows:

(A) The duty imposed by this paragraph shall not apply if the institution reasonably determines that, because of special circumstances, or because of the specific purposes, terms, distribution requirements, and other circumstances of the institutional fund, the purposes of such fund are better served without complying with the duty. For purposes of this paragraph, special circumstances shall include an...