Wills, Trusts, Guardianships, and Fiduciary Administration
| Publication year | 2016 |
Wills, Trusts, Guardianships, and Fiduciary Administration
Mary F. Radford
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This Article describes selected cases and significant legislation from the period of June 1, 2015 through May 31, 2016 that pertain to Georgia fiduciary law and estate planning.1
A. Virtual Adoption
Virtual adoption is a declaration a court issues after a decedent has died that allows a child whom the decedent agreed to adopt to be treated, for inheritance purposes, as if the child had been legally adopted.2 The case of Johnson v. Rogers3 illustrates the interaction between the virtual adoption doctrine and Official Code of Georgia Annotated ( O.C.G.A.) section 53-4-48,4 which allows a child who is adopted after his or her parent's will has been executed to take a share of the parent's estate equal to the share the child would have inherited had the parent died intestate. In this case, the wife of a couple who had raised their
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grandniece wrote a will devising some property to the grandniece and the bulk of her estate to her husband.5 When the wife died, the grandniece tried to claim an intestate share of the estate under the theory that she was virtually adopted by the couple after the wife's will was executed, and thus was entitled to share the estate with the surviving husband.6 Although the Georgia Supreme Court discussed in detail the circumstances under which it would recognize a virtual adoption,7 it concluded the doctrine would not apply in this case because the doctrine is applied only when a decedent has died intestate.8 In this case, the decedent died with a will, rather than intestate, so the court refused to expand the doctrine to cover this case.9 The court noted that "only a clear legislative direction could abrogate the rule that virtual adoption requires intestacy."10
B. Breach of Fiduciary Duty
In Wells Fargo National Bank, N.A. v. Cook,11 the Georgia Court of Appeals examined whether a bank trustee of a charitable remainder annuity trust (CRAT) had breached its fiduciary duty and contractual obligations in the management of the trust. The CRAT was set up by a couple who planned to use the annuity stream from the CRAT to fund their retirement.12 With a CRAT,
donors can transfer assets into a trust and then provide for, among other options, an annual distribution to one or more beneficiaries for their lifetime, with the remainder of the trust paid to a qualified charity upon the beneficiaries' death [citing 26 U.S.C. § 664(d)(1)]. The annuity amount paid to beneficiaries must be in a predetermined fixed sum (calculated on the date that the CRAT is funded), and it must be no less than 5 percent and no greater than 50 percent of the initial fair market value of the trust [citing 26 U.S.C. § 664(d)(1)(A)].13
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As their annuity amount, the couple chose an amount equal to 7.5% of the initial fair market value of the trust.14 Over time, the bank paid the annuity amount and sent reports to the couple. The couple became concerned when the reports showed the annuity distributions were depleting the trust funds at a high rate, and they claimed that the bank had guaranteed an annual distribution from the trust to the couple for the remainder of their lifetimes.15 When the trust funds had been completely depleted, the couple sued the bank, alleging the bank had breached its fiduciary duty by mismanaging the funds and its contractual promise to provide an annuity stream to the couple for the rest of their lives.16 The court of appeals began by stating that the bank deserved summary judgment in its favor for any claims accruing before April 2010 because those claims were barred by the applicable statute of limitations.17 As to the claims not barred by the statute of limitations, the court of appeals held these claims failed as a matter of law because the couple did not provide any expert testimony demonstrating mismanagement of trust funds resulting in the depletion of the trust assets.18 As to the breach of contract claim, the court agreed with the bank that the trust document itself clearly contemplated that the annuity distributions could be made from the trust principal if the income earned by the trust was not sufficient to pay the designated amount.19 Furthermore, the court found nothing in the trust document to suggest the trustee would continue to make payments to the couple after the trust funds were depleted.20
C. Guardianship of Minors
Generally speaking, Georgia probate courts are responsible for overseeing the guardianships of minors.21 The probate court has the power to appoint a "permanent guardian" for a minor who has no other
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parent or guardian.22 This means, in the case of a child who has a living biological or adoptive father and mother, a "permanent guardian" can only be appointed by the probate court for the minor child if the biological or adoptive father's and mother's parental rights have been terminated or voluntarily relinquished.23 The Georgia Juvenile Code,24 which in some situations allows a juvenile court to appoint a "permanent guardian," does not take the same approach.25 The juvenile court may place a "dependent child"26 in a "permanent placement," which may include placement of the child with a "permanent guardian."27 However, placement by the juvenile court of a child with a "permanent guardian" does not contemplate that the parents' parental rights have been terminated or relinquished; in fact, placement with a "permanent guardianship" is an alternative to the termination of the parents' parental rights. In a petition for the appointment of a permanent guardian filed in the juvenile court, the petitioner must state that termination of parental rights is not in the best interests of the minor.28 In addition, a permanent guardianship order issued by a juvenile court must include "a reasonable visitation schedule which allows the child . . . to maintain meaningful contact with his or her parents. . . ."29 Thus, unlike a permanent guardianship ordered by a probate court—which is typically contemplated to continue until the minor reaches the age of
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majority or sooner dies30 —a permanent guardianship established by a juvenile court may terminate, and the child may be returned to his or her parents while the child is still a minor.31
In In the Interest of M.F.,32 the juvenile court placed the minor into a permanent guardianship due to the substance abuse of her parents.33 The father later sought to terminate the permanent guardianship when he had resolved his addiction problems. O.C.G.A. § 15-11-244(c)34 allows the juvenile court to modify, vacate, or revoke a permanent guardianship,
upon a finding, by clear and convincing evidence, that there has been a material change in the circumstances of the child who was adjudicated as a dependent child or the guardian and that such modification, vacation, or revocation of the guardianship order and the appointment of a new guardian is in the best interests of the child.35
The juvenile court in this case refused to vacate the guardianship because it did not find a change in the circumstances of the father that fell within the types of changes contemplated by the statute.36 The Georgia Supreme Court disagreed with the juvenile court.37 First, the supreme court pointed out that a permanent guardianship is granted by a juvenile court only after it determines that a termination of parental rights is not warranted.38 Thus, the father's parental rights remained intact. Second, the supreme court stated a permanent guardianship granted by a juvenile court is "presumptively permanent, in the sense that the permanent guardians are vested with parental power indefinitely, and a heavy burden is put upon those who would seek to change or undo the guardianship. . . ."39 The court also noted that the law recognizes a presumption that a child ordinarily belongs in the custody and care of her parents.40 Thus, the court determined the change in the father's circumstances clearly fell within the type of change contemplated by the statute.41 Finally, the court discussed the fact that any other
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reading of the statute would call into question its constitutionality. The court pointed out the presumption in favor of parental custody is not just "a presumption of the statutory and common law, but it has roots in the fundamental constitutional rights of parents" to direct the upbringing of their children.42 Thus, to the degree there was any ambiguity in the statute, the court chose to invoke "the doctrine of constitutional doubt and construe the statute so as to avoid the serious constitutional concerns" another construction might raise.43
A. Uniform Guardianship and Conservatorship Proceedings Jurisdiction Act
In 2016, the Georgia legislature added a new chapter to Title 29 of the Georgia Code.44 Title 29 contains the statutes dealing with the guardianship and conservatorship of minors and incapacitated adults.45 The new chapter, Chapter 11, is entitled the "Uniform Adult Guardianship and Conservatorship Proceedings Jurisdiction Act" (the Act).46 The Act addresses issues that arise when an adult who is the subject of guardianship or conservatorship proceedings (the respondent)47 has contacts with two or more states, thus raising the question of which state should exercise jurisdiction over the proceedings.48 Under the new Act, the court that has exclusive jurisdiction over the guardianship or conservatorship proceeding is the appropriate court in the "home state" of the respondent.49 The respondent's "home state" is,
the state in which the respondent was physically present, including any period of temporary absence, for at least six consecutive months
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immediately before the filing of a petition for a conservatorship order or the appointment of a guardian or, if none, the state in which...
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