By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Administration and Probate Litigation Attorney

The title to this blog is a recurrent question I’m asked in my practice and one I deal with often in probate estate administration and/or estate litigation.

Here’s a recent case which addressed this issue.

PROCEDURAL BACKGROUND

The Trustee of decedents Living Trust, and the brother of the decedent appealed from an Order of the Trial Court denying the brother’s motion to block the transfer of substantial funds to unrelated family members pursuant to a TOD designation listed on the account.   Until the merits of their complaint were resolved at trial, the Appellate Court denied their appeal.

The issue for review was whether the lower court correctly dismissed the complaint for failing to state a claim upon which relief could be granted.

FACTUAL BACKGROUND

The decedent executed transfer on death (TOD) beneficiary designations for three (3) Ameriprise Financial Accounts   In the TOD designations, decedent assigned 75% of the funds to an ex-girlfriend and the remainder to charitable organizations.

In August 2016, the decedent executed estate planning documents including a Will and Living Trust (Trust).  Decedent selected his attorney to be his trustee.  The appellants maintained that decedent intended all assets of his estate to be transferred to the Trust upon his death, and for the trustee to then distribute the funds in trust in accordance with its terms.   In the Trust, decedent named multiple beneficiaries.

Prior to his death, decedent transferred some of his real estate and assets into the Trust, however, decedent failed to transfer the Ameriprise accounts into the Trust.   It was unknown why decedent did not transfer the accounts.  As a result, Ameriprise distributed the balance of the decedent’s accounts that had a total approximate value o $660,000.00 in accordance with the TOD beneficiary designations

Under the terms of the Trust, however, the TOD beneficiaries would have received much less.  The distribution of funds pursuant to the TOD designations resulted in a shortfall to the trustee and the trustee was unable to distribute the remaining gifts to the beneficiaries designated in the trust.   As a result, the Trustee filed a complaint challenging the validity of the TOD designations claiming the transfers unjustly enriched the TOD beneficiaries because decedent intended to transfer the Ameriprise accounts into the Trust.   He argued equity required the Court to transfer the proceeds from the Ameriprise accounts into a constructive trust to be distributed pursuant to the Trust’s terms. The Trustee requested an injunction “enjoining (the TOD Beneficiaries) from “disposing of or otherwise dissipating the corpus of the constructive trust.”  Obviously, the TOD beneficiaries moved to dismiss the complaint for failing to state a claim upon which relief could be granted, arguing Decedent’s actions, by not transferring the Ameriprise accounts into the Trust prior to his death, were dispositive.

The Trial Court held that Decedent’s TOD designations superseded the contrary provisions in the Trust because the Ameriprise accounts were non-probate assets.

Accordingly, it was the beneficiary designations in the Ameriprise account, not any contrary provisions in the trust, which controlled the distribution of the funds in dispute.  Decedent had every opportunity during the three months between the time he established his trust and his death to change the beneficiaries of his Ameriprise account, but he did not do so.

The Court denied Trustee’s motion for preliminary injunction and dismissed the complaint with prejudice.

In my next post I’ll further discuss the legal argument on appeal before the Appellate Court.

To discuss your NJ Estate Administration and Probate Litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.