Authored by: Wrightsel & Wrightsel
R. Douglas Wrightsel
Bradley B. Wrightsel
Are your conversations with your doctor and attorney private? You expect that when you meet privately with your doctor to discuss health issues or with your lawyer to discuss legal matters that these conversations are between you and your professional and not to be shared with others without your permission. While that is generally known to be the case, what about when you die? Should the privilege die when you do?
When you die, these privileges will be held by the fiduciary of your estate, who is typically the person you select and entrust to be your executor. As was the case when you were alive, your estate fiduciary must give express written consent to the waiver of the medical and legal privilege. However, effective March 31, 2003, Amended House Bill No. 533 (Am. H. B. No. 533) chopped away at the privilege of keeping this information private by granting interested parties, in a will contest, the ability to have the medical privilege waived. Additionally, House Bill 144, which provides for the waiver of the attorney-client and doctor-patient privilege in probate litigation cases, has passed the House and Senate and will be enacted in the near future. The ultimate purpose of this article is to discuss the scope of these changes.
Will the change made by Am. H. B. No. 533 and the upcoming changes in H. B. 144 be considered good changes? The answer may depend upon which side of the contest you are on. For example, our firm has developed a niche in defending the validity of wills. In this type of practice, it would be very rare to advise a client to waive the estate’s privileges (and never before reviewing the privileged material first). Our opponents, the counsel for the will contestant, may feel that the privilege is not being asserted to preserve confidences of the deceased, but rather to win the case.
From a public policy standpoint on the issue of privilege, there are really two views which are best illustrated by ways of example. On the one hand, you have a situation where a relative, feeling slighted by the omission of his name in decedent’s will, contacts an attorney, who agrees to take the matter on a contingency fee basis, i.e., there is really nothing for the client to lose. While there may be no merit to the case (and perhaps the testator knew this relative to be just the type of scoundrel who would file such a lawsuit), a complaint is filed in a “shotgun” fashion, alleging that the testator lacked testamentary capacity, that there was undue influence exerted on a susceptible testator, and that the will was not properly executed (the complainant may even throw in a claim of tortuous interference with expectancy of inheritance for good measure). This strategy would entail lengthy discovery, requests for waivers of privileges, and perhaps a motion to remove the fiduciary. The plaintiff may find a “carrot” in the discovery process (enough to survive a motion for summary judgment) or at least create enough stress, headache and expense to negotiate a settlement.
On the other hand, you have a situation where your client tells you that a person in a trusted position took advantage of a relative, who was elderly and vulnerable. Your client tells you that this person became very involved in the relative’s financial affairs and ultimately the client’s relative made a deathbed will which drastically changed the relative’s estate plan. This change, of course, benefited the conspirator by making him both the beneficiary and executor. The conspirator, in this instance, will certainly decline to waive the medical or legal privilege and/or to cooperate in the discovery process, creating delay and further deception.
Lets call the person who is most concerned about situation one the proponent of the privileges, and the person who is most concerned about situation two the proponent of full disclosure. No matter which category you fall under, the change implemented by Am. H. B. No. 533 and the upcoming enactment of H. B. 144 shows the legislature’s willingness to relax the law of privileges.
Since at the time of this article the change in the law affects only the medical privilege and not the attorney-client privilege, the two privileges are addressed separately below. Ohio Revised code §2317.02 creates both of these privileges in Ohio. However, although these privileges are statutorily-created, the courts have not hesitated to expand the reach of the waiver. Probate courts tend to take the view that the fiduciary must remain impartial and that the potential use of the statutory privileges for the fiduciary’s own advantage is a conflict of interest worthy of the fiduciary’s removal. In general, if your client is the executor and a beneficiary under the will, and you assert the privilege on your client’s behalf, the probate court will replace your client with a disinterested successor fiduciary. Therefore, in practice, the proponent of the privilege would state that the waiver of the privileges has been “forced” by the probate courts. The proponent of full disclosure feels that the court acted properly and should be assisted by the statutory revision.
Significantly, the previous change to O.R.C. §2317.02 dealt with will contest actions only. As noted above, H. B. 144 will expand the statutory waiver of the privilege to all probate litigation disputes, based upon the logic that there is no legitimate reason to distinguish between the types of disputes. Before the upcoming changes in H. B. 144, the fact that the statute was specific in stating "will contest actions" may have actually made it more unlikely that a probate court would “force” a waiver of the privilege in other probate litigation matters. Clearly the enactment of H. B. 144 provides a significant victory for the advocates for full disclosure.
Furthermore, the previous change to O.R.C. §2317.02 stated that a physician may be compelled to testify “only as to the patient in question on issues relevant to the competency of the patient at the time of the execution of the will.” This language provided the proponent of the privilege with two arguments. First, the waiver deals with “the competency of the patient” only. This would obviously not cover the susceptibility of the patient to undue influence. Therefore, if the contestant of the will is arguing undue influence only and not lack of testamentary capacity, there is no basis for the waiver of the medical privilege.
Second, previous change to O.R.C. §2317.02 specifically stated, “at the time of the execution of the will”. Therefore, the physician would not be permitted to reveal confidences not tied directly to the date of the execution of the will. This language allowed the proponent of the privilege to argue that the statute is specific as to what is allowed to be disclosed, and that the court is not permitted to expand the scope of the statutorily-created privilege. Technically, if there is no medical information occurring during the period of the execution of the will, there is no basis for the waiver of the privilege.
As previously stated, the attorney-client privilege was not altered by Am. H. B. No. 533. The current statutory law states that an attorney shall not reveal “a communication made to the attorney by a client in that relation or the attorney’s advice to a client, except that the attorney may testify by express consent of the client or, if the client is deceased, by the express consent of the surviving spouse or the executor or administrator of the estate of the deceased client …” There was great effort to extend the statutory-waiver to the attorney-client privilege, by adopting Uniform Evidence Rule 502(d)(2). While the estate fiduciary still holds the attorney-client privilege for the decedent (we will save the discussion of what constitutes a waiver for another time), the Ohio Legislature is providing a waiver of that privilege in probate litigation cases.
In many instances, the attorney representing the estate prepared the last will and testament for the decedent and was a witness to the execution of the document. This situation would probably result in two things happening. First, the court would find that the testator waived any privilege and consented to the attorney testifying in the future with respect to the execution of the document. Proponents of the privilege would argue that the waiver should not expand beyond testimony regarding the execution of the will. Second, the attorney could be disqualified from representing the fiduciary in defending the validity of the will. This really is not that big of a deal. Another attorney can simply come in and assert the privilege. Remember the privilege is held by the client and not the attorney.
Like with the medical privilege, if the fiduciary arbitrarily refused to waive all aspects of the attorney-client privilege, the probate court would likely consider removing the fiduciary. However, the legislature’s previous refusal to statutorily change the attorney-client privilege, could be construed as holding this particular privilege in higher regard. However, with the upcoming implementation of the statutory waiver of the attorney-client, the proponent of full disclosure is clearly the winner.
In conclusion, one should know about the ever evolving changes in the area of statutory privileges. If you find yourself in a situation where you hold a privilege or represent a person who does, evaluate the situation. First, review the records yourself, so you know what information would be disclosed. If there is nothing there, you may not want to make a big deal out of fighting the waiver of the privilege and use the information in a motion for summary judgment. However, you may want to make an effort to protect privileged information that is irrelevant to any claim contesting the validity of the will.
The authors suggest that estate planners protect their clients in advance from potential will contests. This can be done by following a routine or a checklist regarding the preparation and subsequent execution of the document. It is useful to keep notes of the meetings with the client and of the execution of the document. These notes should contain specific information regarding testamentary capacity and undue influence. Lastly, it is highly recommended to exclude will beneficiaries from being in the room during the execution of the document (make this a habit). While their presence certainly is not enough to establish a claim of undue influence, the exclusion of their presence would practically eliminate the potential claim.
Wednesday, January 18, 2006
Authored by: Bradley B. Wrightsel
Wrightsel & Wrightsel
3300 Riverside Drive
Columbus, OH 43221
In this day and age, you frequently will have clients who own a vacation home or plan to acquire one. There are different factors causing people to acquire such property. It may be a convenience factor for a client who spends a large amount of time in another location, e.g., a spot where one likes to frequently vacation, or it may be a result of an inheritance, or it may have been acquired as an investment. Ownership of a vacation home poses several considerations for your client; however, the scope of this article is limited to the issue of title to property outside the State of Ohio. If a client consults with you regarding the purchase of a vacation home outside Ohio, it is imperative that you review with your client title ownership of the property. In reality, however, most clients consult with us after the fact. Therefore, if you are preparing an estate plan for a client who already owns vacation property, you need to determine how it is titled and consider whether re-titling might be appropriate. In determining titling, demand to see the deed, don’t rely upon your client’s understanding.
The impact of titling out of state property is similar to that of in state property. It establishes who owns the property and affects the manner in which the property will pass at your client’s death. Titling and transfer of the ownership of real property is determined by the laws of the state where the property is situated. For example, your client might want the equivalent of a transfer on death deed, a relatively new form of ownership recognized by statute in Ohio. Unless you are familiar with the laws of the state where the property is located, you and/or your client may need to consult with an attorney in that jurisdiction.
Another form of titling in Ohio is joint ownership with rights of survivorship. Ohio law sets forth the language to place in a deed to effective that result. However, other states may not actually require the survivorship language. Our office recently had an estate administration that contained several out of state properties. For example, decedent owned real estate in Florida jointly with the surviving spouse. The deed did not have survivorship language, raising the question of whether an ancillary administration would be necessary. Florida legal counsel informed us that, despite the lack of survivorship language, under Florida law, husband and wife own the property in tenancy by the entirety and not as tenants in common. As we all remember from law school, the surviving spouse has the right of survivorship in this form of tenancy.
It is also important to determine how your client took title to the property, i.e., whether your client purchased the property or inherited the property. If your client recently purchased the vacation home, determining title ownership should not be difficult. However, many times your client will not know how the property is titled, particularly if it was purchased many years ago. There may even be occasions where your client doesn’t even know the county in which the property is situated. This is a reason that it is important to see a copy of the document which transferred title to your client. If the property was inherited, determining title ownership may be a much more difficult task. However, it needs to be accomplished and the beginning point is reviewing the document conveying title.
The next step is to discuss your client’s estate planning goals to determine whether the title to the property needs to be changed. Your client needs to know how the property would transfer on death in the event that no further planning were done. For example, if your client owns a vacation home in another state in his/her sole name, assuming that your client dies a resident of Ohio, an ancillary administration will be required to transfer the out of state property. An ancillary administration can be inconvenient, time-consuming, expensive, and will almost certainly involve your client needing counsel in the jurisdiction where the property is located. In other words, your clients undoubtedly would prefer to avoid ancillary administrations if at all possible. The simplest way to avoid an ancillary administration is to title the property so that it passes outside probate.
If your client wants to keep the property in the family, there are numerous considerations. While titling the out of state property with survivorship language in the deed may suffice, placing the property in a trust, a partnership, a limited liability company, are alternatives to consider with multiple beneficiaries. Before deciding on the method of ownership or re-titling of existing property, the client must identify to whom he/she wishes the property to ultimately pass. While in some cases this may be any easy question, there may be instances where either a child has no desire to own an interest in the property or your client has concerns with a particular child or children owning an interest.
You also will have many of the same considerations with a vacation home property that you have with other types of property. For example, if a child fails to survive your client, what should happen to that child’s interest? Should the remainder interest go to the other surviving children or should the deceased child’s interest pass to his/her children? How many children will own the property? If the vacation home is passed on to more than one beneficiary, how will the future decisions regarding the property be made? More times than not, a parent can identify one child above the others who is more adept at management. A limited liability company, trust or partnership may be an appropriate method of deciding, in advance, who will make these decisions.
Another potential concern of your client might be a child’s creditors. If so, the a trust with spendthrift provisions may be appropriate.
Another consideration regarding property ownership is estate taxes. One common means of reducing one’s estate is gifting, utilizing the annual exclusion. If the property has appreciated in value significantly, your client might consider gifting through use of an irrevocable trust. A qualified personal residence trust (QPRT) is a possible choice in removing the value of the vacation home from your client’s estate. Your client transfers his/her interest to the irrevocable trust, reserving the right to occupy the residence for a fixed term of years. At the end of the term, the residence passes to your client’s beneficiaries. At the time that the trust is established, there is a gift of the value of the residence less the value of the grantor’s trust term. If the grantor survives the term, the residence is removed from his/her estate. If the grantor fails to survive, the property remains in his/her estate and the unified credit is restored, making your client no worse off than if the trust was never created.
In conclusion, there are numerous considerations in advising your client regarding the purchase, ownership and the ultimate transfer, upon death or by lifetime gifting, of a vacation home. Your client is best served by your determining their desires and goals with respect to the property. Additionally, your client should periodically update you regarding the status of the property and whether the client’s goals have changed.
 This is especially true when your client inherited from an intestate estate. There are even occasions when a client comes to your office and the property’s title is still in the decedent’s name.
 Again, this is assuming that the deed does not contain survivorship language.
 Suffice it to say that if you were the estate planning attorney, the estate beneficiaries may inquire as to whether ancillary administration could have been avoided.
 It is possible that your client will simply want to have the property sold upon death to provide liquidity to the estate to pay debts and to make the distribution to beneficiaries easier. Even if that is the case, what provisions should be made, if any, should one or more of the beneficiaries want to purchase it from the estate?
 These decisions may include whether certain improvements should be made, who will be responsible for the general management and upkeep of the property, and what insurance coverage should be obtained.
 The uncertainty of the unified credit amount, the future value of the vacation home and your client’s estate can make it difficult to determine immediately what estate tax planning is appropriate.
 Any such lifetime gifting, especially of highly appreciated property, must be balanced against the loss of a “step-up” in basis at death.
 The Internal Revenue Service’s Revenue Ruling 2003-42 provides sample trust language.
 Upon the expiration of the term, if your client is going to continue to occupy the vacation home, it should be pursuant to a lease agreement where he/she actually pays fair market rent.