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Reineck v. Lemen

Supreme Court of Virginia

November 23, 2016





         In this appeal we consider whether the trial court erred in upholding the actions of two children, LaVerne S. Lemen and Jeffrey B. Still, who relied on a broad power of attorney to create inter vivos trusts that disinherited other prospective heirs and caused the entire estate to pass to Lemen and Still. We also consider whether the trial court erred in awarding attorney's fees against the personal representative of an estate[1] in his personal capacity under Code § 64.2-795. We affirm the trial court's reading of the power of attorney, but we reverse the award of attorney's fees.


         I. The estate plans

         In 1991, husband and wife, Frank B. Still, Jr. and Jane F. Still, prepared similar estate plans.[2] Frank executed a will and a revocable trust. Jane also prepared a trust that mirrored Frank's trust in its dispositional provisions. Under the terms of these trusts, Frank's children, LaVerne S. Lemen and Jeffrey B. Still, were to receive 40% of the assets of both trusts. Jane did not have any children. The terms of both trusts, however, called for her relatives to receive a 60% share of both Frank's and Jane's trusts.

         In 1999, Frank and Jane both amended their trusts. Frank's one-page amendment provided that Jane's relatives would receive 55% of the trust assets, down from the 60% the trust had provided in 1991. Frank's children would receive 45% rather than 40%, as provided in 1991. Jane similarly amended her trust, i.e. her relatives would receive 55% instead of 60% and Frank's children would receive 45% rather than 40%.

         Frank also executed a durable power of attorney in 1999. He designated Jane as his attorney-in-fact should he become incapacitated, and Lemen as his successor attorney-in-fact should Jane be unwilling or unable to serve. Frank's power of attorney vested his agent with broad powers under Article II, including:

the power to do and perform in a fiduciary capacity as my Attorney-in-Fact may deem advisable anything of any character which I might do or perform for myself . . . but excluding those matters which my Attorney-in-Fact is not permitted to do as expressly provided in this Power of Attorney or as provided by law.

         The attorney-in-fact also had the power under section K of Article III to:

assign, transfer and convey all or any part of my real or personal property, or my interest in such property, to, and withdraw such property from, (i) any revocable trust established by me during my lifetime, or (ii) any revocable trust established by my Attorney-in-Fact during my lifetime which directs the trustee or trustees to administer the trust for my benefit.

         The document further granted the attorney-in-fact the power to "manage" his Individual Retirement Accounts (IRAs),

including but not limited to (i) the exercise of all rights, privileges, elections, and options that I have with regard to any [IRA] . . .; (ii) making withdrawals therefrom; (iii) determining forms of payments on my behalf, or my beneficiaries; (iv) making, changing or altering investment decisions; [and] (v) changing custodians or trustees.

(POA Art. III, § M).

         Additionally, Frank's power of attorney vested his agent with the authority to create any instruments under seal, including inter vivos trusts, whether revocable or irrevocable, "for my benefit during my lifetime and/or the benefit of my wife and my descendants after my death." (POA Art. V, § F). The power of attorney restricted the agent's power to "cause assets to pass to my Attorney-in-Fact . . . whether by inter vivos transfer, designation of beneficiary of any contract or in any other manner." Such actions are only permissible when "specifically authorized by this [POA]." (POA Art. VI).

         Frank began to show signs of dementia in 2000. He was diagnosed a few years later with Lewy Body Dementia. In April 2006, Jane amended her trust, significantly reducing Lemen and Still's share from 45% of her estate to a lump sum award of $20, 000 for each. Frank was moved to a memory care unit in 2008. In May 2008, Jane again amended her trust, this time completely disinheriting Lemen and Still. Jane died in 2011. Her entire trust was distributed to her heirs. Lemen and Still received nothing from Jane's estate.

         Upon Jane's death, Lemen became Frank's attorney-in-fact and she and Still became co-trustees of Frank's trust and the executors of his will. In January 2012, Lemen invoked her power as Frank's attorney-in-fact to amend Frank's trust. She added a provision to Frank's trust calling for the trustee to "distribute to [Frank's] descendants, per stirpes, the amount necessary to result in Frank's descendants receiving forty-five percent (45%) of the aggregate disposed of pursuant to Jane's Amendments [to her trust] and Frank's Trust."

         On February 27, 2012, Lemen created two new trusts, the living trusts, naming herself as sole trustee of one and herself and Still as co-trustees of the other. The living trusts disinherited Jane's heirs and provided for Lemen and Still to receive Frank's entire estate at his death. When Frank died the following day, on February 28, 2012, Lemen withdrew the assets from the living trusts, totaling approximately $1.24 million and divided the funds between Still and herself.

         II. Litigation ensues

         Jane's heirs, including William J. Reineck, filed suit against Lemen and Still alleging that they breached their fiduciary duties. The court dismissed the case with prejudice on the basis that the plaintiffs, as contingent beneficiaries, lacked standing to bring the suit.

         Reineck next successfully petitioned for an appointment as curator of Frank's estate. Reineck promptly filed a second suit, this time in his capacity as curator pursuant to Code § 64.2-451. He alleged that Lemen and Still breached their fiduciary duties and he asked for the imposition of a constructive trust. The trial court granted Lemen and Still's motion for summary judgment, finding that "Mrs. Lemen acted within the express scope of her authority as agent under Frank['s] Durable Power of Attorney and within the authority granted by the Virginia Uniform Power of ...

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