When a widowed parent begins to lose the ability to care for himself, children may move in and take over the management of the parent’s finances.  In some cases, the managing or caregiver child may change the ownership of assets in a way that is more beneficial to that child than others and changes the parent’s plan for those assets.  A recent Mississippi court decision shows that a court may override this ownership and impose a “constructive trust” if needed to protect the fairness of distribution of those assets.
Facts:  Houston Jarvis Sr. died in 2011.  He was survived by his three children, Shelby Kilpatrick, Houston Jarvis Jr., and William Jarvis.  In 1989, Jarvis executed a general power of attorney and named Kilpatrick as his attorney-in-fact.  In 2001, Jarvis executed a Last Will and Testament.  In this will, Jarvis left his estate to his three children in equal shares. Jarvis never revoked or amended his will.  In 1989, Jarvis opened a joint checking account with his wife at The Commercial Bank.  After his wife’s death, in 2004 Kilpatrick’s name was added to the checking account.
Jarvis, however, did not sign a new signature card.  Instead, the original signature card was amended. The name of Jarvis’s late wife was stamped with the word “DELETE,” and Kilpatrick signed the original signature card under the stamped notation. The survivorship provision on the signature card remained. Following the change of signature card, the monthly bank statements were issued in Jarvis’s name only.  In 2008, Kilpatrick closed and cashed out certificates of deposit in the amount of $105,818.19 on which Houston’s name appeared as joint owner or beneficiary and certificates of deposit in the amount of $127,304.72, on which William’s name appeared as joint owner or beneficiary.  Kilpatrick also closed and endorsed certificates of deposit in the amount of $31,841.70 on which Jarvis’s name appeared.  Kilpatrick opened a liquid certificate-of-deposit account with all these monies at Commercial Bank, with Jarvis as “Signer #1” and Kilpatrick as “Signer #2.”  Jarvis did not sign the signature card creating the account and was not present when the account was created.
Less than one month before Jarvis’s death, Kilpatrick withdrew $5,000 from Jarvis’s checking account and the liquid certificate-of-deposit account.  As of the date of Jarvis’s death, the balance of the checking account was $33,981.10. And as of December 31, 2011, the balance of the liquid certificate-of-deposit account was $122,405.46.  After Jarvis’s death, Kilpatrick advised Houston and William that there was no money in Jarvis’s estate.  Kilpatrick told them that Jarvis had left her a certificate of deposit worth approximately $100,000.
Kilpatrick filed for probate of will and was appointed as executor. Two years later, Houston and William filed a complaint claiming that Kilpatrick had abused the confidence that was placed in her by Jarvis, and, as a result, sought the imposition of a constructive trust.  After a trial, the chancellor found that although a confidential relationship existed between Kilpatrick and Jarvis, there was no undue influence by Kilpatrick.  The chancellor, however, found Kilpatrick’s “attempt to convince her brothers that there was nothing in her father’s estate was substantial overreaching.”  As a result, the chancellor imposed a constructive trust for the use and benefit of all three children.
Kilpatrick appealed, arguing that the funds in Jarvis’s checking account and the liquid certificate-of-deposit account belong to her as joint owner with rights of survivorship and are not subject to a constructive trust.  However, the bank statements from Jarvis’s checking account did not reflect a change in the title of the account.  Instead, the statements were issued to Jarvis in his name only.  Additionally, Jarvis never executed a new signature card when Kilpatrick’s name was added to his checking account and did not execute a signature card when the liquid certificate-of-deposit account was created.  Moreover, Jarvis never amended or revoked his will, even after Kilpatrick’s name was added to his checking account and the liquid certificate-of-deposit account was created. Thus, the record shows an abuse of the confidential relationship between Kilpatrick and Jarvis.
Houston and William appealed and argued that, at the very least, the constructive trust should also include Kilpatrick’s certificate-of-deposit proceeds of $83,452.19 – the amount left from the combination of their CD funds into the new liquid certificate of deposit in 2008. The Court of Appeals found that Kilpatrick paid expenses with funds intended for Houston and William, but preserved certain funds intended for her.  In order to prevent manifest injustice, Kilpatrick’s certificate of deposit in the amount of $83,452.19 should be included in the constructive trust.
KILPATRICK v. JARVIS, NO. 2015-CA-00739-COA
https://courts.ms.gov/Images/Opinions/CO121874.pdf
For more questions and concerns on this topic, contact the experienced lawyers at Courtney Elder Law Associates by calling 601-987-3000.