Probate & Trusts – Payable on Death

Beneficiary’s claim that account was ‘payable on death’ account despite decedent’s failure to finish paperwork before death survives demurrer.

A California Court of Appeals reversed the probate court’s decision in ADRIA E. UNDERWOOD v. VALERIE PEARCHE et al.  The case involved $2 million from the estate of James Donald Gardner, who died on October 11, 2006.  Appellant claims that the money should go to her and her daughter (decedent’s mother and sister) because that was the decedent’s intention, even though he didn’t complete the necessary paperwork prior to his death.  Respondents (decedent’s ex-wives and children) claim that the money should go to his children.  The probate court granted respondents’ demurrer, without leave to amend.  The appellate court reversed this decision.

On January 23, 2009, Adria Underwood (decedent’s mother) filed a petition, to determine the ownership of the decedent’s property.  She listed those with possible interests in the decedent’s estate as herself, Valda Pollard (decedent’s sister), Carmia Eldridge (decedent’s sister), Danielle Ricchiuti (decedent’s minor daughter), Mari Ann Ricchiuti (defendant’s ex-wife and legal guardian of his daughter), James D. Gardner, III (decedent’s minor son), and Valerie Pearce (decedent’s ex-wife and legal guardian of his son).

On June 14, 2006, decedent opened an account with Atlas Funds and deposited $1,008,661.80.  On June 19, 2006, decedent opened an account with Wells Fargo Investments and deposited another $1,008,661.80 into that account.  Appellant alleged that decedent “executed the necessary documentation for the Atlas account to be registered as a ‘payable on death’ account, with appellant and decedent’s sister (Carmia Eldridge), as equal beneficiaries of the account in the event of his death.”

By September 2006, decedent had transferred all money from both accounts into a Wachovia Securities account.  Appellant alleged that “Wachovia staff had prepared an ‘application for registration of account in beneficiary form transfer on death direction,’ which would confirm that appellant & Eldridge were equal beneficiaries of the Wachovia funds.”  Appellant alleged that Gardner died before he had a chance to sign the application.

On February 23, 2009, Mari Ann Ricchiuti (on behalf of her daughter), filed an opposition to the appellant’s petition.  Ricchiuti claimed that because the decedent never completed the paperwork for the Wachovia accounts, they couldn’t be considered POD, despite the Atlas account’s documentation as such.  She also claimed that “decedent never established POD terms for the Wells Fargo account initially, so there was nothing to maintain or transfer when the monies in that account were transferred to Wachovia.”

On February 25, 2009, Valerie Pearce (on behalf of her son) filed a demurrer to appellant’s petition.  Pearce claimed that “appellant failed to plead with certainty whether appellant’s claim of the existence of a Totten trust of POD account is based upon ‘the terms of a written contract carried over from decedent’s Atlas account, or oral contract based upon decedent’s conversation with Wachovia employees, or a contract implied by conduct when Wachovia drafted an Application for Registration of Account in Beneficiary Form Transfer on Death Direction that was never executed by the decedent’.”  Pearce also contended that appellant didn’t establish sufficient evidence to support the idea that decedent intended to create an express oral trust.

On March 23, 2009, appellant filed an opposition to the demurrer, stating that she had adequately pleaded facts to survive a demurrer.

On April 9, 2009, the probate court sustained Ricchiuti’s opposition and Pearce’s demurrer, without leave to amend.  The court found that “as a matter of law, the failure to sign the form resulted in the failure to create a POD account.”  They also concluded that appellant insufficiently plead the creation of an oral trust because she used the same facts to support the creation of the POD account.  They said that “the intent to create one thing cannot be used to support the intent to create another thing.”

The appellate court, however, found that appellant’s allegations sufficiently support a cause of action.  They noted that [they] “must accept appellant’s factual allegations, and appellant has alleged that she ‘is informed, believes and thereon alleges the POD terms were maintained as part of the transfer to Wachovia’.”  As for the oral trust, the court found that appellant’s allegations (that decedent had orally declared that Wachovia hold the money in trust for his mother and sister at the same time he delivered the monies into the account) are sufficient to show that decedent had intent.

The court found that the appellant had sufficiently plead facts to survive a general demurrer, and thus, reversed the probate court’s decision.

Quotes and information gathered from The Daily Recorder, Vol. 103, No. 157, August 16, 2010 Daily Appellate Report.