The entire Anna Nicole Smith story regarding her claim to her elderly late husband’s estate began in 2007 with her claim her late husband made a oral will or trust granting her much of his wealth. This saga continues with attorneys for her estate vowing to, again, go to the Supreme Court. As was widely reported last month the fight is being carried on so Anna Nicole’s daughter can have an inheritance. So far, she will have to work for a living as the court rejected the existence of an oral estate plan.
This is a good time to ask yourself: “WHAT?”. But it is worth space in this blog to examine this law and if it this type of lawsuit would even be possible in Michigan. The short answer? Yes, it is possible as Michigan allows for oral trusts.
While most people understand that a will must be in writing to be valid, this is also the law in Michigan. Many do not realize that our Michigan Trust Code specifically allows for the creation of an oral trust. (click these links for a simple discussion on wills and trusts)
To be a valid oral trust, all of the following must apply:
- The settlor (maker) has capacity to create a trust;
- The settlor indicated an intention to create a trust;
- The trust has a definite beneficiary declared;
- The trustee (person responsible for managing or distributing the trust) has duties to perform; and,
- If there is a sole trustee, the same person can not be the sole beneficiary.
Estate planning lawyers will always insist on a written document to assure the needs of the settlor are full set forth and to assist and to assure the intentions of the settlor can be clearly established, if need be, in court. A major problem with oral trusts, as Anna Nicole first learned and her heirs, is that they are very difficult to prove. All of the above elements must be established with what the law refers to as “clear and convincing evidence”, which is a extremely difficult standard and near impossible to meet with the existence of relevant opposing facts. It is almost the same standard as our criminal standard of “beyond a reasonable doubt” and a far cry from our civil standard of “preponderance of the evidence”.
This failure of proof is what is apparently dooming Anna Nicole Smith’s case and is why oral trusts are a bad idea. While lawful, oral trusts often simply do not work. What they tend to do, as in Anna Nicole’s case, is to make civil litigators the actual beneficiaries of the estate.