When Estate Planning Goes Wrong: Why Might a Receivership Be Required?

Updated: 3 days ago


Combine Harvesting in Nebraska by Tim Vrtiska
Combine Harvesting in Nebraska by Tim Vrtiska

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Today I want to highlight what can go wrong when an estate plan is not adequately developed. Unfortunately, the process of developing an estate plan that works for the family often requires that family members communicate freely on goals and other sensitive topics. At times disputes might arise, especially when we see property co-owned and parties do not agree on its management. In such cases, the court might have to appoint a receiver to manage the property. A recent decision out of Nebraska highlights what can happen when an estate plan goes wrong and leads to conflict. The decision is in Seid v. Seid, 967 N.W.2d 253 (Neb. 2021).


Background


The Seid v. Seid decision involves three parties holding a fractional interest in a life estate. A life estate exists for the duration of a specified person’s life. In this decision, Rita Seid and Judy Ramer, children of the deceased, and Beverly Seid, wife of the deceased, were granted a fractional interest in a life estate in agricultural land. From the court’s opinion, it is unclear if Beverly was the mother or stepmother to Rita and Judy.


Beverly could not agree with Judy and Rita on the management of the agricultural land, and Beverly filed a court action alleging that she had not received her share of the income from the land in 2018. Beverly also argued that she had not received any documentation regarding the income, expenses, and assets associated with the agricultural land. Beverly also requested that a receiver be appointed.


After an ineffective mediation session between the parties, the court appointed a receiver in late 2019. Later in 2020, Rita and Judy requested Beverly to contribute to maintenance and repairs to ensure that the land remained suitable for farming. The court rejected this request, finding that the evidence did not show the work was needed. The receiver performed the duties in 2020 and requested instructions for 2021. Rita or Judy had not filed a motion asking the court to discharge the receiver at this point. Instead, the court gave the receiver instructions for 2021. Rita and Judy filed an appeal on the court’s order providing instructions for the receiver for 2021.


What Is a Receivership?


A receiver is a disinterested person the court can appoint in certain situations, such as a disagreement between joint owners in the property. The court often appoints receivers as an equitable remedy to help preserve property. When co-owners cannot agree on managing the property, for example, the court might appoint a receiver to act as a disinterested person who will work to preserve the property. In that example, the receiver operating on instructions from the court could ensure the tenants receive the best rental rate and repairs are made when needed to preserve the property.


Court’s Opinion

On appeal, Rita and Judy argued that the trial court erred in appointing the receiver for 2021 because no party had requested the appointment of a receiver, the court never determined it was necessary for 2021, and the court never considered their evidence that conservation work was required. The court found that all three arguments failed because the court did not appoint the receiver in 2021 but was appointed in 2019. In addition, the court found it was too late to attack the 2019 appointment because that order had not been appealed in the timeframe allowed.


The court also disagreed with arguments made by Judy and Rita that the 2021 appointment of the receiver was flawed based on the receiver’s motion (and not that of Judy, Rita, or Beverly) and the lack of notice required by the statute. The court found all three parties sought relief through the receiver, so the motion was appropriate. In addition, all parties had participated in the hearing related to the 2021 receiver’s instructions, so they had received notice.


Why Care?


I use this case not because of the procedural issues but mainly to highlight what a receiver is and the times the court might appoint one. For example, parties might give equal shares of the farm to all the children in estate planning, creating natural conflicts. A receiver might be needed to resolve such disputes. Receivers are typically equitable remedies allowing the court slightly more flexibility in resolving disputes. In this case, the parties might find the receiver to be unnecessary, but the receiver can assist in resolving conflicts and helping the parties in maintaining the property.


Reference

Seid v. Seid, 967 N.W.2d 253 (Neb. 2021).