Schoukroun v. Karsenty
| Decision Date | 11 December 2007 |
| Docket Number | No. 1689 Sept. Term, 2006.,1689 Sept. Term, 2006. |
| Parties | Kathleen Sexton SCHOUKROUN v. Maryse L. KARSENTY & Bernadette Schoukroun. |
| Court | Court of Special Appeals of Maryland |
v.
Maryse L. KARSENTY & Bernadette Schoukroun.
[937 A.2d 263]
J. Marcus Slowiak, Annapolis, MD, for Appellant.
Linda K. Brown, Laurel, MD; Harold B. Murnane, III, Glen Burnie, MD, for Appellee.
Panel: MURPHY, C.J., and DAVIS, KENNEY, III, JAMES A., (Retired, Specially Assigned), JJ.
MURPHY, C.J.
During its 1989 annual conference, the National Conference of Commissioners on Uniform State Laws approved and recommended for enactment the Uniform TOD Security Registration Act (the Uniform Act). The Commissioners' Summary of this Act included the following highlights:
• Allows owners of investment securities to designate death beneficiaries when the issuers provide such a service to their customers.
• Frees issuers of any liability for a good faith transfer to any beneficiaries.
• Preserves the rights of a deceased owner's creditors in securities that are transferred to any beneficiaries.
• Preserves a customer/owner's control over the securities, including the power
to revoke any beneficiary designation, during the life of that customer/owner.
• Provides that TOD transfers are nontestamentary transfers.
• Does for investment securities what POD (Pay on Death) statutes have done for cash accounts in almost every state.
Section 9 of the Uniform Act, in pertinent part,1 provides:
(c) A transferee ... is subject to liability to any probate estate of the decedent for allowed claims against that estate and statutory allowances to the decedent's spouse and children to the extent the estate is insufficient to satisfy those claims and allowances. The liability of a ... transferee may not exceed the value of [TOD] transfers received by that transferee.
Clarke A. Gravel, Esq. of Burlington, Vermont, was on the Commissioners' Committee that drafted the Uniform Act. When Vermont adopted that Act, Mr. Gravel authored a Vermont Bar Journal article in which he stated:
Under the uniform law, the transfer-on-death form retains for the owner of the property (such as stocks, etc.) all control until the owner's death. The TOD designee has absolutely no power over the securities until that occurrence.
Existing creditors' interests do not change. If a creditor had any interest in or to the assets of the deceased, those rights carry over to the new owner of the same assets. The new owner must satisfy the creditor's claims.
In addition to protecting creditors' claims, the Act protects statutory allowances to the decedent's spouse and children to the extent the estate is insufficient to satisfy those claims and allowances.
This Act provides an effective, efficient and thus useful tool for the probate practitioner.
Clarke A. Gravel, The Uniform Transfer on Death Security Registration Act (No. 23, Acts of 1999), 25-SEP Vt. B.J. 14 (1999).
The Vermont statute that was the subject of Mr. Gravel's article included the following provision:
(b) A transferee of a nonprobate transfer is subject to liability to any probate estate of the decedent for allowed claims against that estate and statutory allowances to the decedent's spouse and children to the extent the estate is insufficient to satisfy those claims and allowances. The liability of a nonprobate transferee may not exceed the value of nonprobate transfers received by that transferee.
West's Vermont Statutes Annotated, Title Nine, Part 5, Chapter 134, § 4359(b).
Maryland has adopted some — but not all — of the provisions of the Uniform Act. Maryland TOD transfers are controlled in part by the Maryland Uniform TOD Security Registration Act (the Maryland Act), Title 16 of the Estates and Trusts Article. Although the Maryland Act does not include a provision similar to Section 9 of the
Uniform Act, § 16-109(b) provides that "[t]his title does not limit the rights of creditors of security owners against beneficiaries and other transferees under other laws of this State."
Included in the legislative history of the Maryland Act, which took effect on October 1, 1994, is an article authored by Professor Richard V. Wellman of the University of Georgia Law School, in which Professor Wellman notes that "the valid contractual protections ... for the issuer of a TOD registration ... might not protect an account beneficiary against being compelled to make restitution to a deceased owner's creditor or spouse claiming the protection of a domiciliary law against the deceased owner's nonprobate gifts at death." In a 1987 Georgia Law Review article, Professor Wellman stated:
The effectiveness of a TOD directions against claims of a deceased registrant's creditors, the right of a registrant's spouse to elect against any will ... are untested against the will-like effect of a TOD registration.
Transfer-On-Death Securities Registration: A New Title Form, 21 Ga.L.Rev. 789, 823-24 (1987). This appeal from the Circuit Court for Anne Arundel County presents the question of whether the "statutory share" of a decedent's surviving spouse includes the decedent's Transfer-On-Death (TOD) accounts. For the reasons that follow, we answer "yes" to that question.
Two of the parties to this appeal — Kathleen Sexton Schoukroun (Kathleen), appellant/cross-appellee, and appellee/cross-appellant Bernadette Schoukroun (Bernadette) were married to the late Gilles H. Schoukroun, who died on October 18, 2004. The third party to this appeal, Maryse L. Karsenty, is Mr. Schoukroun's sister and is the Personal Representative (PR) of his estate, which was opened in the Orphans' Court for Anne Arundel County on February 2, 2005.
Mr. Schoukroun and Bernadette were married on October 10, 1987. On April 20, 1990, Bernadette gave birth to their only child, Lauren Schoukroun. Mr. Schoukroun and Bernadette were divorced by a judgment of the Circuit Court for Anne Arundel County that was entered on September 5, 1995. On June 23, 2004, Mr. Schoukroun (1) executed the final version of his Last Will and Testament, (2) created a revocable trust, the Gilles H. Schoukroun Trust (hereinafter "Trust"), of which he was the trustee and settlor, and (3) transferred assets from three financial accounts into the Trust.
In his will, Mr. Schoukroun designated his sister, Maryse L. Karsenty, appellee, the Personal Representative of his estate. Clause Three of the will stated: "I give all my tangible personal property, together with any insurance providing coverage thereon, to my wife, KATHLEEN M. SEXTON, of Crofton, Prince George's County, Maryland...." In Clause Four, Mr. Schoukroun bequeathed the "rest, residue and remainder" of his estate to the Gilles H. Schoukroun Trust.
When Mr. Schoukroun created the Gilles H. Schoukroun Trust (the "Trust"), he named himself settlor and trustee, appointed appellee Maryse L. Karsenty trustee of the Trust upon his death,2 and designated Lauren as the sole beneficiary of the
Trust. Clause Two of the Trust, in pertinent part, provided:
The Settlor reserves the right to amend or terminate this trust from time to time by notice in writing delivered to the Trustee during the lifetime of the Settlor, and any amendment or termination shall be effective immediately upon delivery thereof to the Trustee, except that changes with respect to the Trustee's duties, liabilities or compensation shall not be effective without its consent.
On the same day that he created the Trust, Mr. Schoukroun transferred into the Trust assets that he held in three financial accounts: (1) E*Trade Financial Account Number 4607-7939,3 (2) Fidelity Investments Account # Y94-061670,4 and (3) Fidelity Investments Account # Z75-163619.5
On July 12, 2004, Mr. Schoukroun made changes to two other investment accounts, Fidelity Investments Account # Y94-130192,6 and Fidelity Investments Account # 475-549479,7 so that the Trust was listed as the beneficiary of the two accounts. Thus, these two accounts were to "transfer-on-death" (TOD). At the time of Mr. Schoukroun's death, the assets of all five financial accounts totaled approximately $422,000.
On November 2, 2004, Kathleen's lawyer sent a letter to Fidelity Investments stating that Kathleen
1) Claims an interest in the accounts and any other accounts in the name of the deceased or in the name of the Gilles H. Schoukroun trust.
2) Objects to the implementation of the registration in beneficiary form, of the accounts and any other accounts in the name of the deceased or in the name of the Gilles H. Schoukroun trust.
On February 2, 2005, the PR filed a Petition for Administration of Mr. Schoukroun's estate with the Register of Wills for Anne Arundel County, and was appointed the personal representative of the estate on the same day.8
On March 1, 2005, Kathleen filed an Election to Take Statutory Share of Mr. Schoukroun's estate.
On May 5, 2005, the PR filed an inventory of Mr. Schoukroun's estate with the Register of Wills for Anne Arundel County, in which the total value of the estate was appraised at $32,483.17. In the First Account of the estate, the PR recorded disbursements from the estate totaling $12,171.49, thus reducing the balance of the estate to $20,758.11.9
On March 22, 2005, Kathleen filed a "COMPLAINT FOR FRAUD ON MARITAL RIGHTS and to impose a Constructive Trust and COMPLAINT FOR CONSTRUCTIVE FRAUD" against the PR and Bernadette (in Bernadette's capacity "as custodian of Lauren Schoukroun[,] a minor child and trust beneficiary"). Kathleen's complaint included the following assertions:
15. That as the Husband of the Plaintiff, Kathleen Sexton Schoukroun, Gilles H. Schoukroun had both a legal and an equitable duty arising out of the marital relationship between the parties. A material part of said marital relationship was the trust and confidence placed by Kathleen Sexton Schoukroun in Gilles H. Schoukroun,...
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