In Virginia, a person has legal standing to contest an inter vivos transaction (a transaction made during the life of a person who is now deceased) when the person is the executor or administrator of the deceased person’s estate, or when certain legal exceptions apply. In this blog post, we analyze those exceptions and the state of Virginia law on this issue.
Background to the Issue
After a relative or friend passes away, a person may want to contest certain transactions that the deceased person made during their life (referred to as “inter vivos” transactions). Examples of inter vivos transactions that a person may want to contest include beneficiary designations, account titlings, gifts, conveyances of real estate, and transactions using a power of attorney. The person may want to contest these transactions on the grounds that the deceased person lacked the required capacity to enter into the transaction, or was unduly influenced or defrauded into making the transaction.
This raises the question of who – when someone has passed away – has the legal standing to contest inter vivos transactions. In 2021, the Virginia Supreme Court issued a ruling in the case of Platt v. Griffith 299 Va. 690 (2021) that held that “Virginia law establishes that ‘[t]he personal representative, not a beneficiary of the estate, is the proper party to litigate on behalf of the estate and that is true even when the personal representative is also a possible beneficiary of the estate.’ Id. at 692.
You can probably see what the potential dilemma is: what about those situations where the personal representative (which is either the executor or administrator of the estate) is the very same person who stands to benefit from the allegedly improper transaction or who committed the undue influence or fraud? It’s extremely unlikely that that person (in his capacity as personal representative) is going to turn around and sue himself in his individual capacity. As a result, it could seemingly result in a situation in which there is no accountability.
This is exactly what the litigants argued on appeal in the Platt case. However, the Virginia Supreme Court stated:
The appellants contend that it is unreasonable to expect “a personal representative and beneficiary whose unlawful conduct has cheated other beneficiaries and the estate” to pursue claims on behalf of the estate to correct his or her own misconduct. This appeal is not the proper forum to consider the question of whether Charles has conflicts of interest necessitating his removal as administrator of the estate. Charles remains the personal representative of Dr. Griffith’s estate, and he is the only party entitled to bring suit on behalf of the estate.
As a result, litigants need to explore ways to get around Platt’s rule that only the personal representative has standing to bring claims on behalf of the estate.
Options to Get Around Platt’s Holding
Fortunately, there are several options available to litigants to get around the general rule in Virginia that only a personal representative of an estate has the exclusive standing to sue on behalf of an estate. In the case of Phillips v. Rohrbaugh 300 Va. 289 (2021), the Virginia Supreme Court spelled out a series of exceptions to the general rule that only an executor or administrator of an estate has the exclusive standing to sue on behalf of an estate. It stated:
Phillips nevertheless contends that she fits within a narrow exception to the general rule that enables certain beneficiaries to serve as ad hoc representatives of an estate under special circumstances. See generally John Mitford et al., Mitford’s and 9 Tyler’s Pleadings and Practice in Equity 251-52 (1890); Joseph Story, Commentaries on Equity Pleadings § 514, at 394-95 (2d ed. 1840). Affirming the circuit court, we find that the general rule — not the exception — applies to this case. Although we have recognized that “there is no fixed and rigid rule by which to determine what constitutes such special circumstances,” Jeffries v. Antonsanti, 142 Va. 218, 227 (1925), the exception may apply if the allegations in the complaint, “so far as they are well pleaded,” Beaty v. Downing, 96 Va. 451, 454-55 (1898), at least approximate the typical scenarios. These scenarios include a showing of “fraud” or the “refusal to sue,” Bane v. Adair, 116 Va. 587, 595 (1914), as well as “the insolvency of the personal representative, collusion between him and the debtor, the fact that the debtor was . . . a trustee holding property for, or an agent of, the decedent.” Saunders v. Bank of Mecklenburg, 113 Va. 656, 659-60 (1912) (citation omitted). 6 “A [complaint] which fails to charge these or other special circumstances which will take the case out of the general rule is bad on demurrer.” Id.; cf. George Cooper, A Treatise of Pleading on the Equity Side of the High Court of Chancery 176 (1813) (observing that the typical recitation of special circumstances omits “mere negligence” of the personal representative as a special circumstance).
Id. at 303.
So, when can a litigant circumvent the Platt rule? When the litigant pleads in the complaint that the personal representative:
- Committed fraud;
- Refused to sue on a claim; or
- In a debt collection context, when the personal representative is insolvent, there is collusion between him and the debtor, or where the debtor was a trustee holding property for, or an agent of, the decedent.
As a result, litigants should carefully consider (when they draft their lawsuits) whether they can allege facts in support of any of these circumstances that would give them legal standing to bring such claims.
Trust Context
Up until this point, we have been discussing situations involving legal standing in the context of estates. What about in the context of trusts? There are good arguments to be made that Virginia courts would apply the same principles in situations involving trusts.
In the case of Hunter v. Hunter, 298 Va. 414 (2020) (which I litigated at trial and on appeal), the Virginia Supreme Court considered the applicability of a no contest clause in a trust. When discussing how no contest clauses are interpreted in Wills, it remarked:
These canons of construction have great weight in the context of a no-contest provision in a trust instrument since a trust’s very identity as a creature of equity presupposes the possibility of oversight of the trustee by a chancellor jealous of safeguarding the rights of all parties with an interest in the trust.
Id. at 434. Under this rationale, it appears that courts would be just as permissible (if not more so) to beneficiaries of a trust with respect to them bringing claims regarding inter vivos transactions (in lieu of the trustee bringing such).
Additionally, Virginia case law has held that beneficiaries of a trust may sue derivatively, by and in the name of the trust (much like derivative suits are permitted in the corporate context if a corporation refuses to bring a claim). See, e.g., Burton v. Dolph, 89 Va. Cir. 101 (Norfolk Circuit Ct. 2014).
In sum, litigants and their attorneys should keep these principles in mind when they are representing clients seeking to contest inter vivos transactions.