In an intriguing though non-precedential decision, a panel of the Pennsylvania Superior Court considered an interesting set of issues, the disposition of which provide guidance to estate planners, family law practitioners, and their respective clients.

Paul had a net worth of over $80 million and was the father of two sons from his prior marriage.

Then he met Tina, with whom he lived for about seven years before marrying. Prior to the marriage, the couple executed a prenuptial agreement containing the basic provisions of “what’s yours is yours and what’s mine is mine and we each waive any claim we have to the property of the other.”

Attached to the agreement were two exhibits listing the major assets of each party. Neither party listed household furnishings or specific items of personalty, which is defined as personal, movable property.

Paul simply indicated he possessed “personal property with a value of $350,000.”

As Paul’s health deteriorated, tensions between Tina and Paul’s family arose regarding Tina’s actions while serving as Paul’s agent under a power of attorney.

Paul’s family challenged the validity of Tina being able to hold this role and the legitimacy of her decisions. The dispute was ultimately settled in the Orphans Court.

The parties agreed that granting of power of attorney to Tina was not valid, while Paul and Tina’s prenuptial agreement was valid. 

The parties agreed that Tina would no longer use the power of attorney.

Paul passed away about two months following the date of the stipulation. Paul’s Will specifically provided that his significant business-related assets pass to his children and that all death taxes were to be paid from his residuary estate.

The residuary estate is the estate remaining after all gifts are bequeathed and debts, taxes, probate fees and administrative costs are paid.

Paul also had significant non-probate assets which passed directly to Tina by virtue of the beneficiary designation on each account.

Due to the value of the probate and non-probate assets, and despite the size of the estate, the taxes owed exceeded the value of the residuary estate. Paul’s children decided to begin selling Paul’s personal property to raise the funds necessary to pay the tax.

Tina, of course, disagreed.

In her court filings she argued that the property in dispute belonged to her as she had become a joint owner with Paul during her lifetime. Tina argued the fact that Paul’s funds had been used to purchase all of the items was irrelevant.

Multiple hearings were held before the Lower Court which heard testimony regarding the walking stick, zebra throw pillows, cigar cutters, laser pointers, flashlights, and 1,400 bottles of California wine and wine racks.

We should feel sympathy for the Lower Court judge, the Honorable Thomas A. James, Jr., who related the following anecdote on the record:

When I was doing divorces…I remember walking out the door here with my client and we were arguing about personal property. We came down to a blender and I reached into my pocket, gave her $20, and said ‘go buy the damn blender. I am not arguing anymore.’

Now, this is that case on super-duper steroids. 

The Court went on to decide that the disputed items of personalty belonged to Tina on the basis that although the items had been purchased by Paul, they were then either gifted to Tina or were brought into the home to be used jointly. Upon Paul’s passing, these items became solely Tina’s. 

There are a couple of lessons to be learned from this decision.

One, if entering into a prenuptial agreement, specificity regarding property ownership is critical.  Had Paul listed all the items in controversy on his exhibit, there would have been a far greater likelihood that Tina would have been held to have specifically waived her right to claim ownership even though she had access to and use of the items. 

Second, regardless of the size of the estate, a plan requiring the estate to be responsible for all death taxes has a high risk of creating disgruntlement and disputes if the residuary amount does not have the value necessary to pay those taxes.

If you have questions about Estate Planning, please contact Jack Dooley — or for Prenuptial Agreements, please contact the Dischell, Bartle & Dooley family law team.