PROBATE CORNER
Testamentary Transfers under the UFTA ( Continued )
DAVID M . GARTEN
The court reasoned : “ More importantly , SEPH ' s [ the creditor ’ s ] argument misses the mark because of the mechanics of what actually happens to a joint tenancy when one joint tenant dies . It is hornbook law that "[ u ] pon the death of one joint tenant , that tenant ' s share in the property does not pass through will or the rules of intestate succession ; rather , the remaining tenant or tenants automatically inherit it ." United States v . Craft , 535 U . S . 274 , 280 , 122 S . Ct . 1414 , 152 L . Ed . 2d 437 ( 2002 ) ( citations omitted ). Under well-settled Alabama law , "[ A ] joint tenant ' s property interest in the tenancy ... does not pass into the tenant ' s estate upon death if he or she is survived by another joint tenant . Instead , the property interest is extinguished and the surviving tenant owns the property in fee under the conveying instrument ."
JOINTLY HELD PROPERTY : In SE Prop . Holdings , LLC v . Center , 2017 U . S . Dist . LEXIS 124708 ; 2017 WL 3403793 ( S . D . Ala . 2017 ), Charles and Belinda Trammell acquired a Short Line Residence in1986 . The Warranty Deed conveying that property to them provided that the Trammells owned it " for and during their joint lives and upon the death of either of them , then to the survivor of them in fee simple ...." The Trammells held the Short Line Residence as joint tenants with rights of survivorship for 27 years . Upon Charles Trammell ' s death , Belinda Trammell owned the Short Line Residence in fee simple . The issue on appeal was whether the Short Line Residence transfer to Belinda Trammell was a fraudulent transfer under the Act . The court held that Charles Trammell ' s death did not effectuate a " transfer " for the Act ’ s purposes of his interest in the Short Line Residence to Belinda Trammell . The court reasoned : “ More importantly , SEPH ' s [ the creditor ’ s ] argument misses the mark because of the mechanics of what actually happens to a joint tenancy when one joint tenant dies . It is hornbook law that "[ u ] pon the death of one joint tenant , that tenant ' s share in the property does not pass through will or the rules of intestate succession ; rather , the remaining tenant or tenants automatically inherit it ." United States v . Craft , 535 U . S . 274 , 280 , 122 S . Ct . 1414 , 152 L . Ed . 2d 437 ( 2002 ) ( citations omitted ). Under well-settled Alabama law ,
"[ A ] joint tenant ' s property interest in the tenancy ... does not pass into the tenant ' s estate upon death if he or she is survived by another joint tenant . Instead , the property interest is extinguished and the surviving tenant owns the property in fee under the conveying instrument ." Ex parte Arvest
Bank , 219 So . 3d 620 , 2016 WL 4943250 , 13 ( Ala . 2016 ). The Alabama Supreme Court has emphasized that the termination of the decedent ' s property interest is not properly viewed as such interest passing from decedent to survivor . The surviving joint tenant takes full ownership not because the decedent passed an interest to her , but rather because the conveying instrument ( i . e ., the 1986 Warranty Deed ) so provided . As the Arvest Court explained : " Alabama cases are united with other authorities in indicating that the last survivor of a joint tenancy takes full ownership under the conveying instrument , not because the deceased joint tenant passed an interest to the surviving joint tenant . ... Death does not enlarge or change the estate . Death terminates [ the deceased joint tenant ' s ] interest in the estate . It is rather a falling away of the tenant from the estate than the passing of the estate to others ." 219 So . 3d 620 , Id . at * 13 n . 8 ( citations omitted and emphasis added ). What this means is that , upon Charles Trammell ' s death , his interest in the Short Line Residence was extinguished , along with any encumbrances on such interest . The entire estate in the Short Line Residence vested in Belinda Trammell on October 24 , 2013 not because Charles Trammell ' s interest passed to her , but because his interest ceased and he fell away from the estate , leaving Belinda Trammell to assume sole ownership by virtue of the 1986 deed .” … Belinda Trammell ' s ownership of the entire estate is simply a continuation , or extension , of the same interest in the Short Line Residence she had held since 1986 …. In terms of the Act ’ s framework , Charles Trammell ' s death could not have effectuated a fraudulent transfer of his interest in the Short Line Residence to Belinda Trammell because , as a matter of Alabama law , nothing passed from Charles Trammell to Belinda Trammell . Stated differently , Belinda Trammell ' s interest in the Short Line Residence was neither enlarged nor changed in any way . Her husband ' s death simply caused his interest to fall away , leaving her with full ownership under the terms of the 1986 Warranty Deed . This is not , and cannot reasonably be viewed as , a " transfer " of something from Charles Trammell to Belinda Trammell .
CLAIM MUST ARISE PRIOR TO DEATH : In an estate context , the only persons protected by the Act are those who have a claim prior to the transfer . If there is no legal or equitable claim which preexists the death of the testator , then the claimant is not a creditor under the Act . For example , in Hossay v . Newman , 1998 CanLII 15139 ( British Columbia S . C .), the decedent ’ s son unsuccessfully tried to set aside his deceased father ’ s transfer of property into a joint tenancy with one of the defendants . The court reasoned : “ In the circumstances of this case , the plaintiff would have no claim against the testator during the testator ’ s lifetime and the claim arises against the estate solely on death . In my view , s . 1 of the Fraudulent Conveyance Act in using the term “ creditors and others ” contemplates a situation where the person claiming , if not a creditor , at least has some legal or equitable claim against the debtor during the debtor ' s lifetime . I cannot interpret s . 1 as extending to claims that arise solely on the death of the debtor / testator . In my view , therefore , the answer to the question posed must be qualified . If the claim under the Wills Variation Act can be supported by a legal or equitable claim of the plaintiff against the testator prior to the testator ’ s death , that claim may be capable of being transformed into a claim under the Wills Variation Act after death . On one interpretation at least , Jack [ v . Parkinson ( 1994 ), 91 B . C . L . R . ( 2d ) 96 ( C . A .)] supports that proposition and it is not necessary for me today to answer that question definitively . However , if there is no legal or equitable claim which pre-exists the death of the testator , then the claim is solely one arising on death under the Wills Variation Act . Without any prior foundation , the claimant does not have the status of creditor or others within the meaning of s . 1 of the Fraudulent Conveyance Act . For a person within that category , which includes the plaintiff , the question must be answered in the negative .
PALMBEACHBAR . ORG 14