Some types of estate assets, such as a person’s business succession interests, can be complicated to settle during probate without a valid will or any other estate planning tools. In a June 29, 2017 Tennessee estate decision, the Court of Appeals was asked to decide which of the decedent’s heirs was entitled to ownership of a company operated by the decedent. The lower court had concluded that the widow was the owner of all of the shares of stock in a summary judgment motion, and the decedent’s daughters appealed.
The stock certificate at issue was titled in the name of the decedent and his widow as joint tenants with rights of survivorship. The widow argued that the shares of stock in the corporation passed to her as the surviving joint tenant with right of survivorship. The decedent’s daughters, however, argued that the corporation’s assets should be part of the decedent’s estate. The daughters contended that the stock certificate was defective, citing a Tennessee statute that requires a share certificate issued by a corporation to be signed by two officers who are designated in the bylaws or by the board of directors. The widow responded that even if there was a technical defect resulting from the lack of a second signature, the clear intent of the incorporators and directors was to issue the shares of stock to the decedent and the widow as joint tenants with rights of survivorship.
On appeal, the court stated that the question of the ownership of the corporate stock turned on the intent of the directors and incorporators. The court observed that the widow had presented affidavits supporting the conclusion that she, the decedent, and the incorporator intended to issue the stock as joint tenants with rights of survivorship, and the stock certificate itself also supported her argument. The court went on to find that although the certificate was not signed by two corporate directors or officers as directed by Tennessee statute, it could nevertheless be used to indicate the intent of the issuers of the stock.
The appeals court then looked at the corporate bylaws, which specified that the decedent was the sole shareholder of the corporation. The court concluded that this evidence would allow a finding that the issuers of the stock intended the decedent to be its sole owner. As a result, the court found that the bylaws were sufficient to create a genuine issue of material fact as to whether the corporation’s directors and incorporators intended that the company would be owned by the decedent, or whether it would be owned by the decedent and widow as joint tenants with rights of survivorship. Accordingly, the court held that summary judgment was inappropriate based on the evidence in the case, and it remanded the matter back to the lower court for further proceedings.
The Nashville estate planning lawyers at Martin Heller Potempa & Sheppard can assist individuals in preparing for the distribution of their assets as well as family members who are settling a loved one’s estate. To discuss your estate planning needs, schedule an appointment with one of our skilled attorneys by calling (615) 800-7096 or contacting us online.