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Estate of Treviño

2020 COA 125. No. 19CA0199. Breach of Fiduciary Duty—Payable on Death Account—Collateral—Estate Funds.

August 20, 2020

Treviño opened a payable on death (POD) certificate of deposit account naming his son Tony as the beneficiary. Later, Treviño and his wife Victoria obtained an $80,000 secured loan, pledging the POD account as collateral. The pledge agreement provided that neither the account’s beneficiary nor the representative of decedent’s estate would have any interest in the account until the pledge agreement was satisfied. Treviño and his wife were jointly and severally liable on the loan. Treviño passed away, and Victoria, in her capacity as personal representative and through her attorneys, sent a letter to the bank directing it to use the POD account to pay the $77,212.03 balance on the loan and to distribute the remaining $27,246.52 to Tony.
Tony later filed a petition asserting that Treviño’s will was invalid based on Victoria’s alleged undue influence. Tony also claimed that Victoria had misused the account and breached her fiduciary duties when her lawyer directed the bank to use the POD account to pay the loan in full. The court ruled against Tony.

On appeal, Tony argued that the trial court erred in finding that Victoria did not breach her fiduciary duty in paying the loan from the POD account instead of paying it to Tony. Ordinarily, POD accounts are non-testamentary and not subject to estate administration because at the instant of the account owner’s death, the named beneficiary becomes the account owner. But when a POD account is subject to a pledge agreement and the account holder dies, the account holder’s personal representative has authority over the account as to the amount secured by the pledge agreement. Here, Victoria had authority over the remaining loan balance. However, the estate had $2,415.61 in unpledged liquid assets, which Victoria should have used to pay the loan before applying the POD funds to such purpose. Thus, Victoria’s use of POD funds violated her fiduciary duties to Tony.

The order was affirmed in part and reversed in part. The case was remanded for the trial court to consider a surcharge judgment against Victoria and related issues of interest, attorney fees, and costs.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

Related Topics

Breach of Fiduciary Duty, Payable on Death Account, Collateral, Estate Funds

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