Veucasovic v. Veucasovic

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MICHELLE M. VEUCASOVIC, Plaintiff-Appellant, v. CRAIG D. VEUCASOVIC, FMR CORP., FIDELITY MANAGEMENT TRUST, and FIDELITY BROKERAGE SERVICES, LLC, Defendants-Appellees.

No. 366978

Court of Appeals of Michigan

July 25, 2024

UNPUBLISHED

Wayne Circuit Court LC No. 22-010031-CK

Before: MARKEY, P.J., and BORRELLO and GARRETT, JJ.

PER CURIAM.

In this declaratory judgment action, the plaintiff appeals as of right the trial court's order entering a declaratory judgment enforcing the decedent's May 17, 2007 beneficiary designations. For the reasons set forth in this opinion, we vacate this order and remand for further proceedings consistent with this opinion.

I. BACKGROUND

This appeal arises from a dispute over the proper distribution of the decedent's retirement account (IRA) held by Fidelity Investments. The decedent, Barbara Veucasovic, passed away in June 2020. Plaintiff Michelle Veucasovic is Barbara's^[1] daughter and the personal representative of Barbara's estate. Defendant Craig Veucasovic is Michelle's brother and Barbara's son.

In this case, the dispute centers on the interpretation of Barbara's IRA beneficiary designations and the potential impact of the absence of a trust on asset allocation.

Barbara made her initial beneficiary designations on May 17, 2007, as follows:

Michelle M Veucasovic Relationship Non Spouse Share 33.33%

Deena Lynn Hazlett Relationship Non Spouse Share 33.34%

Craig D Veucasovic Relationship Non Spouse Share 33.33%

On January 5, 2016, the beneficiary designations were changed as follows:

Michelle M Veucasovic Relationship Non Spouse Share 50.00%

Brooke L. Hazlett Relationship Trust Share 20.00%

Craig D Veucasovic Relationship Trust Share 20.00%

Andrew W. Hazlette Relationship Trust Share 10.00%

On December 11, 2016, the beneficiary designations were changed as follows:

Michelle M Veucasovic Relationship Non Spouse Individual Share 50.00%

Craig D Veucasovic Relationship Trust Share 30.00%

Brittany Marie Hazlett Relationship Non Spouse Individual Share 20.00%

On April 17, 2018, the beneficiary designations were changed as follows:

Michelle M Veucasovic Relationship Non Spouse Individual Share 50.00%

Craig D Veucasovic Relationship Trust Share 50.00%

Concerning the April 17, 2018 beneficiary designations, both were designated "primary beneficiaries." No secondary or contingent beneficiaries were selected. Article VIII, Section 26 of the Fidelity IRA Custodial Agreement applicable to Barbara's IRA provided as follows:

26. Governing Law. This Agreement, and the duties and obligations of the Company and the Custodian under this Agreement, shall be construed, administered and enforced according to the laws of the Commonwealth of Massachusetts except as superseded by federal law or statute.

It was undisputed that despite referencing a "trust" for Craig in her IRA beneficiary designation, Barbara never formally took any steps to create a trust for Craig's benefit. In a letter dated October 6, 2021, Fidelity responded to Michelle's claim for the remaining 50% balance of the IRA and informed Michelle that it was unable to determine whether Barbara intended to "name Craig Veucasovic as a Trust or an Individual since the designation contains the individual's date of birth." Consequently, Fidelity would not transfer the 50% share allocated for Craig without a court order or Craig's consent.

On August 23, 2022, Michelle filed this action in the circuit court seeking declaratory relief regarding the proper distribution of Barbara's IRA held by Fidelity Investments. The complaint indicated that Michelle brought this action in her capacity and not in her capacity as the personal representative of Barbra's estate, which was not an interested party in the matter. Michelle alleged that defendant FMR Corp. was the parent company for companies operating under the Fidelity Investments trade name, which included defendants Fidelity Management Trust and Fidelity Brokerage Services.

In her complaint, Michelle alleged that she had initially received 100% of the value of Barbara's IRA account after Barbara's death and that this action was subsequently "reversed." Half of the proceeds were "taken back" by Fidelity because Fidelity was unable to determine Barbara's intent regarding whether a trust had been designated on Craig's behalf as a beneficiary or whether Craig had been named a beneficiary in his capacity. Michelle claimed that a trust on Craig's behalf had been designated as the beneficiary of Craig's alleged share and that because this trust "never came into existence" and because it was not Barbara's intent to name Craig as a beneficiary in his individual capacity Michelle was entitled to the entire IRA account as the "surviving and sole beneficiary." Michelle sought a declaratory judgment requiring the remaining 50% of Barbara's IRA account to be paid to Michelle, with no costs or attorney fees to be awarded to any party.

Michelle relied on Article VIII, Section 7 of the Fidelity IRA Custodial Agreement to support her contention that "since Plaintiff, Michelle M. VeuCasovic was the only beneficiary on the date of death of Barbara A. VeuCasovic she is entitled to all of the proceeds of the IRA account pursuant to the beneficiary designation language . . . found in the Custodial Agreement . . . since a Trust for Craig D. VeuCasovic never came into existence . . ."

Article VIII, Section 7 of the Fidelity IRA Custodial Agreement provided in relevant part as follows:

7. Designation of Beneficiary.

A Depositor may designate a Beneficiary for his or her Account as follows:

(a) General. A Depositor . . . may designate a Beneficiary or Beneficiaries at any time, and any such designation may be changed or revoked at any time, by a designation executed by the Depositor . . . in a form and manner acceptable to, and filed with, the Custodian . . . The latest such designation or change or revocation shall control except as determined by applicable law. If the Depositor had not by the date of his or her death properly designated a Beneficiary in accordance with the preceding sentence, or if no designated primary or contingent Beneficiary survives the Depositor, the Depositor's Beneficiary shall be his or her surviving spouse, but if he or she has no surviving spouse, his or her estate. If the Depositor designates more than one primary or contingent Beneficiary but does not specify the percentages to which such Beneficiary(ies) is entitled, payment will be made to the surviving Beneficiary(ies), as applicable, in equal shares. Unless otherwise designated by the Depositor in a form and manner acceptable to the Custodian, if a primary or contingent Beneficiary designated by the Depositor predeceases the Depositor, the Shares and Other Funding Vehicles for which that deceased Beneficiary is entitled will be divided equally among the surviving primary and contingent Beneficiary(ies), as applicable.... Unless otherwise designated by the Depositor in a form and manner acceptable to the Custodian, if there are no primary Beneficiaries living at the time of the Depositor's death, payment of the Depositor's Account upon his or her death will be made to the surviving contingent Beneficiaries designated by the Depositor. If a Beneficiary does not predecease the Depositor but dies before receiving his or her entire interest in the Custodial Account, his or her remaining interest in the Custodial Account shall be paid to a Beneficiary or Beneficiaries designated by such Beneficiary(ies) as his or her successor Beneficiary in a form and manner acceptable to, and filed with, the Custodian; provided, however, that such designation must be received and accepted by the Custodian in accordance with this section. If no proper designation has been made by such Beneficiary in accordance with this section, distributions will be made to such Beneficiary's estate.... In all cases, the Custodian shall be authorized to rely on any representation of facts made by the Depositor, the executor or administrator of the estate of the Depositor, any Beneficiary, the executor or administrator of the estate of any Beneficiary, or any other person deemed appropriate by the Custodian in determining the identity of unnamed Beneficiaries.

(d) Judicial Determination. Anything to the contrary herein notwithstanding, in the event of reasonable doubt respecting the proper course of action to be taken, the Custodian may in its sole and absolute discretion resolve such doubt by judicial determination which shall be binding on all parties claiming any interest in the Account....

The Fidelity defendants (FMR Corp., Fidelity Management Trust Co., and Fidelity Brokerage Services LLC) were dismissed by stipulation between Michelle and the Fidelity defendants. The order provided that the IRA account would be restricted from withdrawals or distributions pending further court orders. Michelle's claims against the Fidelity defendants were dismissed with prejudice. The stipulation provided that the Fidelity defendants were neutral stakeholders whose presence in the suit was not required to adjudicate the matter properly. Still, the Fidelity defendants agreed to participate as necessary in discovery.

A default was entered against Craig for failure to plead or otherwise defend. Michelle moved for entry of a default judgment against Craig, requiring Fidelity to list Michelle as the 100% primary beneficiary of Barbara's IRA account and to transfer all of the assets in that account to Michelle under Article VIII, Section 7(a) of the Fidelity IRA Custodial Agreement. The trial court decided to hold an evidentiary hearing under MCR 2.603(B)(3)(b).

At the hearing, Autumn Webster, an employee of Fidelity in the personal investing operations...