(Courtesy of Haas & Zaltz) This series usually focuses on ways to avoid litigation, suggesting things like regular, open and honest communication with beneficiaries, ensuring that your estate plan contains clear directives, naming a trusted individual to serve as trustee, anticipating potential conflicts, inserting no-contest provisions, and updating your estate plan regularly. Those acts may prevent litigation; however, sometimes it’s unavoidable. Let’s review the most common areas ripe for litigation in the trusts and estates world.
An often litigated area focuses on the mental state of the individual who created the documents. Individuals desiring to challenge the mental state of the decedent start with a claim that the decedent lacked the mental capacity to create a will or trust at the time the decedent signed the documents creating or updating the estate plan. Most states presume competence to make a will or trust and place the burden on the contesting party to prove that the testator or grantor lacked capacity. Thus, a beneficiary desiring to question the estate plan in this way would need to gather evidence to demonstrate that the decedent lacked capacity. This could include things such as medical records demonstrating dementia, psychosis or other diagnoses that affect the mind. or witness testimony regarding the decedent’s mental state. A court may consider other factors, such as an unnatural distribution, as evidence of lack of capacity.
Even with such evidence, the documents usually withstand the challenge for two reasons. First, the testator need only demonstrate a low level of capacity to create a will or trust. In many states, one only needs to understand the natural objects of their bounty, the nature and extent of their property, and the effect of their estate plan. One need not understand each asset or the value assigned to it. If the testator lacks that understanding most of the time but executes the will or trust at a time of clarity, then the will or trust is valid. Second, the challenger typically needs to prove by a preponderance of evidence that the decedent lacked testamentary capacity in the case of a will and potentially contractual capacity in the case of a trust. While it sounds easy, it usually proves a high bar for the aggrieved party to clear.
Undue influence presents another potential avenue for challenge of an estate plan. In an undue influence situation, the testator may have had capacity, but because of their susceptibility to influence, they changed their planned disposition. Simple enough to explain but understanding what constitutes undue influence requires a close examination of the behavior and the totality of the circumstances.
The American Bar Association indicates that undue influence occurs when an individual in a fiduciary capacity or other confidential relationship substitutes their own desires for that of the influenced person’s desires. Put another way, a person influenced the testator in such a way that convinced the testator to alter their estate plan, usually in favor of the individual exerting undue influence and to the detriment of the testator’s other beneficiaries. Each state lists certain factors that indicate the presence of undue influence, such as intimidation, physical threat or coercion. Perpetrators of undue influence use subtle tactics and are often close to the testator. For example, the influencer may stop providing transportation to the testator or otherwise cause the testator to fear for their health and well-being. The emergence of elder abuse and mandatory reporting thereof has helped shine a light on the existence of undue influence and gives families a way to protect against it.
An interested party may challenge a will or revocable trust, or to a lesser extent, a deed or other ancillary document, by alleging the invalidity of the document. That could mean that the document lacks necessary elements or that the testator or grantor failed to sign the document with the requisite formalities. Most states require the presence of two witnesses who watch the testator sign the will. Some states require that to occur in the presence of a notary public to make the will self-proving. Although trusts do not always require that level of formality, a few states require a trust to be signed with the same formalities as a will because of the testamentary provisions. Of all the potential attacks on documents, this one finds the most success because it’s a bright-line test.
Finally, many beneficiaries file lawsuits alleging breach of fiduciary duty. This blog frequently examines cases in which such allegations occur. Anyone serving as a fiduciary, for example, a trustee, personal representative or attorney-in-fact, has responsibilities and duties to act in accordance with the terms of the document appointing them and in the best interests of the beneficiaries named in the document. The attorney-in-fact needs to act in the best interests of the principal. State and federal laws may impose additional duties and address conflicts between the document and state or federal statutes. If a beneficiary believes that a fiduciary has violated their duties, then the beneficiary may initiate a lawsuit. These types of cases require significant funds to undertake and require hiring a skilled trust and estates litigator.
While qualified estate planning attorneys work to avoid litigation, sometimes it’s necessary. In those situations, it’s good to understand the options that exist. If you have concerns about a parent or loved one and either their capacity at the time the plan was created or their ability to create a plan without undue influence, raise the issue with one of our experienced trusts and estates attorneys. Remember, it’s less expensive and stressful to address the issues while everyone is alive.
To learn how to protect you and your family visit www.haaszaltz.com or call (845) 425-3900. You can also email them at [email protected].
