Without question, one of the most common estate disputes we see centers around allegations that one person unduly influenced another person to write (or re-write) a will or trust. The typical situation involves an elderly person, no longer capable of living independently, who becomes increasingly reliant on another person for care and assistance.
Under Virginia law, undue influence occurs when a testator’s free will is destroyed due to the influencer’s close relationship with the testator. This theory is one of the most common methods used to attack a will or trust. There are different ways to prove undue influence. Undue influence can be shown either by direct proof or by circumstantial proof. Circumstantial proof, which is far more commonly used, may be shown by the satisfaction of certain factual elements (which are set forth below).
The typical undue influence situation is as follows: an elderly parent (“Parent”) moves in with (or nearby) a particular sibling (“Caretaker Child”). Caretaker Child becomes increasingly involved in Parent’s medical care and finances. Parent changes his or her will and/or trust to benefit Caretaker Child to the disadvantage of Parent’s other relatives. Parent dies. Caretaker Child probates the will and/or distributes copies of the trust. The disadvantaged relatives cry foul and accuse the Caretaker Child of unduly influencing Parent to re-write the will and trust. Caretaker Child’s actions with Parent may have been perfectly honorable but they could also have been malignant. Litigation ensues and the courts must determine the operative estate planning documents and the proper beneficiaries.
For disputes involving undue influence, the alleged undue influencer is almost always a beneficiary of the trust or will at issue. However, what happens if the undue influencer is not a direct beneficiary? May a disadvantaged relative still attack the will or trust on the grounds of undue influence?
The Virginia Supreme Court recently answered this very question in its review of a case from the Fairfax Circuit Court, Kim v. Kim, No. 161505. The basic facts were: a testator (“Scott”) executed a will and trust a mere eight days before his death. Scott’s brother Brian, an attorney, drafted the will and trust. Brian was the named executor of the will and the successor trustee of the trust. Brian was not a direct beneficiary of the will or trust, although he was permitted to receive compensation for his services as trustee and executor. Moreover, Brian was permitted, under the terms of the trust and will, to make discretionary distributions of trust property to relatives (presumably, including his children).
Lili, Scott’s wife, filed suit in Fairfax Circuit Court (the “Trial Court”) to, in part, ask the Trial Court to set aside the trust on the grounds of undue influence. Brian filed a separate lawsuit to establish the will as Scott’s will and to prevent Lili from interfering with the estate. Lili filed a counterclaim alleging that the will and trust were invalid on the grounds of undue influence.
Notably, Brian filed a demurrer (a responsive pleading that asserts that a party’s claim fails to state a cause of action under Virginia law) arguing that Lili’s undue influence claim failed because Brian is not a beneficiary of the trust or will. The Trial Court agreed with Brian as to the demurrer and dismissed Lili’s counterclaim. Lili sought and was awarded an interlocutory appeal (an appeal limited to a certain issue or issues in the course of litigation and before a final judgment is rendered by the trial court).
The Virginia Supreme Court (the “Appellate Court”) specified that this case involved the presumption of undue influence, and was not a case of direct proof of undue influence. The Appellate Court stated that a presumption of undue influence arises if (i) the testator suffered from a feeble mind when the documents were executed, (ii) the testator named a beneficiary who was in a relationship of confidence or dependence, and (iii) the testator previously expressed an intent to make a different disposition of his or her property. A confidential relationship alone, the Appellate Court noted, is not enough to prove the second element. The Appellate Court also pointed out that neither Scott’s will nor trust named Brian as a beneficiary or expressly permitted him to receive a distribution. Importantly, the Appellate Court ruled that neither executor or trustee compensation, nor Brian’s ability to choose beneficiaries of trust property (including, conceivably, his own children or family members), are sufficient to establish him as a “beneficiary” of the trust or will. The Appellate Court also stated that some uncertain, future benefit is not enough under Virginia law to establish Brian as a “beneficiary” under the estate planning documents. The Appellate Court affirmed the Trial Court’s ruling dismissing Lili’s counterclaim as to undue influence.
So what does this mean? We do not yet know the full impact of this case in the context of estate disputes involving undue influence. It is unclear whether the influencer must be a direct beneficiary in cases involving direct proof of undue influence cases. It is quite possible that courts will interpret this case as being limited to presumption of undue influence disputes and not those involving direct proof.
For presumption of undue influence cases, this decision may make it a bit more difficult to bring such a claim. In presumption of undue influence cases, the undue influencer must be a direct beneficiary of the document at issue. Compensation and discretionary distributions to an influencer’s family members are not enough to qualify the influencer as a “beneficiary”. For this reason, this case may also change the way some estate planning attorneys draft distribution language to potential close-family member beneficiaries. It may also change the way estate litigation attorneys litigate their claims involving undue influence. Given these complexities, it is best to seek out an experienced estate litigation attorney if you have a matter involving a potential claim of undue influence.