Inheritance

Undue Influence Found by Appellate Court in Case of Elderly Man and Neighbor

If undue influence can be proven, it is established that a will can be set aside.

If undue influence can be proven, it is established that a will can be set aside.

Wills-trusts-and-estates-coveredA 2013 probate judgment ordering Frank and Angelina Picciolo to return all funds that Mrs. Picciolo received was appealed. The funds were from an annuitiy transfer that her husband completed, while acting as attorney-in-fact for their neighbor William C. Mallas

The Superior Court of New Jersey, Appellate Division recently decided this in the case captioned “In re Estate of Mallas.” Apparently, before his death, Mallas executed a power of attorney (POA) naming Frank as attorney-in-fact, a new will naming Angelina as a beneficiary and later, a codicil appointing Frank as executor.

Frank used the POA to transfer funds contained in a long-standing Bristol Myers Squibb IRA into two annuities, with the estate as beneficiary. Sometime later, Frank used his POA to transfer the annuities into one annuity with another company and designated Angelina as sole beneficiary.

The sales agent for the annuity transaction testified that Frank directed him to make Angelina, instead of himself, the primary beneficiary, because Frank had an IRS lien against him. The sales agent also testified that he met with Frank and Angelina on several occasions, but he never met with Mallas. When the agent requested to meet Mallas, Frank told the agent it "wouldn't be feasible to go meet him."

At his deposition, Frank testified that the annuity sales agent met with Mallas in his home. At trial, Frank changed his testimony and said he confused the sales agent with a bank employee who handled the elderly man’s accounts. At trial, Angelina admitted she "had very little contact with Mr. Mallas," and "never set foot in his house."

After Mallas died in 2010, Frank filed to probate the will and codicil. Two of Mallas’s nieces challenged the decedent's will, codicil, POA and the annuity transaction. The Chancery Division found that Mallas had the required capacity to execute each document and the benefit of independent counsel. The court upheld the POA, will, and codicil, but found that Frank "failed to prove . . . that no undue influence was exerted" upon Mallas regarding the purchase of an annuity, which designated Angelina as sole beneficiary. As a result, the court ordered Angelina to disgorge all related benefits and ordered the beneficiary changed to "the Estate of William Mallas."

The court also concluded that Frank "failed to properly account" for his actions using the POA. The court also removed him as executor because, "[a]s a result of this [c]ourt's decision, the Estate of William Mallas has substantial claims against him."

On appeal, in a per curiam opinion, Judges Reisner, Hoffman, and Mayer of the Superior Court of New Jersey, Appellate Division wrote that the concept of undue influence connotes "mental, moral, or physical exertion of a kind and quality that destroys the free will of the testator by preventing that person from following the dictates of his or her own mind as it relates to the disposition of assets . . ." This is generally accomplished "by means of a will or inter vivos transfer in lieu thereof."

The challenger of a will typically maintains the burden of proof in showing undue influence, but the Court explained that the burden shifts when a beneficiary "stood in a confidential relationship to the testator and if there are additional 'suspicious' circumstances" present. A confidential relationship exists when "the testator, 'by reason of . . . weakness or dependence,' reposes trust in the particular beneficiary, or if the parties occupied a 'relation[ship] in which reliance [was] naturally inspired or in fact exist[ed].'"

The Appellate Division judges said that similar principles apply for setting aside inter vivos gifts and property transfers on the grounds of undue influence. To establish a presumption of undue influence and shift the burden of proof, a challenger must show either that "the donee dominated the will of the donor or . . . a confidential relationship exist[ed] between [the] donor and donee.”  However, here there’s no requirement that the challengers show suspicious circumstances to set them aside.

To rebut the presumption after the burden switches, the beneficiary must prove "not only that 'no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well understood.'"

In this case, the Appellate Division found that the trial judge reasonably determined that a confidential relationship existed between Mallas and Frank and that as to the suspicious circumstances surrounding the execution of each of the challenged documents in the case, the judge concluded that Frank met his burden of proving there was no undue influence exerted by him in connection with the estate planning documents and beneficiary designations.

 However, with the annuity, the trial judge said that Frank and Angelina failed to carry their burden of proving the absence of undue influence. The appellate court said there was sufficient evidence in the record of the confidential relationship between Mallas and Frank and the highly suspicious circumstances surrounding the annuity transaction.  However, the record contained no credible evidence to rebut the presumption of undue influence, they said.

The trial judge crafted an equitable remedy that accounted for the lack of credible evidence that the annuity transaction had been authorized by Mallas, stated the Appellate Division. It also found that there was no credible evidence that Mallas intended to have that transaction nullify his will and codicil, which was done with the benefit of counsel.

Reference: Superior Court of New Jersey, Appellate Division (March 6, 2018) “In re Estate of Mallas”

Insurance Agent Ordered to Give Back $1 Million from Client Policies

An administrative law judge said that Blanche Berenzweig should return the $1 million she collected from a deceased client’s estate.

An administrative law judge said that Blanche Berenzweig should return the $1 million she collected from a deceased client’s estate. The heirs of a reclusive man have objected to the will, claiming that she pressured their uncle.

Claire-anderson-60670This fall, a trial will be held to determine who LeRoy Ern’s real heirs are, as ordered by Milwaukee County Circuit Judge Marshall Murray. With an estate worth $1.6 million, the reclusive man, who died at 92 of advanced dementia, left his entire estate to a retired insurance agent. His will was drafted by an attorney that shared an office with the insurance agent.

The Milwaukee Journal Sentinel article, “Insurance agent should give up $1 million received from client's policies, judge recommends,” reports that 11 of Ern's 12 nieces and nephews objected to the will that was drafted in 2009. They said Berenzweig improperly pressured their reclusive uncle.

Ern also gave her power of attorney over his financial and health affairs, if he became incapacitated.

Rachel Pings, an administrative law judge, wrote a proposed order that was filed in the Circuit Court probate case. She says Berenzweig put herself in a position to entirely manage his money and exploited Ern's trust and isolation by knowingly being named as the beneficiary of his annuities, when she had no insurable interest in his life.

"She profited illegally by more than $1 million," Pings wrote.

The order now goes to state Insurance Commissioner who will decide whether to uphold the recommendations that Berenzweig return the annuity proceeds, permanently revoke her insurance license and fine her $3,000. The annuity proceeds are frozen.

Pings' decision says the fact that Berenzweig served as Ern's agent, beneficiary, and power of attorney posed obvious conflicts.

Ern was never close to his nieces and nephews. The relationships grew more distant as his siblings died. He met Berenzweig in 1993, when she helped him purchase an annuity. They became reacquainted in 2008, when Ern was having a problem with that policy.

A friendship developed, and Berenzweig said she vehemently objected to Ern making her the beneficiary of the annuities and the estate but that her client was insistent.

Pings noted in her opinion that insurance regulators consider Berenzweig "an unethical insurance agent who took advantage of her position of trust with a lonely old man, so she could benefit from his sizable estate when he died."

Berenzweig’s attorney argues that she did not violate any laws or rules, but that some of the problems she is facing could have been avoided. The entire will, which named Berenzweig the sole beneficiary, is being challenged.

Reference: The Milwaukee Journal Sentinel (March 12, 2018) “Insurance agent should give up $1 million received from client's policies, judge recommends”

Does Your Estate Plan Match Your Life Right Now?

If you love your family, you’ll keep them in mind when considering whether to make an appointment to update your estate

Remember to update your estate plan, especially if your life includes events like new kids, a new marriage or the death of a loved one.

Bigstock-Extended-Family-Outside-Modern-13915094If you love your family, you’ll keep them in mind when considering whether to make an appointment to update your estate, as you go through the inevitable changes of life. Not doing so can create financial and emotional burdens. That’s probably not how you want to be remembered.

According to a recent Newsday article, “Make sure your estate plan keeps up with life changes, experts say,” estate planning may seem overwhelming and depressing because it deals with issues of aging.  Some people believe that estate planning is just for the very rich.

That’s not right. Estate planning is for everybody. Make a plan to do it now, in order to avoid consequential fumbles.

Let’s look at what you need to do.

Estate planning is a set of legal documents that state who will receive your assets and property when you pass away.  It also specifies who you want to make medical decisions, and who should make financial decisions, if you are unable to do so yourself.

This should make everything easier for your heirs at this stressful time, when they most need it.

Remember that estate planning isn’t a one-and-done proposition. It’s wonderful that you finally got your will finished and signed, and you have your medical directives in place along with a designated individual to have your authority via power of attorney.

However, that’s not the end of it. Your estate planning documents must keep pace with change.

It’s critical that you update the contingent (secondary) beneficiaries on life insurance policies after the first spouse dies.

The birth or adoption of a child and divorce are similarly important life events that will require you to review and update your estate planning documents.

Don’t assume that establishing joint tenancy (sharing ownership in personal property, like your family home) or joint ownership over financial accounts is enough to protect your assets.

Finally, be certain to work with an experienced estate planning attorney who has the insights and legal knowledge to create a plan that aligns with your goals. An online will has the potential to create more problems than it solves. You might save some money, only to cost your heirs thousands of dollars to undo the damage.

Reference: Newsday (March 4, 2018) “Make sure your estate plan keeps up with life changes, experts say”

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