Undue Influence

Can I Disinherit a Family Member?

This is never a decision to be made lightly, but we do live in a world where families aren’t always as perfect as their holiday cards. Some blended families never really blend, opioid addictions create huge challenges for families and some individuals are family in name only. In that case, says Next Avenue in the article “How to Disinherit a Family Member,” you may choose to disinherit someone.

The first step is to work with an experienced estate planning attorney, who practices in your state. This is a complicated process, and if you don’t do it right, it’s entirely possible the person you want to disinherit can appeal your action in court after you’ve died—and win.

A living trust may work better than passing all your assets through a will, when you want to disinherit someone. A will is easier to challenge. He or she may say you were being influenced by someone else when you had your will written, and, therefore, the disinheritance does not reflect your real wishes.  They could also claim that you signed the will without understanding what you were signing, and that you were not mentally competent and could not make legal decisions at that time. This is a charge of fraud.

After you die, your will becomes a public document, and anyone can find out who you decided to disinherit. They may be angry or embarrassed and feel the need to set the record straight, challenging your will to prove their worth.

A living trust, when prepared correctly, remains a totally private document. In some states—check with your estate planning attorney—it can only be challenged by the beneficiaries of the trust.

There can always be charges of fraud, as a result of your being mentally incompetent to sign the trust. However, most people who create living trusts do so several years before their death. Wills are often written or revised shortly before death. Therefore, the person who created the trust has likely opened accounts in the name of the trust, used the accounts, paid bills, etc. That activity makes it hard to prove incompetence.

What if you want to leave someone only a partial inheritance? Your best bet is to ensure that your estate includes a strong “No Contest” provision, technically termed “In Terrorem.” It’s a little harsh, but the general idea is that whoever challenges the will, gets nothing. Courts don’t always like it, but heirs may think twice about challenging your will.

Remember that many of your assets are in accounts with beneficiary designations: IRAs, SEPs, investment accounts, life insurance policies, etc. Review the names on your accounts to make sure the person you want to disinherit does not appear on those accounts. You can also use Payable on Death (POD) or Transfer on Death (TOD) on accounts to keep that “disinherited” person from knowing about assets moved to other heirs outside of your will.

Blended families face unique challenges. Friction between stepparents and stepchildren can explode, when one parent dies and the second spouse is left without the other parent as a buffer. Tensions that were kept under the surface, may bubble up quickly. Make sure that all the children know what your plans are for your estate, to avoid breaking up the blended family.

Disinheriting someone, for whatever reason, can create hard feelings that remain for generations. If you feel you have no choice, speak with your estate planning attorney to be sure it’s done correctly and lessen the chances of any challenges.

Reference: Next Avenue (Dec. 11, 2018) “How to Disinherit a Family Member”

Estate Battle Shifts into High Gear Between Truck Dealership Owner’s Widow and Sons

The company posted $172 million in profit on $4.7 billion in revenue in 2017.

Marvin Rush II founded, what is now the biggest commercial truck dealership chain in North America. Lawsuits are now flying, between his third wife and his son, who claims that his father was incapacitated when new wills were created.

Marvin-rush-chairman-emeritus*750xx760-428-0-46The dispute over the estate of W. Marvin Rush II, between his wife Barbara Rush and his son, W.M. “Rusty” Rush lll, has led to both parties filing lawsuits.

The San Antonio Express-News reports in its article, “Dueling wills filed over late truck dealer Marvin Rush’s estate,” that chief among the assets at stake is most of Marvin’s stock in Rush Enterprises. That’s the business he founded, grew, and later took public. There are now more than 100 Rush Truck Centers in 22 states, and shares in the company are worth about $74 million. The company posted $172 million in profit on $4.7 billion in revenue in 2017. It employs nearly 7,000 workers.

Rusty claims those shares belong to him, based on his father’s 2006 will. Barbara says her husband of 26 years revoked that will, when he made a new one in May 2013 and then another in November 2013. The 2013 wills don’t have any specific bequest of Marvin’s shares, so Barbara says they’re part of his residuary estate. She’s the sole beneficiary.

Rusty alleges that his dad suffered from dementia, when he signed the 2013 wills. Barbara disagrees.

Marvin’s obituary said that in “his last few years” he battled Lewy Body Dementia, which can have a range of symptoms. They include problems with thinking, memory, moving and changes in behaviors.

Rusty filed his opposition to probating either of the 2013 wills. He said that the onset of his father’s dementia was at least five to eight years prior to his death, “thus placing Mr. Rush’s mental capacity in doubt from May 2010 onward.”

Marvin completely disinherited Rusty in the 2013 wills. They will stated, “I do not wish to make any provision hereunder for my son William Maurice Rush, III, or any of his descendants.”

Barbara was named the executor of Marvin’s estate in the 2006 will and in each of the 2013 wills.

The two 2013 wills, which cut Rusty out of any inheritance, “represented a dramatic departure from (Marvin’s) long-standing estate plan of leaving his shares of Stock in Rush Enterprises to his son Rusty,” Rusty’s filing states.

“These wills were also executed shortly after Mr. Rush, apparently with the encouragement of his wife, Barbara, had formed an irrational belief that his son Rusty was somehow ‘at fault’ when the Board of Directors insisted that Mr. Rush step down as Chairman of the Board in May of 2013,” Rusty’s filing continues.

Barbara challenges Rusty’s argument, saying that the 2013 wills were prepared by a law firm and signed by two witnesses.

Barbara’s argument is that if Marvin truly lacked capacity or was being subjected to undue influence by her, when the will was made in May 2013, then how was it possible that Rusty, who was the CEO and president of Rush Enterprises could have entered into a “Retirement and Transition Agreement” with his father at that time?

Expect this to be a long, drawn out estate battle.

Reference: San Antonio Express-News (August 24, 2018) “Dueling wills filed over late truck dealer Marvin Rush’s estate”

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”

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