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Recent Case Analysis of Undue Influence

Undue Influence is when someone pressures another in such a way that the person being influenced is not acting by their own free will; they are being coerced into taking a certain action. The person being influenced does not understand the repercussions of their actions.

Recognizing undue influence is a job for many – lawyers, financial advisors, notaries, bankers, and family members. Due to the nature of undue influence, it is often carried out by loved ones and kept hidden from others. Undue influence often happens in the case of illness, where there is a deterioration in physical and mental abilities. The bad actor will take advantage of the ill person, and unduly influence them into taking actions to benefit the bad actor.

The issue of undue influence was recently litigated in Malousek v. Meyer. Here, we have Molly and Greg who began cohabitating in 2009. In 2015, Molly was diagnosed with cancer and began treatments. By 2017, her health had drastically deteriorated. In mid-October of 2017, the pair added Greg as a joint owner on Molly’s bank accounts, changed beneficiary designations in Greg’s favor, got married, and executed a quitclaim deed in order to have the home transfer to Greg upon Molly’s death. In addition, Molly executed a power of attorney naming Greg’s son, Mark, as agent.

By October 23, Molly passed away. Her adult children, A.J. and Courtney, filed a declaratory judgment action seeking to have all the property interest changes reversed and the marriage annulled. Their reasoning was that Molly lacked capacity to make these decisions, she had previously indicated that she did not want to get married and did not want Greg or Mark as beneficiaries, and thus was the victim of undue influence. The district court found in favor of A.J. and Courtney, declaring that the marriage was annulled and ordered that the property be conveyed to Molly’s estate. Greg and Mark appealed.

The instant case is out of the Nebraska Supreme Court. The court reviewed the evidence in the case. Plaintiffs’ arguments and evidence were as follows:

  • In 2010, Molly began wearing a ring that she had bought and told friends and family it was a commitment ring but that she did not want to ever get married again.
  • Mark eventually lived with Molly and Greg and several witnesses testified that Molly would routinely complain about having to financially support Mark.
  • Witnesses also testified that Molly complained that Greg spent too much of her money on alcohol, sometimes buying friends rounds of drinks and expecting her to pay for it.
  • Further testimony stated that in 2013, Greg asked to be included on the home’s deed and Molly told him no.
  • Molly was quoted as saying that Greg was “leeching” or “mooching” off of her.
  • Friends testified that Molly had stated, as late as August 2017, that she was thinking about leaving Greg $50,000 but nothing else.
  • In June 2017, Molly contacted her attorney to draw up both healthcare and financial powers of attorney, naming A.J. as agent. Molly made statements to her attorney that she did not need further estate planning because since she was single her assets would pass to her children, which is what she wanted.
  • Molly’s nail technician, who had done her nails every 3 weeks for years, testified that on September 14, 2017, Greg’s sister drove Molly to the appointment. The nail technician testified that Molly appeared frustrated with Greg’s sister and Molly told Greg’s sister to “Give me a break. Let me breathe.” The sister would also ask the nail technician what Molly had talked about during the session.
  • Near the end, friend and family couldn’t get in touch with Molly via phone. Greg would always answer and says Molly was unavailable or sleeping. Greg did not mention the marriage to any of Molly’s friends or family.
  • On October 10, 2017, Greg’s best friend came to the house and at that time, Molly did not recognize him.
  • The bank manager who assisted with adding Greg’s name to the accounts testified that Molly appeared sick and “couldn’t even walk” and that Greg was “holding her up”. Upon request, Greg refused to let the bank manager and Molly talk alone. Greg held Molly’s hand to help her sign the necessary documentation.

The Defendants’ arguments and evidence were as follows:

  • When Molly executed new beneficiary designation forms, Molly’s financial advisor and attorney were present. They both testified that Molly led the conversation and stated that she wanted to leave a certain amount to her children and to leave two residences to Greg. The attorney told Molly that if Greg’s names were on the deeds, he would have to pay inheritance taxes when Molly passed, if the two were not married. Molly supposedly replied “Then we’ll get married.”
  • The wedding officiant testified that he had a conversation alone with Molly before the ceremony and she appeared coherent and that the occasion was a happy one.
  • The notary who acknowledged the quitclaim deed and powers of attorney testified that Molly appeared to be coherent and uncoerced.
  • Greg produced evidence from Molly’s physician that stated Molly was oriented at her appointments between late 2016 and October 19, 2017, save the October 18 appointment where she was incoherent.

The court quoted Miller v Westwood and gave the elements of proving a claim of undue influence: “(1) that the person who executed the instrument was subject to undue influence, (2) that there was opportunity to exercise undue influence, (3) that there was a disposition to exercise undue influence for an improper purpose, and (4) that the result was clearly the effect of such undue influence.” The court further went on to state that undue influence is sometimes difficult to prove with direct evidence and other factors may need to be inferred.

In the end, the Supreme Court ruled for Molly’s children. The court stated that as Molly’s health deteriorated, there was a sequence of events carried out to transfer her property to Greg, it was done in secret, contact with Molly’s friend and family was controlled, and the effect of the transactions was contrary to her prior stated wishes. Importantly, the Supreme Court noted that witness credibility is an issue for the trier of fact, giving the district court deference since that court had the opportunity to observe and question the witnesses. The district court obviously found the Plaintiffs’ witnesses to be more credible than those called by the Defendants.

There are a few lessons from this case. The first is to plan early, while still healthy. This way, the likelihood of an argument for undue influence can be decreased. The second lesson is that practitioners need to be aware of undue influence and have a procedure to analyze each case for its presence. Talk to clients and their families about undue influence and the warning signs. Finally, it might be best to encourage clients to talk on their friends and family about their estate plan, so everyone is aware and on the same page before the client’s death.

Need help starting the conversation with your clients about proactive planning? Watch this video and learn strategies to initiate proactive planning discussions with your clients in order to anticipate future problems, prevent crises, and gain revenue.

Proactive Planning: How to help your clients gain control of their future

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