Trust, Estates & Estate Planning
Case Study – 3 Tips in Naming Non-Traditional Beneficiaries
We recently defended an individual in trial whose long-time friend made him the sole beneficiary of his multi-million-dollar trust. The plaintiff was Decedent’s brother who alleged that our Client had exercised undue influence over Decedent. Brother reasoned that because Decedent didn’t leave his wealth to him, and instead chose to leave his wealth to his friend, it must have been the result of undue influence.
Although most of us generally want to leave our wealth to our family, it is not uncommon for a person to leave his or her wealth to non-family members. This can become quite sticky depending on the role of the beneficiary as related to the trustor or testator and as related to the family in general. Watch out when family dynamics, close relationships with non-family, and greed all converge!
In our case, Decedent was a gentleman in his late 60s suffering from Parkinson’s Disease. Decedent had been estranged from his family for some time, was not married and had no children. Although Parkinson’s did affect his memory, the evidence indicated that Decedent was managing his own financial affairs, managing his own healthcare and was competent when he signed the trust. Although Client helped Decedent towards the end of his life, we successfully argued that the help provided by Client did not rise to the level of a caregiver.
Caregivers are given special status in estate planning. Any gift to a non-relative caregiver is presumptively invalid as a matter of law. If someone desires to leave a gift to a caregiver, special steps are necessary to ensure that a trustor’s wishes are enforceable. Given the caregiver rules, and the significant impact such status will have on a trust or will contest, special attention should be devoted to this issue in the estate planning process.
The estate planner did a great job in this case of protecting the Decedent’s intent. All the “I’s” were dotted and all the “T’s” were crossed. The trust unambiguously named Client as the sole beneficiary and, equally important, unambiguously disinherited Brother. We also observed three key elements that were particularly helpful in defending Decedent’s intent:
Initial Next To Distributive Provisions In The Trust
Trusts are frequently dozens of pages, and in many cases, the ability of the decedent to understand the trust is called into question. Here, in addition to signing the trust at the end, the estate planner had Decedent initial next to the specific distributive provisions and the specific omission of Decedent’s Brother. The estate planner was then able to testify that he specifically goes over the distributive provisions with each client, and then asks each client to initial in the designated blank, confirming the client’s intent. This process permitted the planner to testify as to his modus operandi, without having to specifically remember the event. While not required, this unique planning technique was helpful in emphasizing to the court that Decedent understood the intended beneficiaries.
Additional Confirmation of Intent & Documenting the File
The estate planner also testified that in the 60-day period leading up to the trust signing, he checked in with Decedent to confirm that Decedent was certain in his intent to disinherit his family and to make his friend the sole beneficiary. The estate planner took this extra step because of the significant change from Decedent’s prior stated wishes (to leave it all to Brother) and the amount of wealth involved. The file showed that the planner didn’t confirm Decedent’s intent on a single occasion, but rather on multiple occasions. This type of documentation, and the timeline it created, made a significant impact at trial.
Document Specific Reasons of Disinheritance
When a trustor disinherits family members or removes individuals who had previously been identified as beneficiaries, it is imperative that the drafting attorney understands “the why,” and for the attorney to then carefully document the reasons in his or her file; if not in the trust itself. Documenting the reasons for disinheriting family members is crucial evidence. It provides unbiased motive, which is extremely powerful in persuading the finder of fact. Remember, the trustor won’t be around to explain himself or herself and often-times the estate planning attorney only has a vague recollection of events that occurred years earlier.
Trusts can bring to the forefront a wide array of underlying family dynamics. This case was no exception. The court’s job was to sort through all the extrinsic evidence and to determine the intent of Decedent. This can be a challenging exercise even in the best of circumstances. Fortunately, here, the estate plan was well drafted, and the estate planner’s file was well documented – providing the court with a roadmap of Decedent’s intent. Regardless of the circumstances, the goal should always be to honor the decedent’s true intent. Through careful preparation and incorporating some of these strategies, estate planners can help protect their clients’ testamentary wishes.
About The Author: Roland Achtel and Scott Ingold are attorneys with Higgs Fletcher & Mack and possess extensive trust and estate litigation experience. They can be reached at firstname.lastname@example.org and email@example.com.