UNDUE INFLUENCE IN WILL CONTESTS
Claims seeking to set aside a will based on undue influence have become more prevalent over the last few years as the economy weakens and as more baby boomers reach the fragility of old age. Opportunities for children or others to take control of a senior’s finances often leads to temptations that are too often acted upon to the detriment of the intended heirs and beneficiaries.
Undue influence has been defined by the courts (in the context of will contests) as that sort of influence which results in the destruction of the free agency, that is the free will and judgment, of the person over whom it is exerted. In re Hale’s Will, 21 NJ 284 (1956). It has been found to exist where the testator yields to the will of another merely for the sake of peace or, in other words, where a testator is mentally or morally coerced into doing something contrary to his own volition. It amounts to mental, moral or physical coercion which constrains a person to do what is contrary to his own wishes. 5 N.J. Practice Clapp, Wills & Administration (3 ed. 1982), § 62.
The New Jersey Supreme Court has defined “undue influence” as “‘mental, moral or physical’ exertion which has destroyed the ‘free agency of a testator’ by preventing the testator ‘from following the dictates of his own mind and will and accepting instead the domination and influence of another.’” Haynes v. First Nat. State Bank, 87 N.J. 163 at 176 (quoting In re Neuman, 133 N.J.Eq. 532, 534 (E. & A. 1943). The Appellate Court in In re Liebl, 260 N.J. Super. 519 (App. Div. 1992), certif. denied, 133 N.J. 432 (1993), expanded on the concept of undue influence:
“It must be such as to destroy the testator’s free agency and to constrain him to what he would not otherwise have done in the disposition of his worldly assets. The coercion or domination exercised to influence the testator may be moral, physical, or mental, or all three, but the coercion exerted upon the testator’s mind must be of a degree sufficient to turn the testator from disposing of his property according to his own desires by the substitution of the will of another which he is unable to resist or overcome.”
260 N.J. Super. at 528.
In order to raise a presumption of undue influence, a contestant needs to establish that a confidential relationship between the testator and the beneficiary existed at the time the will was made, and that there are suspicious circumstances surrounding the change in disposition.
Courts have found that a confidential relationship includes all legal and fiduciary relationships as well as relationships where trust and confidence actually exist. A confidential relationship is found “where trust is reposed by reason of the testator’s weakness or dependence…” Haynes, supra. at 176. The essentials of a confidential relationship are a reposed confidence and dominant and controlling position by the beneficiary of the transaction. A confidential relationship exists when circumstances make it certain that the parties do not deal on equal terms, but on one side there is an overmastering influence, or, on the other, weakness, dependence or trust, justifiably reposed, which does not exist where parties deal on terms of equality. See In re Stroming’s Will, 12 N.J.Super. 217 (N.J.Super. A.D. 1951); Croker v. Clegg, 123 N.J. Eq. 332, (N.J.Err. & App. 1938).
The second element required to raise the presumption of undue influence in relation to testamentary bequests is the presence of suspicious circumstances, which circumstances “need be no more then slight.” See Haynes, supra. at 177. See also In re Lehner’s Estate, 70 NJ 434 (1976); In re Catelli’s Will, 361 NJ Super 478 (App Div 2003).
From a practice perspective, Courts will look to the following factors to assist them in finding suspicious circumstances surrounding the preparation and signing of a will and the presence of undue influence:
a. whether the beneficiary was present at the execution of the will;
b. whether the beneficiary was present when the testator expressed a desire to make a will;
c. whether the beneficiary recommended the attorney who drafted the will for the testator;
d. whether the beneficiary had knowledge of the contents of the will prior to its execution;
e. whether the beneficiary was involved with speaking to the attorney about the preparation and contents of the will prior to its preparation;
f. whether the beneficiary was involved in securing witnesses to the will;
g. whether the beneficiary was in charge of safekeeping the will subsequent to its execution;
h. whether the beneficiary secreted the will from other beneficiaries;
i. whether the beneficiary isolated the testator from other family members; and
j. whether the beneficiary disparaged other family members to the testator.
SETTING ASIDE INTER VIVOS TRANSFERS BASED ON UNDUE INFLUENCE
There is a growing trend of undue influence that is less frequently written about, but is occurring with increasing frequency. When someone dies, many look to the decedent’s will to determine how the estate is to be distributed. However, the titling of assets trumps the terms of a will. Generally, if assets are titled jointly with a spouse, as an example, then upon one spouse’s demise, that asset passes to the surviving spouse. Similarly, certain assets like life insurance, IRA’s or 401(K) plans have named beneficiaries. The beneficiary designation governs the distribution of such an asset – not the will. Often times, undue influence occurs not with the preparation of a new will, but rather with whom the accounts are titled, or how the beneficiary designation forms alter the intent of the testator or testatrix.
Joint accounts are afforded statutory protection and the courts will respect the disposition of a joint account to the surviving joint tenant so long as there is a finding of donative intent, delivery and relinquishment of control. However, if there is clear and convincing proof that a decedent did not intend for the surviving tenant to retain the property, the transfer may be set aside. In other words, the survivorship aspect of such accounts remains open to attack based upon equitable grounds such as fraud, duress, undue influence and mistake, which are matters that go to the true intent of the depositor.
Where a grantor is dependent upon a grantee and makes an improvident inter vivos transfer, stripping himself of substantially all of his assets, a presumption of undue influence arises and the gift will be declared invalid unless the donor has had the benefit of competent and disinterested counsel and it is shown that he understood and fully intended the consequences of the gift. A presumption of undue influence arises in connection with transactions inter vivos where a confidential relationship exists between the grantor and the grantee. The burden rests on the grantee to prove not only that no undue influence or deception was practiced, that all was fair, open and voluntary, but that the transaction was well understood. The purpose of this presumption is to afford protection against the consequences of voluntary action by the grantor induced by the confidential relationship, the effect of which upon the grantor’s own interest he may only partially understand.
In the area of probate litigation, there are a growing number of cases wherein spouses, children, siblings or friends, through the creation of joint accounts, are frustrating the intentions of a decedent. In analyzing such transfers, the courts have held that once a confidential relationship between decedent and the donee is established, a presumption arises whereby the burden of proof shifts to the donee of such transfers to show, by affirmative proof, that a gift was intended by the decedent. Absent such a showing, the transfer will be set aside.
The statutory provisions governing joint accounts provides that “[s]ums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.” N.J.S. 17:16I-5; Cziger v. Bernstein, 33 N.J. Super. 404 (1955) (courts will respect the disposition of a joint account so long as there is a finding of donative intent, delivery and relinquishment of control); In the Matter of Estate of Del Guercio, 206 N.J. Super. 159, at 162, (N.J. Super. L. 1985) (gifts between spouses have higher protections); Trotta v. Trotta, 103 N.J. Super. 295, (App. Div. 1968); Tucker v. Tucker, 121 N.J. Super. 539 (1972).
Although this result cannot be changed by will, a review of the case law makes it clear that the survivorship aspect of such accounts remains open to attack based “upon equitable grounds such as fraud, duress, undue influence and mistake”, i.e. “matters going to the true intent of the depositor.” Sadofski v. Williams, 60 N.J. 385, 290 A.2d 143 (1972), citing Bauer v. Crummy, 56 N.J. 400 (1970); Ward v. Marine National Bank of Wildwood, N.J., 38 N.J. 132 (1962) (as to defense of “mistake”).
The majority of cases on this subject center around the claim of undue influence. The New Jersey Supreme Court has defined “undue influence” as “‘mental, moral or physical’ exertion which has destroyed the ‘free agency of a testator’ by preventing the testator ‘from following the dictates of his own mind and will and accepting instead the domination and influence of another.’” Haynes v. First Nat. State Bank, 87 N.J. 163 at 176 (quoting In re Neuman, 133 N.J.Eq. 532, 534 (E. & A. 1943). See also In re Liebl, 260 N.J. Super. 519 (App. Div. 1992), certif. denied, 133 N.J. 432 (1993).
In Haynes, supra. the court also pointed out the different standards used in determining undue influence in the context of inter vivos gifts as compared to a will contest. The Haynes court concluded that “in inter vivos transfer cases, where one is giving away what one can still enjoy, the presumption of undue influence is raised more easily than in cases involving wills. [In inter vivos cases] [a]ll that is needed is a confidential relationship.” Id. at 176. New Jersey law is clear that the presumption of a right of survivorship in inter vivos gifts shifts in instances where a confidential relationship exists. See also In the Matter of the Estate of Penna, 322 N.J. Super. 417 (NJ Super AD 1999); Bronson v. Bronson, 218 N.J. Super. 389 (App. Div. 1987); Pascale v. Pascale, 113 N.J. 20 (1988).
“The nature of a confidential relationship is difficult to define, but encompasses all relationships ‘whether legal, natural or conventional in their origin, in which confidence is naturally inspired, or, in fact, reasonably exists.’” Pascale v. Pascale, 113 N.J. 20, 34 (1988), quoting In re Fulper, 99 N.J. Eq. 293 (Prerog. 1926). A confidential relationship “includes not only cases of technical, legal, fiduciary relationship, such as guardian and ward, principal and agent, trustee and cestui que trust, but also all cases where trust and confidence actually exist.” Id. at 134.
A confidential relationship arises where confidence is reposed by reason of weakness or dependence or where the parties occupy relations in which reliance is naturally inspired or in fact exists. The essentials of a confidential relationship are a reposed confidence and dominant and controlling position by the beneficiary of the transaction. A confidential relationship exists when circumstances make it certain that the parties do not deal on equal terms, but on one side there is an overmastering influence, or, on the other, weakness, dependence or trust, justifiably reposed, which does not exist where parties deal on terms of equality. See In re Stroming’s Will, 12 N.J.Super. 217 (N.J.Super. A.D. 1951); Croker v. Clegg, 123 N.J. Eq. 332, (N.J.Err. & App. 1938).
“[T]he person in whom the confidence is reposed and who has acquired an advantage, is required to show affirmatively 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 re Dodge, 50 N.J. 192 (1967) quoting In re Fulper’s Estate, 99 N.J. Eq. 293, 302 (Prerog. Ct. 1926). See also Haydock v. Haydock, 34 N.J.Eq. 570, 575 (E. & A. 1881) (“the influence which is undue in cases of gifts inter vivos, is very different from that which is required to set aside a will”). See also Seylaz v. Bennett, 5 N.J. 168 (1950); Slack v. Rees, 66 N.J. Eq. 447 (E & A 1905).
In Bronson, supra., an aged and ill mother’s transfer of substantially all her assets into joint accounts with her son, upon whom she relied for transportation and daily care, raised a presumption of undue influence. The mother became seriously ill and moved in with her son in May of 1985. Prior to moving in with her son, she had a Will naming both of her sons as equal beneficiaries. At such time, she also had approximately $25,000 held in joint accounts. At her death in November of 1985, she had in excess of $200,000 titled in joint name with the son with whom she was living. The court determined that the burden was on said son to show that his mother understood and desired all her assets to pass directly to him rather than under her will. The Appellate Court in Bronson determined that sufficient evidence existed for a finding that a confidential relationship existed and, accordingly, held that the son had the burden of proving that his mother intended to make the gifts to him through the transfers into joint name and that his mother acted without undue influence.
The principles governing an inter vivos undue influence case are clearly laid out in In re Dodge, 50 NJ 192 (1967):
“[T]he common law has always imposed a heavy burden of proof in most instances of claimed inter vivos gifts, even where the donor is not shown to have been mentally incompetent at the time of the transaction. The principle has been expressed frequently that “in all transactions between persons occupying relations, whether legal, natural, or conventional in their origin, in which confidence is naturally inspired, is presumed, or, in fact, reasonably exists, the burden of proof is thrown upon the person in whom the confidence is reposed and who has acquired an advantage, to show affirmatively 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 re Fulper’s Estate, 99 N.J.Eq. 293, 302 (Prerog. Ct. 1926).
In the application of this rule it is not necessary that the donee occupy such a dominant position toward the donor as to create an inference that the donor was unable to assert his will in opposition to that of the donee. As Chief Justice Gummere observed in Slack v. Rees, 66 N.J.Eq. 447, 449 (E. & A. 1904), the doctrine has a much broader sweep. “Its purpose is not so much to afford protection to the donor against the consequences of undue influence exercised over him by the donee, as it is to afford him protection against the consequences of voluntary action on his part induced by the existence of the relationship between them, the effect of which upon his own interests he may only partially understand or appreciate.” In our judgment, whenever it appears that the relations between the parties to an inter vivos gift are of such character that in reasonable probability they do not deal with each other on terms of equality…equity should regard it as voidable at the instance of the donor or his representatives. In such a situation the donee must show by explicit and convincing evidence that the donor intended to make a present gift and unmistakably intended to relinquish permanently the ownership of the subject of the give. And where death or incompetency of the donor has intervened between the alleged gift and the making of the claim, which generally facilitates the making of false and non-meritorious claims, the common law has long recognized a particular need for compliance with the burden of proof: …”
50 N.J. at 227-228, 234 A.2d 65.
The court reaffirmed these principles in Pascale v. Pascale, 216 N.J. Super. 133, (App. Div. 1987), certif. granted, 108 N.J. 183 (1987). In Pascale, the court held that “[w]e are convinced that in the present day it is equitable and just to require only that it be proven that the donor has reposed such trust in the handling of financial and legal affairs in the donee that a confidential relationship exists. Once this has been established the donee must carry the burden of affirmatively demonstrating that there was no deception or undue influence and that all was open, fair and completely understood. 216 N.J. Super. at 140.
Thus, despite the statutory provisions of N.J.S. 17:16I-5, the courts will entertain actions to set aside an inter vivos transfer of individual assets into joint accounts based on grounds of undue influence. Through proof of a confidential relationship between donor and donee, the burden shifts to the donee to show that a gift by the donor was intended. In these cases, a potential litigant should seek experienced counsel in dealing with such matters to ensure that their rights are protected.
CONCLUSION
In an effort to avoid probate litigation, estate planning attorneys should seek to implement an estate plan that is tax efficient, provides for spouse and/or children adequately, both in terms of timing and amounts in hopes that the plan promotes harmony. In the event that a family member or spouse is to be cut out, care should be taken to document the testator’s intent so that a Court can read into the reasoning behind the omission. Additionally, attention should be given to the titling of assets so that there is clarity as to what assets are to pass by Operation of Law as opposed to being distributed through the probate estate under the will. Finally, in the event of a subsequent marriage, a prenuptial agreement should be implemented that deals specifically with the elective share claim, or the waiver of said claim, such that the parties document to what extent, if any, they are to share in their respective spouse’s estate. In the absence of the above, the likelihood of probate litigation increases dramatically.