Avoiding Will and Trust Challenges and Resulting Probate Litigation
One of the biggest threats to your estate plan, especially as you grow older, is a challenge to your Last Will and Testament and/or your Living Trust Agreement, most likely by your children, contesting the validity of either document on the grounds of undue influence, incapacity, or both. The following is a brief explanation of South Carolina validity laws relating to Wills and Trusts and my suggestions to help mitigate factors your beneficiaries might attempt to argue in a Court.
In order for a Last Will and Testament to be validly executed in South Carolina certain conditions must be met: the testator must be 18 years of age or older, the Will must be in writing, the Will must be signed by the testator and two disinterested witnesses, and the testator (meaning you) must be of sound mind. Of sound mind has been defined by the South Carolina courts to mean the testator: (1) has a general idea of the property he has an interest in; (2) who the natural objects of his bounty are; and (3) to whom he wishes to leave his property. More generally, the testator must also understand that he is signing a Will, and not some other document.
In order for a trust to be validly executed in South Carolina, the same capacity standards as those of a Last Will and Testament are now required. Old law required the same capacity as when signing a contract.
Both a Last Will and Testament and a trust can be challenged by an interested person, meaning heirs, devisees, children, beneficiaries, the Trustee, or any other person with a property right in the trust or estate. An heir is a person that would have received the decedent's property should there be no Will and the property passes via intestacy laws. A beneficiary is a person named in the Will or trust to receive property. Technically, beneficiaries are called devisees when in a will.
Both a Will and a trust are voidable to the extent the document’s creation was induced by mental incapacity or undue influence. Voidable, in this case, means that the Will or the trust is deemed to be effective, unless or until a Court, meaning a judge or jury, decides otherwise and invalidates the Will or trust. In order for this to occur, the Will or trust must be contested by an heir, beneficiary, Trustee, or other interested person on grounds such as undue influence or mental incapacity.
If your Will is challenged and deemed to be void, based on undue influence or mental incapacity, the Court could reinstate your previous Will. In a South Carolina Court of Appeals case, In Re: Estate of Lillian Cumbee, the Probate Court held that a series of Wills were void ab initio and therefore did not revoke the previous Will. In this case, the testator created a 1987 Will, and then created a 1991 Will that revoked all previous Wills followed by a 1994 Will that also revoked all previous Wills. The Court found that the 1991 and 1994 Wills were created while the testator was under undue influence, and held that both of the Wills were void ab initio.
In essence, even though the last two Wills of the testator revoked all previous Wills, the Court found them vitiated by undue influence resulting in the revocation of the older Will being deemed void as well. Therefore, the 1994 and 1991 Wills were excluded and the 1987 Will was held to be the valid Last Will and Testament. The South Carolina Court of Appeals upheld this ruling.
To mitigate the probability of a Will or Trust contest, both your Will and Trust should contain "No Contest Clauses", similar to the following, but should not be used without the advice and consent of a qualified attorney in estate planning or probate law:
"Should any devisee under this Last Will and Testament, or beneficiary of any trust created hereunder or which is to receive assets pursuant to this Last Will and Testament, contest the validity of this Last Will and Testament or any provision hereunder, or attempt to prevent any provision from being carried out in accordance with its terms, in legal proceedings or otherwise, then any interest provided for such devisee is hereby revoked and such beneficiary or devisee shall be deemed to have predeceased me, for all purposes under this Last Will and Testament".
However, please note that the South Carolina statute will deem a "No Contest Clause" unenforceable if "probable cause" to contest the Will or trust exists. Probable cause is defined as acts that led the contestant to believe that a purported Will is not in fact the Will of the purported testator. Probable cause is more than family strife coupled with unfavorable inheritance.
If the "No Contest Clause" is activated without probable cause, the Court will view the challenger as a person that predeceased you, and the property will transfer according to your documents as if that person had predeceased you. For example, if your child is deemed to predecease you and your Will bequeathed money to your son, and if he predeceases you, then to his children, then the money would bypass your son and go directly to his children, even though your son is still living. This tends to incentivize beneficiaries not to challenge Wills and trusts when they are left without property of a large value or quantity, unless there is sufficiently strong evidence of undue influence or duress.
However, a situation where someone may run the risk because they do not mind the assets going to their children can present a problem. If you believe that one of your children may think this way, then you can also provide that both the child and his or her children are all presumed to predecease you. For obvious reasons, I would use caution in using this method of deterrence.
Can you tell, which method is being used in the above example? Not sure? That is why you should never do such a thing without the advice and input of a qualified attorney in estate planning and probate matters.
If the "No Contest Clause" is activated, and the Court finds probable cause exists to believe you were under undue influence or incapacitated, the case will be decided by the Court, and the challenger will not be barred from receiving the interest granted in either the Will or trust. In other words, if any of your children challenge your trust, and probable cause does exist, your children will receive assets regardless of the "No Contest Clause."
There is a strong argument in support of your Will and trust passing your property as you desire. In general, people are allowed to leave their property to whomever they wish. In the past, people have left property solely to their pets, in trust and their Wills and trusts were upheld by the Courts. In a landmark Wills case from the early history of South Carolina, a man known to be an alcoholic and sleep in hollow logs, left a significant amount of money to the State of South Carolina, the Court held that he was entitled to be eccentric and pass his property as he desired. However, it all heavily depends upon facts and circumstances. There have also been less extreme cases.
While an important element of property ownership is the right to convey the property under the testator's own terms, in some cases, the actions of the testator can be so unreasonable as in itself to justify the Court finding mental incapacity or undue influence. That being said, leaving property or an interest in property to someone who is not considered a natural object of your bounty does not in by itself lend credit to a claim of undue influence or mental incapacity. However it does not help, especially with a very large gift or one that seems out of proportion to the relationship.
In order to mitigate the claim that you left property to someone as part of an undue influence claim, you may wish to amend your trust document to state why you are leaving them property.
If a challenge is brought to void a Will or trust based on mental incapacity, the person or persons alleging incompetence bear the burden of proving incapacity at the time of the execution of the document(s), by a preponderance of the evidence.
The Courts tend to listen to testimony from doctors, friends, attorneys, and family. The Courts also tend to put more emphasis on those who spent more time with the decedent. For example, in one case, the Court of Appeals found that greater weight should be given to the testimony of the decedent's friend that saw him several times per week rather than the niece who saw him only two or three times per year or even the nephew who saw him once per month. The Court also gave greater deference to those who did not stand to gain from the decision of the Court.
If there are concerns, you may want to establish a paper trail for a defense against any claims of mental incompetence and/or undue influence that may be raised in the future with regard to execution when you are no longer around to explain your actions.
Affidavits of friends or family who are not receiving property can be prepared and executed stating that you are mentally competent to execute estate planning documents. Also, it may assist if a challenge is later brought, to have a doctor as a witness, or a statement from your physician stating you are mentally capable of executing documents and understanding exactly what you are doing. It may also be beneficial for you to provide us with medical records to review prior to resigning your documents. If done in combination, these suggestions will help mitigate any claims of mental incompetence that may be raised by your children.
Undue influence tends to be found in cases where the Testator or Settlor is under such influence that "the influence exerted must be undue and operate to such a degree as to amount to coercion." The influence exerted must destroy "the free agency of the creator of the Will or trust" and force him to do that which he would not have done otherwise had he been left to his own judgment. In other words, it must be shown that the Will or trust created was not the product of the Testator's or Settlor's desires, but rather the influence of another party resulted in overcoming the Testator's desires and resulted in the implementation of that third-party's desires.
Evidence of such influence would be living with the alleged influencer, where the Testator/Settlor cannot act on his own. For example, if you are unable to discuss matters with your attorney without the alleged influencer overhearing the conversation, or having the opportunity to influence your decision. Additional evidence would be a forced restriction on the testator's visitations.
Sometimes, depending upon circumstances, living in a retirement community may raise an inference that you are unable to take care of yourself and could be unduly influenced by others.
In a case where no one resides with you, it is important to avoid depending too much on someone who consistently takes you to all of your appointments, or supervises your medical appointments. In all cases, you should be freely able to visit with your doctors, friends, and family whenever you desire, without a third party sitting in on the visit.
However, if this is unavoidable and you want to mitigate the probability of an undue influence claim in the future if you leave assets to someone who is constantly helping you, then proof of no such influence should be established now. We would need to highlight these facts for a Court looking backwards, after your death or in the event of your disability.
One option for establishing evidence that there is no undue influence by the person helping you would be to have you execute new estate planning documents without any input or assistance from the person who helps you. The person helping should not arrange the meeting with us, nor drive you to or attend the meeting, if this is at all feasible. This would provide the opportunity for you to review and make any desired changes to your documents. This would also tend to demonstrate that you did not review any changes with the person who might be alleged to assert undue influence.
By laying a proper foundation in advance, it tends to show that you are capable and not under the control of the third party by not discussing the matter prior to execution, traveling to and from your appointment without assistance, and lack of the third party’s presence while you are making decisions, it will be somewhat more difficult for anyone to prove undue influence while challenging your Will or trust.
Please note that while under normal circumstances the burden of proof for undue influence is unmistaken and convincing, this is not the case where the alleged influencer is a fiduciary. The existence of a fiduciary relationship creates a strong presumption that shifts the burden of proof to the proponent of the instrument to show the absence of undue influence.
If any alleged influencer is your Agent, or Attorney-in-Fact under a Durable General Power of Attorney, or Trustee, this is an unfavorable fact and creates a fiduciary relationship between such person and yourself. Should your Will or trust be contested on the grounds of undue influence, the alleged influencer, or most likely your named Personal Representative and Trustee, need to be in the position of positively demonstrating that such person did not exert undue influence upon you, assuming this is what you want to accomplish. However, I am not sure if this is a fight most Personal Representatives and/or Trustees are willing to take on and it may need to be addressed prior to the situation arising.
If you believe there may be a Will or Trust challenge and resulting probate litigation, and you want to mitigate the likelihood of a successful challenge to your estate planning, we can discuss the options listed below.
However, first and foremost we need to see your medical records to see if there are any conditions or comments that would support a claim of mental incapacity or even possible undue influence.
· Amend your Will or Trust to include language as to why you are leaving property to someone who is not the natural object of your bounty, or why you are leaving a disproportionate amount to one or more persons who are the natural objects of your bounty;
· Obtain notarized affidavits from friends and family that you are mentally competent and do not appear to be under the undue influence of your friend;
· Have a medical doctor witness the execution of your estate planning documents;
· Obtain a notarized affidavit from your medical doctor(s) stating you are mentally capable of executing new estate planning documents and understanding what you are doing;
· Execute estate planning documents while the person who might be accused of being the alleged influencer is not present and has not had any input;
· Execute estate planning documents completely unaided by anyone who may be accused of undue influence. Anyone who may be a possible influencer should not drive you to your appointment or be involved in any way;
· Direct your Personal Representative and Trustee to defend against your estate or trust relating to altering the provisions listed, even directing against a settlement agreement that cuts back on the inheritance of someone who may be alleged to be an undue influencer;
· Tighten up your "no contest" clauses to include children of a person who contest the Will or trust, but with careful consideration.
Further, if you want us to explore and research additional and less used avenues, such as a contractual agreement not to contest, between your beneficiaries, heirs, devisees, Trustee, and you, video executions of documents, etc., please let us know.
If you have any questions, or if you would like to further discuss the suggestions I offered, please call to set up an office conference.