Trust and Estate/Probate Litigation
i. What types of trust and estate/probate litigation services does MacDonald Rudy provide?
Our Litigation Department provides a wide range of skilled legal representation to fiduciaries, beneficiaries, creditors and other parties who have some legal relationship with the trust or probate estate. We handle various trust and will construction actions where the interpretation of a trust instrument or last will and testament may be at issue. We also participate in complex trust and estate accounting actions as well as a wide range of other issues involving fraud, embezzlement, theft, undue influence, lack of capacity where the legal ability of the person executing the instrument is called into question. Our cases involve a broad range of disputes often involving sophisticated and even novel legal issues. Much of our trust and estate litigation does not strictly involve trust or will instruments, but also involves disputes concerning the proper ownership and possession of life insurance proceeds, joint bank accounts, stock brokerage accounts, pension funds, individual retirement accounts as well as real estate.
We also handle many cases involving complex real estate and business disputes regarding family-owned assets throughout the State of Hawaii. We are known for litigating some of the largest family trust disputes in the state, involving well-known families and family-owned and created businesses in Hawaii. Our cases may range in value from a few hundred thousand dollars (in the case of a dispute concerning an estate with a modest-sized home) to cases valued in the tens of millions of dollars. No matter how complex or basic the case is and no matter how much is stake in terms of dollar controversy, we treat every case seriously and with the utmost professionalism.
ii. What is probate?
Probate is the legal process that occurs upon a person’s death to administer his or her estate and transfer assets to those beneficiaries named in the will or to the intestate heirs at law if there is not will. It involves a petition to the court by providing a Will and requesting an appointment of a Personal Representative. A Personal Representative is someone who will have legal authority to settle claims against the estate and disburse the decedent’s property in accordance with the will. Letters Testamentary are issued to the Personal Representative to prove his or her legal authority to deal with institutions such as banks and title companies on behalf of the decedent. During this process, a court will determine the validity of a will and who the heirs to the estate are.
iii. What are common issues that come up in trust and estate/probate litigation?
- Lack of testamentary capacity (lack of ability to make a wil or execute a trust)
- Lack of donative capacity (lack of ability to make a gift)
- Undue influence
- Fraud in the inducement of the making of a trust/will instrument
- Disinherited spouses – petitions for determination of elective share
- Trustee removal actions
- Petitions for instructions
- Petitions for orders compelling trust terminations, accountings, and distributions
- Theft/embezzlement (of bank accounts, retirement benefits, savings, stocks, etc.)
iv. What is a lack of testimentary capacity and how is it measured?
The law requires that all individuals who make or execute a will or a trust or other estate planning documents have the requisite degree of mental capacity, also referred to as testamentary capacity, in order to make a validly enforceable estate planning document. In order to have testamentary capacity, a decedent must be able to: (1) understand the business in which he or she is engaged, i.e. the effect of making the will or trust; (2) understand and know the nature and extent of his or her property; (3) to know his or her next of kin and natural heirs of his or her bounty and (4) to have sufficient ability to perceive the relationship between the estate planning document(s), one’s property, and the testamentary or inter vivos plan of distribution.
In short, testamentary capacity requires that one know generally what they have in the form of assets; who their relatives or next of kin are; and that the purpose of the estate planning document(s) is to leave various assets to individuals in a coherent plan. A coherent plan does not mean that the plan of distribution is necessarily fair, but rather, it must only be logical in terms of matching the assets with the described plan of distribution. Thus, the level of cognitive function required to have testamentary capacity is quite low in comparison to the degree of cognitive functioning required for other types of capacity, such as capacity to contract or the capacity to manage one’s own daily financial affairs.
Moreover, the measure of testamentary capacity must be judged at the time the individual executed the estate planning document(s), not before or after. This is important because even people who are suffering from delusions or insane beliefs may have lucid intervals at the time that the estate planning document is executed and can therefore still form a coherent plan and have testamentary capacity. For these reasons, proving a document invalid, due to the lack of testamentary capacity is quite challenging and is, in fact, a relatively rare occurrence. It almost always necessitates expert testimony by the decedent’s former treating physician or by a forensic psychiatrist opining that the individual lacked capacity at the time the estate planning document(s) was executed. Because of the low threshold of testamentary capacity and the difficulty of proof, experienced law practitioners often rely on undue influence to void the estate planning document(s) rather than attack a testamentary or inter vivos instrument on a theory of lack of testamentary capacity.
In analyzing the testamentary capacity, the law in most states generally recognizes the basic principle that capacity is typically measured in the sliding scale. That is, the more complex the instrument, or the more complex the decision, the greater amount of capacity is required for the law to recognize that the individual had the legal ability to undertake the action. A person may need for example a lower amount of testamentary capacity to execute a simple will, but a greater amount of capacity to execute a complex trust with multiple assets in different forms which is being disbursed to various individuals under different terms and conditions. There are other various types of capacity that the law recognizes and our law firm has litigated virtually all of them. For example, there is contractual capacity to execute a document; there is general capacity to handle one’s day-to-day finances; there is capacity to consent to medical treatment (what is commonly referred to as informed consent); there is donative capacity, which is the capacity to make lifetime gifts; and there are other miscellaneous capacities as well including the capacity to marry, the capacity to divorce and others as well. Each of these capacities reflects a slightly different standard and a slightly different definitional approach depending on the jurisdiction the clarity that psychologists and psychiatrists have been given by the courts varies greatly leaving sometimes subsequent room for analysis and interpretation of individual’s capacity.
v. What is undue influence and how is it measured?
In an age of advanced medicine, individuals are increasingly living longer, and as a consequence, people may outlive their full cognitive faculties. As a result, people may be more susceptible to undue influence because they may spend many years of their life physically or psychologically dependent on others for their care and financial well-being. Elderly individuals are sometimes faced with a situation in which they have been coerced, pressured or as the law says “unduly influenced” to change their estate plan. This change often results in an unnatural bequest to a third-party who commits the undue influence. In an undue influence case, the change in an existing plan or creation of a new plan alters the disposition of some or all of the individual’s assets upon death and does not reflect the individual’s own wishes or independent desires, but instead reflects the wishes of a third-party who will benefit from the new or altered estate plan.
With few exceptions, the law generally does not expressly allow one to bring a claim for undue influence until after the death of the maker of the estate plan, therefore, proving undue influence can be a difficult undertaking; it is almost exclusively proven by indirect and circumstantial evidence. This is because undue influence, which is a form of fraud, is rarely done visibly where others may directly observe the subtle coercion and pressure that may occur over a protracted period of time and behind closed doors. Proving undue influence can be a very fact-intensive investigation which may require a collection of a multitude of witnesses and requires the attorney to paste together a timeline of facts and circumstances which, by themselves, would seem innocent or benign, but in the totality of circumstances may lead to proving a strong circumstantial case of undue influence.
For these reasons, litigating undue influence claims requires extensive experience and expertise on the part of the attorney. Often, experts such as forensic psychiatrists, physicians, psychologists, some of whom may not have even treated the individual while alive, may be called to testify and opine to the decedent’s susceptibility to undue influence and/or diminished capacity, which tends to prove that the decedent did not understand that he or she was being coerced or pressured at the time of execution.
Where mere persuasion ends and undue influence begins is not always clear. After all, we are all influenced in our everyday lives. We are influenced by the opinions of others, by our family, by the media, and we are influenced by our own life experiences. The law of undue influence, however, in the area of wills and trust litigation, examines whether one has been coerced through outside pressure or influence of others which has deprived the individual of his or her own free will to the point where they are no longer expressing their own wishes, but are expressing, instead, the wishes of third parties. This is often a very subjective determination by the fact finder, whether it is a judge or jury.
vi. How do Hawaii courts determine whether undue influence exists?
Hawaii law and the law of other states examine several elements in determining whether undue influence exists. These elements as expressed by the Hawaii State Supreme Court are:
- Whether the individual who executed the instrument was susceptible to undue influence. This element is typically proven by examining the age and physical and mental health of the individual at the time of the execution of the instrument and alleged undue influence. It may also be proven by analyzing the degree to which the individual relied upon the alleged influencer for financial assistance and/or custodial care.
- Whether the alleged influencer had the opportunity to commit undue influence. With respect to this element, the court may look at such factors as the relationship of the alleged influencer to the individual and whether the alleged influencer had the ability, over a period of time, to commit the acts of undue influence without interference or the knowledge of others.
- Whether the alleged influencer has the disposition to influence. For this element, the court may look at the motive of the alleged influencer and whether there are other factors, personality traits, or circumstantial evidence that leads one to believe that the alleged influencer had the motive and ability to commit the act of undue influence.
- Whether the disposition resulted in a benefit to the alleged influencer. In analyzing this element, the court would review the result of the disposition to determine if, in fact, the alleged influencer received a “coveted result.”
These factors have evolved in the Hawaii courts to aid judges and juries in determining whether or not an existing estate planning document should be enforceable or essentially cancelled and rendered null and void as a result of undue influence.
vii. How common are undue influence cases?
In Hawaii, partly because of the nature or our state’s unique geographical isolation, undue influence cases are especially plentiful. Often times, children move away from their parents, leaving them geographically isolated and creating a vacuum in which individuals, whether related or unrelated, may step in and take advantage of an unsuspecting, aging adult.
Sometimes undue influence cases can be very difficult to prove and present to a fact finder. The mere fact that an individual wants to give more or less to a specific child or other third party may be reflective of many different considerations which have nothing to do with undue influence, pressure, or coercion. There are many cases where individuals give a disproportionate interest or share in one’s estate plan as a token of gratitude or for other reasons, such as an unwritten bargain for custodial care, companionship, and other services in exchange for property at death.
For these and other reasons, our office sometimes recommends that estate planning for elderly people, particularly those being cared for by their children, be completed openly with frank discussion among the family members. There is nothing improper with putting the reason for one’s wishes in writing or in some other method of documentation such as a videotape or recording, addressed to all relatives to explain one’s reasoning and motivation for a new estate plan.
viii. What is elder financial abuse?
Financial abuse against an elder is any act or pattern of an act that is committed against an elderly individual (typically a person age sixty-five (65) years or older, but in some cases may be younger) which involves an individual wrongfully taking property/assets from an elder without obtaining proper consent.
Some common forms of financial elder abuse include:
- Undue influence
- Conversion of assets
- Wrongful procurement of wills/trusts/deeds
- Life insurance designee changes
- Payable in death account changes
ix. What are some factors that place someone at higher risk to be subject to financial elder abuse?
Financial elder abuse cuts across all socio-economic, all cultural and ethnic levels and all educational levels. Financial elder abuse is often committed against elders who are physically or cognitively impaired—and not necessarily both. This is because these elders tend to be dependent on third parties for care and support, which allows a third party to isolate and take advantage of the elder’s unfortunate circumstance.
An example of a cognitive impairment which is commonly seen in those individuals subjected to financial elder abuse is dementia. Those in the latter stages, or even middle stages, of dementia are most at risk. However, even those suffering from mild cognitive impairment (such as the early stages of dementia) may be subject to abuse, especially when this cognitive abuse is combined with physical impairments.
Financial elder abuse also tends to happened when an elder is isolated from family members (either geographically or socially). Again, this isolation makes it easier for the perpetrator to take advantage of his/her victim.