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Hi, this is Keith Davidson at Albertson & Davidson.  In this video, I want to discuss whether the successor trustee of a trust has an obligation to declare the trust settlor incompetent.

Let me explain some of those terms before we get started. The settlor is the person who creates the trust. Typically, when people create these revocable living trusts, they’re the settlor, the creator, and the are also the trustee during their lifetime, so they manage those trust assets.  Somebody is usually named the successor trustee for when the original trustee either loses capacity or dies.

The question is: if you are named as a successor trustee, and you’re seeing the trust settlor is fading and losing capacity, is there an obligation to step in and take action?  This usually happens within families. For example: your father creates a trust, he’s the trustee, and you’re one of three children and named as the successor trustee. You can see that Dad is fading, and starting to lose capacity, and that he is having a hard time managing the finances.  Do you, as a successor trustee, have an obligation to step in and take action?

The interesting thing is that from a legal perspective, you don’t have any legal obligation to step in. A successor trustee doesn’t have any duties, responsibilities, or obligations until they agree to act as trustee.

But, then there’s the moral obligation.  You know that if the trustee can’t manage finances, he going to cause harm to himself because his finances won’t be properly managed, and he’s also going to cause harm to the other trust beneficiaries receiving these assets after he passes away.  And from that perspective, maybe you do have a moral obligation to step in.

The good news: that most trusts usually have a section that tells you what you need to do to have the settlor deemed incompetent. Once you do those things, the settlor is no longer trustee and the successor can step in and start acting.

Many trust documents say you need a letter or declaration from at least one or two treating physicians.  And that’s all you need.  Once you have that letter from the doctor deeming the settlor incompetent, the successor trustee can step into place.  It’s just that simple.  You don’t have to go to court to get an incapacity declaration or a conservatorship. Just follow the steps in the trust.

If your trust doesn’t have instructions on how to have the trustee declared incapacitated, then you do have to go to court.  This is harder and can be a problem.  However, I estimate 90% of trusts have instructions on how to handle the settlor’s incapacity.

So, take a look at your trust. See what it says, and follow those steps. Then, the successor trustee can step in, control and properly manage the assets, and make sure that the trust is stable moving forward.

This is not a medical blog, but medicine and the law interact extensively when it comes to determining (or challenging) a person’s legal capacity.  To prove lack of capacity requires evidence of a mental defect, such as dementia or Alzheimer’s disease.  Alzheimer’s also plays a role in proving a weakness of mind—required for undue influence.

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The problem is that dementia and Alzheimer’s is often overlooked, misdiagnosed, or not diagnosed at all even though the conditions may be present.  For example, Alzheimer’s patients can go ten to fifteen years with the disease before showing any outward symptoms.  In part, a lack of diagnoses stems from the difficulty medical science has had determining when a person has Alzheimer’s disease.

In a recent report by CNN, as reported by Dr. Sanjay Gupta, detecting the presence of Alzheimer’s disease may be possible by looking into a person’s eyes.  Dr. Gupta explains that Alzheimer’s can be detected by sticky plagues in the brain made up of proteins called “beta amyloid.”  But these proteins are very difficult to detect in the brain without doing invasive surgery.  However, researchers now believe that the same proteins found in the brains of Alzhemer’s patients may also be present in the eyes—at the back of the retina.  They are now conducting a clinical trial to see if the eye test can identify patients who are starting to develop Alzheimer’s disease.

Better diagnoses means better understanding of the disease, and a chance to address the problem before it progresses.  For the legal community, earlier diagnosis provides a better (and more accurate) idea of when an elder becomes incapacitated or susceptible to undue influence because of a weakness of mind. 

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In California, proving a weakness of mind or lack of capacity requires medical evidence of a mental defect (see Probate Code Section 811).  We have come across many elders who are obviously susceptible to undue influence, yet they have no medical diagnosis of a mental defect.  As a result, their mental condition cannot be established in a Court proceeding.  By having a more accurate picture of a person’s mental capacity, the true state of their decision making abilities can be determined.  This can be a huge breakthrough to protecting elders and ensuring their true desires are reflected in their Trusts and Wills.

They say the eyes are the window to the soul, but they may also be the window to better mental health too.

(For more on signs of Alzheimer’s, see this CNN article: The 10 warning signs of Alzheimer’s.)

Lack of capacity is probably the most used concept in trying to overturn a California Will or Trust.  And while nearly ever Trust or Will contest lawsuit contains an undue influence allegation, undue influence is usually minimized or even ignored altogether at trial.  In this vide, Keith A. Davidson discusses how both concepts can be used to overturn a California Will or Trust.  For those viewing this blog by email subscription, you can click on the title for a link to the video.

People influence others every day, and most types of influence simply persuades a person to make a certain decision–where to eat, what to buy, who to like, you get the idea.

Sometimes influence can get out of hand and become “undue.”  What separates normal influence from undue influence?  Simply put, undue influence is coercion.  It typically occurs when a person has a weakened mental state (such as with dementia or Alzheimer’s) and her intent is replaced with the intent of the undue influencer.  In other words, the Will or Trust the decedent creates no longer represents her intent, it represents the intent of the wrongdoer.  The wrongdoer is said to have “supplanted the intent” of the decedent (that term always makes me think of brainwashing—another good analogy).

The weakened mental state required to establish undue influence is not unlike the mental defect needed to prove lack of capacity.  Yet, with undue influence, the various elements of capacity are not required.  For example, capacity for the creation of a Will requires that a person knows (1) the nature and extent of their property, (2) their relationships to the persons who are to receive property under the Will, and (3) that they are making a Will.  And a Will is presumed valid unless the person lacked capacity at the very moment they signed the Will.  Thus, a person with dementia, who may have good days and bad days, could conceivably have capacity on the day of signing a Will and then lapse back into incapacity the next day.

When there is little or no medical evidence around the Will signing date, proving a lack of capacity at the time the Will was signed may be difficult.  But proving undue influence is another matter because all we need is a weakness of mind, plus some facts showing that weakness was taken advantage of by the wrongdoer.  Once established, it’s irrelevant whether a person had capacity when signing a Will.  Instead, the question turns on whether the person’s intent is reflected in the Will.  This is why I call undue influence “capacity lite.”

What’s more, with undue influence we have the ability at times to shift the burden of proof on to the opposing party (unlike capacity where the burden always remains on the person contesting the Will).  And that is a huge advantage when trying to overturn a Will.  How do we shift the burden?  We must prove that (1) the wrongdoer was in a confidential relationship with the decedent (such as principal and agent, or caregiver, etc.), (2) the wrongdoer participated in the Will creation, and (3) the wrongdoer profited from his actions (i.e., he received something under the Will or Trust).  Once established, the burden is passed on to the wrongdoer to prove that he did NOT engage in undue influence, which is very difficult to overcome.

In sum, undue influence can be a powerful weapon in trying to overturn a Will or Trust, when used properly.  And it can give a person contesting a Will or Trust some hope when capacity appears hard to prove.

California Form Interrogatory 15.1 (an “interrogatory” is just a question) is the most important interrogatory to serve on your opposing party in a lawsuit. And the law requires they answer it fully and completely. Yet, so many attorneys refuse to answer the question properly.

A typical use of 15.1 follows:

You file a Trust Contest or a Will Contest (or any other type of lawsuit) alleging three causes of action: (1) Undue Influence, (2) Lack of Capacity, and (3) Financial Elder Abuse. The opposing party files an answer to the Trust Contest or Will Contest denying most, or all, of your allegations, and on top of that includes 15 affirmative defenses (an affirmative defense, if proven by the opposing party, operates to defeat your claims even if the facts supporting the claim are true).

The opposing party’s denials and affirmative defenses must ultimately be tried, which can make for a long, costly and confusing trial.  But what if the denials and affirmative defenses could be trimmed down before trial?  That’s the purpose of 15.1—you can narrow the issues, and force the opposing party to show their cards—factual cards—before trial. Once you narrow the issues in a case, you are able to clearly and forcefully present the true facts of the case at trial, which generally equals a win for you.

How does 15.1 do this? 15.1 requires the opposing party to provide all facts, all persons, and all documents that support (1) their denials, and (2) their affirmative defenses. In other words, for each denial of a material allegation in your lawsuit (i.e., Trust Contest or Will Contest) the opposing party must (1) identify all facts supporting each denial, (2) identify all witnesses (including their names, addresses, and phone numbers) who can testify about facts supporting each denial, and (3) identify all documents (or things) (including the name, address and phone number of the person who has each document) supporting each denial. Likewise, the opposing party must identify all facts, witnesses, and documents that support each and every affirmative defense (all 15 of them in the case presented above—that’s a lot of work).

To date, I have never received a proper response from an opposing party to 15.1. I generally follow up the opposing party’s response with a required “meet and confer” letter articulating how they must respond to 15.1. If the opposing party refuses to supplement their improper response I generally file a motion with the court requiring that they properly respond to 15.1. Any time I have filed a motion with the Court on 15.1, the Court has granted my motion and ordered the other side to respond. I have even received monetary sanctions against the opposing parties. So beware, when 15.1 comes your way, especially from my firm, it must be answered.

If you have questions, or would like to receive a form copy of my motion to compel for 15.1, please contact me.  

No contest clauses were originally referred to as “In Terrorem” clauses. In Terrorem is Latin for “To Scare the Pants off my Beneficiaries”—loosely translated. And that’s what a no contest clause is supposed to do, prevent a trust or will contest by disinheriting a beneficiary who dares to contest the terms of the instrument.

California has a love-hate relationship with no contest clauses. And their application seems to be in constant flux. For example, prior to January 1, 2010, all no contest clauses were enforceable except for clauses that pertained to certain protected actions—such as challenging the actions of a trustee or filing a creditor’s claim. And the law allowed a beneficiary to receive an advanced ruling from the court (called Declaratory Relief) to determine that a proposed filing would or would not be a contest. The advanced ruling process allowed beneficiaries to test the waters before committing themselves to a filing that could later be deemed a contest.

That all changed effective January 1, 2010, when a new law came into effect that radically changed the application of no contest clauses in California—in the hopes of making them easier to apply. Let’s test that theory: under the new law, no contest clauses in wills and trust are generally unenforceable except certain narrowly defined actions. These narrowly defined actions include:

  • A direct contest against the instrument based on things like lack of capacity, undue influence, fraud, lack of proper signing,
  • Filing a petition to transfer title in property into or out of a trust or an estate, or 
  • Filing a creditor’s claim.

These actions only trigger the no contest clause if: the precise action is stated in the clause itself, and the action is brought without probable cause. Sound simple?

Furthermore, the advanced ruling procedure (the Declaratory Relief referenced above) has been abolished. So now beneficiaries must take their chances in filing a petition. If a beneficiary contests a trust or will and wins, then the no contest clause does not apply and the beneficiary is happy. If a beneficiary contests a trust or will and loses, the no contest clause may apply (if it falls into one of the three categories set forth above) and then the beneficiary must argue whether they brought their action with “probable cause.” If the beneficiary has probable cause, then no harm, no foul and the beneficiary is not disinherited. If there is no probable cause, the beneficiary loses all interests in the trust or will.

So what then constitutes “probable cause?” Impossible to say at this time because there have been no cases on this issues to date. But rest assured, case law will be coming because the new law is perfectly primed to result in voluminous litigation. Not the easy application the legislature was hoping for, but a good way to keep trust litigation attorneys fully employed.