December 19, 2016

Claims Challenging Estate Plans

by Rebecca Klock Schroer

We are seeing an increase in the number of lawsuits in which people are challenging or trying to circumvent estate plans.  The claims traditionally include lack of testamentary capacity and those involving improper actions by family members, agents under powers of attorney or conservators.

Testamentary Capacity

A challenge to an estate plan often involves a claim that the testator was not of sound mind. Under Colorado law, a sound mind includes the presence of the Cunningham factors and absence of an insane delusion that materially affected the testamentary instrument.  The Cunningham factors are as follows: the testator must (1) understand the nature of the act, (2) know the extent of his property, (3) understand the proposed testamentary disposition, (4) know the natural objects of his bounty, and (5) that the testamentary instrument represented his wishes.  Cunningham v. Stender, 255 P.2d 977 (Colo. 1953).

In addition to these factors, the testator cannot be suffering from an insane delusion.  An insane delusion exists if a person has a persistent belief, resulting from illness or disorder, in the existence or non-existence of something contrary to all evidence, which materially affects the disposition in the testamentary instrument.  Breeden v. Stone, 992 P.2d 1167 (Colo. 2000).  For example, failure to include a child in the will because the testator believes that child has been abducted by aliens and will never return to earth.

Undue Influence

We are also seeing an increase in financial exploitation of those who are vulnerable and susceptible, including the elderly and disabled.  As a result, claims of undue influence are more prevalent.  Undue influence often occurs when someone takes advantage of a confidential relationship, such as a fiduciary relationship.  The influencer’s actions cause the testator to make a certain disposition of his assets that she would not have otherwise made.  This can include a change in a testamentary instrument or transfers during the testator’s lifetime.

Pre-Death Activity

In addition to the traditional challenges, people continue to find creative ways to circumvent estate plans while the testator is still alive.  For example, agents under a power of attorney may take money and claim it was a “gift” or engage in a self-dealing transaction that benefits the agent.  A conservator may fail to include assets on an inventory or conservator report.  In addition, a child might add himself to a bank account to “help a parent pay bills,” but the account ends up titled in joint tenancy, allowing that child to inherit the account as a non-probate asset and circumvent the disposition in the testator’s will.  Another common example is the disappearance of tangible personal property during the testator’s life.  All of these actions are leading to an increase in litigation.

Trends in Related Claims

Finally, we have seen an increase in other challenges to estate plans, such as claims involving missing wills or trusts, joint wills, will contracts, ambiguous language in testamentary instruments, asset purchases by fiduciaries, common law spouse claims and elective share cases.

Practical Tips for Estate Planners

  • Keep in mind that you could be a witness and your file could be produced in a case involving the testator’s capacity, undue influence, fraud, duress or mistake.
  • Take notes during client meetings.
  • Create a checklist for execution of estate planning documents and follow it for every execution, so that you can testify regarding your process.
  • If there is a question about capacity, consider obtaining some contemporaneous evidence such as a treating physician’s letter.
  • If you suspect elder exploitation, report it to the appropriate authorities. See R.S. § 18-6.5-108