Home > Uncategorized > Lesson From Court: Unresolved Family Issues Can Be Costly

Lesson From Court: Unresolved Family Issues Can Be Costly

I was recently in Probate Court over the settlement of an Estate Litigation Case.

The facts were a classic case of a family dispute that inevitably bubbles up into a lawsuit –

I. FACTS

Elderly Dad is a widower, lives by himself. His 6 kids are grown and living their own lives out of town.

Dad, after retiring, has amassed a large retirement fund, held in Trust for the benefit of his kids when he passes away.

In comes the “girlfriend”.

Dad is lonely and starts spending a lot of time with “girlfriend” – who is much younger.

Kids, who already don’t hear much from dad, hear even less from him, as girlfriend moves in and “redirects” dad’s disposable income towards her.

Kids are eventually frozen out of any relationship with dad, presumably at “girlfriend’s” direction.

“girlfriend” becomes power of attorney of Dad’s finances

Dad changes his estate plan to largely benefit “girlfriend” when he passes away.

Litigation ensues between kids and girlfriend. Kids claim girlfriend “unduly influenced” Dad, to change his estate plan.

II. LAW

UNDUE INFLUENCE

 

“To establish undue influence it must be shown that the grantor was subjected to:

1. threats, misrepresentation, undue flattery, fraud, or physical or moral coercion

2. sufficient to overpower volition, destroy free agency and

3. impel the grantor to act against his inclination and free will.

Motive, opportunity, or even ability to control, in the absence of affirmative evidence that it was exercised, are not sufficient.” In re Estate of Karmey, 468 Mich 68, 75; 658 NW2d 796, 799 (2003). 

 

 

Therefore if girlfriend’s actions overpowered Dad’s free will, girlfriend could be liable to Kids. This is a pretty high standard. It’s not illegal for girlfriend to persuade Dad to change his estate plan – it iIF Dad’s will was overpowered, so that essentially he wasn’t making his own decision.

 

a. If Girlfriend acted under a Power of Attorney, then undue influence is presumed

Further, such undue influence may be presumed girlfriend  was acting as a fiduciary of Dad’s with regard to  estate planning.

 

In re Estate of Karmey, 468 Mich 68, 73 (2003) the Michigan Supreme Court held: “[t]he presumption of undue influence is brought to life upon the introduction of evidence which would establish (1) the existence of a confidential or fiduciary relationship between the grantor and a fiduciary, (2) the fiduciary or an interest which she represents benefits from a transaction, and (3) the fiduciary had an opportunity to influence the grantor’s decision in that transaction.”

 

III. Outcome of this Case

 

This case ended up settling.  But only after months of emotional turmoil, and six-figure legal bills, paid out by the Trust.

 

IV. LESSON:

Resolve Family Issues Ahead of time by clear and open communication.

I am sure in hind sight, the Kids look back and think of ways that they could have communicated more openly with Dad about his wishes and expectations for when he passed away., and also their reservations about “girlfriend.” There were numerous instances at various stages of the progression of the dispute that could head been taken advantage of, but weren’t.

 

In estate planning, expectations and intentions of an individual when they die should be clearly discussed among all family members when possible, so that any miscommunication can be cleared up. This lesson applies in the context of Estate matters, but also in Family Businesses. The reason that business disputes and estate disputes lead to litigation in family businesses is exacerbated by the “personal” nature of the dispute. It is hard to make a good “business decision” to resolve a dispute when there is some much personal emotions intertwined.

 

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