As I stated in What is Undue Influence?, the rebuttable presumption of undue influence created by the confidential relationship is often the critical issue in estate litigation. The recent Madison County probate case of In Re Estate of Hart v. Steverson[1] addressed what the alleged influencer must show in order to overcome this presumption.
In November of 2002, Connie Eldridge and Polly Weaver filed a complaint against their sister, Deborah Steverson. The complaint Deborah had exercised undue influence over their mother in order to receive numerous inter vivos gifts and abused her position as executrix of the estate. The complaint further requested that the estate remain open until a full accounting could be filed.
Deborah filed her accounting of her mother’s estate in December of 2002, and Connie and Polly objected to disbursements. The transactions that were contested by Connie and Polly include: (1) $48,338.20 to pay off Deborah’s mortgage; (2) three $20,000 gifts transferred to Deborah dated April 2001, June 2001, and January 2002; (3) several cash withdrawals between December 2000 and January 2002, totaling $4,330 from an account bearing their mother and Deborah’s names with no known purpose; and (4) two transfers totaling $7,700, to Deborah’s personal account in December 2002 as reimbursements for their mother’s funeral expenses. The Madison County Chancery Court denied the objections to the accounting and Connie and Polly’s contest of the estate.
On appeal, Connie and Polly claimed that the Madison County Chancery Court did not apply the correct standard in determining whether the transactions were the product of undue influence. The sisters acknowledge that Deborah had a fiduciary and confidential relationship with their mother. Connie and Polly argued that the contested transactions violated that confidential relationship Deborah had with their mother. As such, the gifts should have been presumptively invalid.
The Mississippi Court of Appeals reviewed the Madison County probate decision to see if it was clearly erroneous. The court restated the established law that, in order to overcome the presumption of undue influence, the parties must show the following:
- Good faith on the part of the grantee/beneficiary;
- The grantor’s/testator’s full knowledge and deliberation of [her] actions and their consequences; and
- Independent consent and action by the grantor/testator. [2]
The court then applied each of these factors to the case.
Good Faith
The court laid out five factors to address when examining whether the grantee/beneficiary acted in good faith:
- The determination of the identity of the initiating party in seeking preparation of the instrument;
- The place of the execution of the instrument and in whose presence;
- What consideration and fee were paid, if any;
- By whom paid; and
- The secrecy or openness given the execution of an instrument. [3]
To prove that Deborah acted in good faith in regard to the inter vivos gifts from her mother, Deborah showed that the money used to pay off her mortgage was actually her mother purchasing Deborah’s home to use as an investment property. Other family members corroborated these facts and stated that her mother wanted to make it an income property for which she could get monthly rent. Deborah was given permission to withdraw the money from their joint account to pay off the first and second mortgage.
Deborah also showed that her mother contacted their family attorney as well as an independent attorney before proceeding with the home purchase. The transaction was done in full knowledge of the rest of the family, including Connie and Polly.
The three $20,000 gifts were also given openly and initiated by their mother. her mother declared that she wanted to give all the kids $10,000 a year from the proceeds of property she had sold. However, because of disagreements, not all the kids wanted the money.
Deborah explained the cash withdrawals as money used for her mother living expenses. Deborah had a power of attorney and took care of a lot of everyday household expenses for her mother. Other witnesses were brought in to testify to the fact that her mother liked to pay for things in cash and used cash exclusively in certain situations.
Full Knowledge and Deliberation
The court laid out four factors to address when examining whether the grantor had knowledge and deliberation of her actions and their consequences:
- Her awareness of her total assets and their general value;
- An understanding of the persons who would be the natural inheritors of her bounty under the laws of descent and distribution or under a prior will and how the proposed change would legally affect that prior will or natural distribution;
- Whether non-relative beneficiaries would be excluded or included ; and
- Knowledge of who controls [her] finances and business and by what method, and if controlled by another, how dependent is the grantor/testator on [her] and how susceptible to her influence. [4]
Deborah introduced witnesses that testified to her mother’s awareness and participation in her finances, her nieces stated that she had attempted to set up online banking so her mother could stay up to date on her balances. When distributing the $20,000 gifts all of her mother’s children testified that she was aware of how much she had left in her account and when she would be able to give them more.
Independent Consent
To overcome this last prong Deborah must show that her mother sought the advice of (a) a competent person, (b) disconnected from the grantee, and (c) devoted wholly to the grantor/testator’s interest. [5]
Deborah offered proof of independent advisors in the form of the attorneys that were consulted when her mother took possession of Deborah’s house. Her mother also consulted all of her children at one point in time when making inter vivos gifts.
Based on their analysis of these factors, the appellate court found that Deborah rebutted the presumption of undue influence by clear and convincing evidence. The court affirmed the holding of the Madison County Chancery Court.
In Re Estate of Hart v. Steverson, 2007-CA-00384-COA (Oct. 27, 2009)
[1] In Re Estate of Hart v. Steverson, 2007-CA-00384-COA (Oct. 27, 2009).
[2] Wright v. Roberts, 797 So. 2d 992, 999 (¶23) (Miss. 2001).
[3] In re Estate of Holmes v. Holmes-Price, 961 So. 2d 674, 682 (¶25) (Miss. 2007).
[4] Holmes-Price, 961 So. 2d at 684 (¶39).
[5] Mullins v. Ratcliff, 515 So. 2d 1183, 1193 (Miss. 1987).
About Jeramie Fortenberry
