This case involves a trust created by the father in 1992. He died in 1994, leaving behind his wife and mother of their four children: son M, son T, daughter S, and daughter M. After his death, his assets (mostly real estate) flowed into two sub-trusts: the marital trust and the residuary trust. Both were intended to provide for the mother for the remainder of her life. The mother and daughter M were designated as co-trustees for the sub-trusts. When the mother passes away, any remaining assets will flow into the children’s trust to be divided equally between the children.
The marital and residuary trusts grant the mother prodigious power and authority to use and disburse of trust assets. The mother may request distributions without limitation and for any reason and may exhaust the trust principals to provide for her needs. She may disburse of trust assets during her lifetime, favoring one child over another in doing so. The trust also shelters the mother from accountability or liability to any of her children for the manner in which she, in good faith, exercises her powers and discretions; her judgment with respect to all matters shall be binding and conclusive upon all her children.
In 2016, Petitioners asserted that the mother and daughter M breached their duty of loyalty by giving son M an unequal share of property from the trust and by depleting the trust for purposes other than the mother’s care.
Petitioners further contended that son M had unduly influenced the mother into giving him control over the trust, which he used as his personal piggy bank. They alleged that son M had usurped the role of trustee by listing himself on the trust’s bank accounts. Petitioners presented evidence that son M managed the daily business of the trust properties and used trust funds to manage his separately owned properties.
Respondents retorted that the language of the trust gave the mother great discretion to disburse property as she saw fit and even to designate son M as a business representative.
A presumption of undue influence arises when there is evidence of (1) a confidential or fiduciary relationship between the grantor and a fiduciary, (2) the fiduciary or an interest he represents benefits from a transaction, and (3) the fiduciary had an opportunity to influence the grantor’s decision in that transaction.
When the presumption is established, the party seeking to enforce the trust must offer other evidence to rebut the presumption.
In this case, not only did the probate court prematurely dismiss petitioners’ undue influence claim without a motion and without a hearing, but the court also improperly dismissed the case in the face of conflicting evidence that created a genuine issue of material fact.
The court of appeals vacated the probate court’s summary dismissal of petitioners’ undue influence claim and on remand order the probate court to conduct the remainder of the proceedings on the record.
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