Overview
In this elder financial abuse case, our attorneys helped a client whose son had manipulated her into executing a Qualified Personal Residence Trust (QPRT) and then signing a deed transferring the primary asset of her existing trust — a three-unit income-producing property – into the QPRT.
Worse still, the son, who was sole trustee of the QPRT, had been pilfering money from the QPRT for his own personal benefit. The client was seeking to not only suspend her son as trustee of the QPRT, but to revoke the trust or have it invalidated.
In order to obtain a court order revoking an irrevocable trust, such as a QPRT, all the beneficiaries of the trust must agree to the revocation. Our client and her three children were the beneficiaries of the QPRT. While two of her children agreed to the revocation, the son who was the trustee of the QPRT refused to play along. If he were to have agreed to the revocation, he would have lost all control of the trust and its resources.
You may be wondering how a competent person can fall victim to undue influence and act against their own best interests. In this case, our client transferred her primary source of income into a QPRT that she never meant to create. Unfortunately, even a competent person can be manipulated.
To make our client more susceptible to his influence, our client’s son deliberately had been over-medicating her. She had been so impaired when her son took her to an attorney that she could not recall executing the QPRT or transferring her income-producing asset into it.
The QPRT was not even beneficial to our client. While this type of irrevocable trust can provide estate tax savings to individuals whose estates exceed the estate tax exemption threshold (which was $5.4 million the year our client executed the QPRT), our client’s estate was a fraction of that.
At the time she executed the QPRT, she had been temporarily incapacitated. As such, she had lacked the awareness to know she was gifting away her primary income-producing asset. Our trust dispute attorneys would later argue that since our client had lacked the requisite intent and capacity to create the QPRT, and was subjected to undue influence by her son, the QPRT should be invalidated.
Invalidating a Trust on Account of Lack of Capacity, Undue Influence and Elder Financial Abuse
In order for someone to create a trust or will, it is required that they be competent and have the intention to do so; otherwise, the document could potentially be invalidated by means of a trust contest based on lack of capacity and testamentary intent.
At the time the QPRT was executed, and a few months later, when the deed transfer was signed, our client lacked both capacity and intent. While competent in her everyday life, she had been in a state of heavy sedation when her son took her to an attorney to create the QPRT. By dispensing her the incorrect dosage of her medication, the son had induced her groggy state, which had left her feeling disoriented and confused. The client had no recollection of meeting the attorney or signing the QPRT.
It may also be possible to set aside estate planning documents if it seems they were procured by undue influence. Undue influence is defined under California law as “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.”
Undue influence is a common form of elder financial abuse, and if it can be proven that an abuser took or obtained property from an elder by means of undue influence, the court may order the abuser to pay double or treble damages, as well as the plaintiff’s attorney’s fees and costs.
Elders are particularly vulnerable to financial exploitation, particularly because many of them are socially isolated and declining mentally. Additionally, they may not have anyone to help them keep tabs on their finances. However, in our client’s case, her son was able to unduly influence her because of his proximity to her.
“Keystone handles many cases like this one in which an elderly person is financially abused through undue influence,” says Shawn Kerendian, the founder and managing partner of Keystone Law Group, P.C. “Fortunately, there are legal measures that can be taken to prevent this kind of elder abuse. For instance, if the elder is competent, they can appoint an attorney-in-fact they trust to help them manage their finances. If the vulnerable elder lacks capacity, a loved one can try to obtain conservatorship over them.”
Trustee Suspension or Removal
The trustee of a trust is considered a fiduciary, which means they are obligated to always act in the best interest of the trust beneficiaries, or they could be accused of trustee misconduct. Their fiduciary duties certainly don’t permit them to personally gain by misappropriating or mismanaging assets belonging to the trust, as our client’s son did.
As the trustee of our client’s QPRT, the son was supposed to provide our client with the net income from her property at least once a quarter, which he never did. He also spent rampantly from the QPRT, using trust assets to fund his own lavish lifestyle.
The actions of our client’s son warranted legal action. He, at least, needed to be suspended as trustee of her QPRT, if not removed as trustee. In many instances, when a trustee’s actions are sufficiently egregious, they may even be surcharged and held liable for paying the attorney fees and costs of the plaintiff.
An In-Depth Look Into Keystone’s Undue Influence Case
It is rare for trust attorneys to file a petition to invalidate a trust while the trust creator (called the settlor, grantor or trustor) is still alive, since most trusts only become irrevocable after the trust creator dies. But QPRTs, like the one our client unknowingly signed at the urging of her son, are by nature irrevocable. And since irrevocable trusts can only be revoked if all the beneficiaries of the trust agree to the revocation, it was impossible for our client to have the QPRT revoked without the express consent of her son, the trustee of the QPRT.
As a result, Keystone’s only option was to secure a court order invalidating the trust due to lack of capacity, undue influence and financial abuse.
The client’s son did not have much going for him in terms of credibility. He had a history of addictions, which caused him to previously, on many occasions, misappropriate funds from our client’s bank accounts, misappropriate her possessions and even open new credit lines in her name.
At one point, the son even had our client sign a power of attorney while she had been heavily sedated to give him access to her finances. Our client vaguely remembered signing the power of attorney and revoked it as soon as she could, but a substantial amount of damage had already been done.
At the court hearing to invalidate the QPRT and suspend the son as trustee, Keystone’s probate attorneys argued that their client lacked capacity when she signed the trust document, and had been subjected to undue influence and financial abuse at the hands of her son — a predator with a demonstrated history of malfeasance and fraud.
Results
Hearing our trust attorneys’ compelling arguments around the son’s history of questionable conduct toward our client and her finances, the judge determined that the son’s behavior raised enough concern about financial abuse to immediately suspend him as the trustee of the QPRT and appoint the private professional fiduciary proposed by Keystone as an interim trustee.
By devising a winning legal strategy, Keystone’s attorneys ultimately were able to convince the son to agree to a settlement in which he would give his consent to invalidate the QPRT and return control of its assets to our client.
“If this QPRT had not been invalidated, our client basically would not have had any source of income in retirement or any control over her finances,” says Verlan Kwan, of counsel at Keystone who served as one of the client’s attorneys. “Thanks to our quick work to suspend the son as trustee and invalidate the trust, our client will be able to enjoy her retirement after decades of hard work.”
Elder Financial Abuse Stopped in Its Tracks
The swift action taken by Keystone’s attorneys to invalidate the QPRT and suspend the client’s son as trustee helped the client to retain her source of income during retirement. Without our attorneys’ efficient handling of this case, our client could have struggled to retire and to exercise any control over her finances, given that most of her assets were tied up in the QPRT. Our work also stopped the son from perpetrating more financial abuse against our client. While the client resided overseas, we worked hand-in-hand with the successor trustee to administer the trust and close it out.
My son, who I’d put through medical school was about to spend my entire life savings and sell my house. I had given him the legal authority to do so. He was challenging my ability to think for myself and retain legal counsel. He was playing dirty. I was lucky to have Verlan on my side. She really fought for me and eventually got the judge to void the document. Believe me when I say there is not a case Verlan can’t win
The Takeaway
Financial abuse runs rampant among elders. No one wants to believe their own family members could be the perpetrators of it, but they often are, as demonstrated by this case. The lesson is for elders to remain cognizant of their finances at all times. And if they are not well-versed in money matters, they should have an attorney or accountant assisting them.
If an elder lacks competence, then it is equally important for their attorney-in-fact or conservator of the estate to keep tabs on their financial affairs. The earlier misconduct is detected, the less damage the perpetrators will be able to inflict.
Dealing with a trust dispute? Our attorneys can help you resolve it.
Trust and will disputes based on elder financial abuse are more common than you might think. Not only can the probate attorneys at our firm investigate and litigate elder financial abuse to have the problematic document invalidated, but they can provide you with legal options for protecting the vulnerable adult in your life.
Discover how our skilled attorneys can help you secure the outcome you want for your case by requesting a free consultation. Call us today!
