Traversing Diminished Capacity and Undue Influence in Estate PlanningJay E. Rivlin, Cornelius J. O'Reilly and Erica J. Goldberg

New York Law Journal
09-19-2011

Longer life spans and the attendant mental capacity issues, as well as society's expanding willingness to litigate, has fueled an increase in estate controversy litigation. Whatever the causes or merits of the claims, estate planning attorneys must be aware of not only the mental capacity standards for a client to validly execute estate planning documents, but also the steps to take to prevent against a successful challenge to an estate plan due to undue influence.

Life expectancy at the turn of the 20th century was a mere 49 years, while it is now over 77 years.1 The formulation of the testamentary capacity standard took place in an era when dementia was a rare phenomenon and the number of individuals who learned to live with and cover for its effects was extremely low. The low testamentary capacity standard may have been outpaced by the effects of an extended life span and the higher incidence of dementia. This article discusses steps to effectively identify the separate, yet intertwined, issues of diminished mental capacity and undue influence and how to best assist clients who are affected by them.

Capacity Standards

Under New York law, when a question arises regarding a testator's testamentary capacity, the will's proponent must establish that the testator had the requisite capacity to validly execute a will. The threshold for requisite capacity, which dates back to the late 1800's, is lower than that required to execute a contract and merely requires the court to look at the following factors:

(1) whether [the testator] understood the nature and consequences of executing a will; (2) whether [the testator] knew the nature and extent of the property she was disposing of; and (3) whether [the testator] knew those who would be considered the natural objects of her bounty and her relations with them.2

Surprisingly, the testator need only meet this minimal test at the moment the will is executed.3 Therefore, a will may be valid even if the testator is in the throes of delusion immediately before and subsequent to executing it, as long as he or she possesses the requisite testamentary capacity at the moment of execution.

The capacity required to execute a revocable trust (i.e., potentially a will substitute) is not clear. However, the Kings County Surrogate held that the capacity necessary to execute a valid trust is higher than that to execute a will and is the same as the capacity necessary to make a valid contract, which is also the same capacity necessary to make a valid gift.4 It is clear that the level of capacity required to execute an irrevocable trust is the same as that required to execute a contract.5 The traditional test for sufficient capacity to execute a contract focuses on whether an individual could comprehend or understand the nature of the transaction and includes a requirement that the individual be able to make a rational judgment concerning the particular transaction.6 The Court of Appeals added to the traditional test by permitting a contract to be voided where a person "by reason of mental illness or defect" is "unable to act in a reasonable manner in relation to the transaction."7

Duty to Confirm Capacity

When does an estate planner have a duty to investigate whether a client possesses the requisite capacity to execute estate planning documents? An attorney should investigate his or her client's capacity when there are warning signs of dementia, such as those published by the Alzheimer's Association,8 including, for example, challenges in planning or solving problems, confusion with time or place and poor judgment.

While the Alzheimer's Association's list is helpful when dealing with a family member or friend with whom an individual has steady contact, the average attorney/client relationship does not provide adequate interaction to gauge whether a client's actions or abilities have changed to a degree that would signal possible decrease in mental capacity. The problem is compounded when the attorney/client relationship is new.

The problem for the estate planning attorney is that while it may appear that a client satisfies the current testamentary capacity test, the reality may be that he or she lacks significant cognitive understanding but may be adeptly masking the symptoms of dementia by merely reciting names of family members and other basic information.

The attorney's duty, however, is to protect the client's best interests and not merely to conduct the minimum required inquiry. The question is, therefore, when does an attorney have the duty to make a deeper inquiry regarding the client's testamentary capacity and what should that inquiry entail?

The duty to confirm a client's testamentary capacity exists in every case and can usually be met while conversing with the client and discussing the client's family, including specific members and dynamics, reviewing his or her assets and eliciting his or her testamentary wishes. The duty to inquire further arises at the first sign that the client may not have full capacity, for example, if he or she is unable to recall simple, basic facts about family or finances, or other facts such as the year, home address or current events.

The scope of this initial inquiry is limited for both ethical and practical purposes. An attorney can initially fulfill his or her ethical obligation to protect the client's interests with a minimally invasive conversation to further probe the client's capacity. While it is important to confirm that forgetfulness is not a sign of a larger capacity issue, not every forgotten fact or misstatement results from incapacity. Furthermore, on a more practical level, it is reasonable to expect that a client would be offended if his or her mental capacity were persistently questioned. The client's objection might be based upon the common aversion to having one's capacity challenged, as well as the client's concern that the attorney is wasting time and money on an inquiry the client perceives to be unnecessary.

If the client fails to allay concerns regarding capacity, then the estate planner should consider alternative measures to confirm mental capacity. Each suggestion involves tact and time as it requires counsel to build the rapport necessary to seek and obtain access to more personal information. The follow-up could take the form of receiving permission to speak with the client's family members, friends, and/or doctor to determine his or her medical history. While it is likely not commonplace for attorneys to speak with a client's doctor, this option should not be dismissed out of hand. The attorney is generally not trained to make definitive capacity determinations. Rather, the attorney is usually well-intentioned in relying on past experiences, self-constructed benchmarks or biases. Fidelity to the client's best interest should necessitate the opinion of a trained professional in more difficult situations to ensure the client's actual understanding of his or her estate plan.

Estate planners should include a standardized series of questions designed to confirm testamentary capacity in every estate planning matter to ensure that the attorney has adequately focused on the inquiry. These small steps provide probative evidence, and also add credibility to the attorney's testimony in a subsequent litigation contesting the client's capacity.

Commentators have recommended making it standard practice to videotape the document execution ceremony to offer clear proof regarding the client's actual demeanor, understanding and testamentary capacity at the time of execution. While in years past this could have been unduly burdensome for the average law firm, the advent of digital cameras and computer storage capabilities have made video recording less expensive and burdensome.

However, problems arise in two circumstances. First, the client's behavior during the recorded execution ceremony may provide an objectant with ample, credible evidence to contest and void the estate planning documents. But, if the client actually lacked testamentary capacity, this is the preferred result.

Second, if the attorney only rarely records the execution ceremony, for example, when the attorney has some doubt, however fleeting, about the client's capacity, a litigator could use the estate planner's doubts to attack the client's capacity and the validity of the estate plan. Therefore, it is a better practice to record every execution in an effort to avoid an attack and potentially save the client's estate from excessive litigation or settlement costs. Additionally, these preventative measures could save the estate planner from becoming embroiled in time-consuming litigation and may prevent the embarrassment and aggravation of having one's actions questioned and criticized.

Undue Influence

The separate, yet invariably related, issue that could void an estate plan is if the client was unduly influenced to execute his or her estate planning documents. The Court of Appeals has stated that, while undue influence is not subject to a black letter definition, an estate plan may be voided due to undue influence under the following circumstances:

It must be shown that the influence exercised amounted to a moral coercion, which restrained independent action and destroyed free agency, or which, by importunity which could not be resisted, constrained the testator to do that which was against his free will and desire, but which he was unable to refuse or too weak to resist. It must not be the promptings of affection; the desire of gratifying the wishes of another; the ties of attachment arising from consanguinity, or the memory of kind acts and friendly offices, but a coercion produced by importunity, or by a silent resistless power which the strong will often exercises over the weak and infirm, and which could not be resisted, so that the motive was tantamount to force or fear…lawful influences which arise from the claims of kindred and family or other intimate personal relations are proper subjects for consideration in the disposition of estates, and if allowed to influence a testator in his last will, cannot be regarded as illegitimate or as furnishing cause for legal condemnation[.]9

The hallmark of undue influence is a client who appears unable to communicate or express independently his or her testamentary wishes. This may be because a third party insists on directing the communication or the client depends on a third party to explain the plan. Be especially wary of a plan that benefits the third party to the exclusion of others that were previously included in the estate plan or would reasonably be expected to be included in such plan.

Whenever the attorney suspects that a client's estate plan is the product of undue influence, the attorney must speak with the client apart from all other persons and take the time to determine what plan the client truly desires. In many circumstances the attorney may be compelled to refuse to represent the client due to undue influence concerns that cannot be removed.

This situation does not only arise with new, or potential, clients. It may arise with established clients, and the attorney may fear that the unduly influencing party may take the client to a new attorney to change the client's estate plan in a manner that is inconsistent with the client's clearly established wishes. In such a situation, attorneys must keep in mind that, under New York Rules of Professional Conduct, Rule 1.14(a),

[w]hen a client's capacity to make adequately considered decisions in connection with a representation is diminished, whether because of…mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a conventional relationship with the client (emphasis added).

Faced with concerns that an estate plan may be changed due to undue influence, the attorney is under an ethical obligation to take steps to ensure that the previously expressed wishes of a client with diminished capacity are respected. In an effort to do so, the attorney may suggest to the client to "freeze" the existing plan by, for example, transferring assets to a trust, where the client may not subsequently change the trust terms or the trustee(s), thus preventing future, unwanted alterations to the client's estate plan.

The planner could also counsel the client to hire a "shadow" lawyer who will independently meet with the client, reach an independent conclusion regarding the client's capacity and estate planning wishes and review any documents drafted by the lead counsel. This would give both the attorney and client comfort that the client's wishes are being properly expressed and that the estate planning documents conform to such wishes.

Conclusion

In conclusion, the estate planner can take steps to blunt lack of testamentary capacity or undue influence claims, but litigation can never be prevented. The attorney's responsibility is to determine the client's true wishes, draft documents that best serve those wishes, consult with an objective attorney and document the process. By doing so, the attorney is best positioning himself or herself, and protecting his or her client's testamentary plan, from potential attack in the future.

Jay E. Rivlin is a partner McDermott Will & Emery in New York. Cornelius J. O'Reilly and Erica J. Goldberg are counsel at Fox Rothschild in Hackensack and Roseland. Ms. Goldberg also works at the New York office.

Endnotes:

1. "Life Expectancy in the United States," Congressional Research Service, Library of Congress (Aug. 16, 2006).

2. In re Estate of Kumstar, 66 N.Y.2d 691, 692 (1985) (quoting In re Will of Slade, 106 A.D.2d 914, 915 (N.Y. App. Div. 1984)); see also In re Estate of Rosen, 17 Misc.3d 1103A, 851 N.Y.S.2d 61, 2007 NY Slip Op 51818U, 5 (N.Y. Sur. Ct., Kings County 2007); In re Will of Coddington, 281 A.D. 143, 146, 118 N.Y.S.2d 525, 528 (3d Dept. 1952), aff'd 307 N.Y. 181, 120 N.E.2d 777 (1954); In re Estate of McCafferty, 254 N.Y.S. 789, 798, 142 Misc. 371, 378 (N.Y. Sur. Ct., Kings County 1932), aff'd In re McCafferty, 257 N.Y.S. 978, 236 A.D. 678 (N.Y. App. Div. 1932); In re Lyddy's Will, 4 N.Y.S. 468, 470 (N.Y. Sur. Ct., New York County 1888).

3. Calligan v. Haskell, 128 N.Y.S. 293, 143 A.D. 574, 576-77 (N.Y. App. Div. 1911).

4. In re Estate of Rosen, at 5-6. But see, Uniform Trust Code, Article 6, Revocable Trusts, §601 ("The capacity required to create amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will").

5. In re Estate of Rosen, at 5; Restatement [Third] of Trusts §11[3].

6. In re Estate of ACN, 509 N.Y.S.2d 966, 970 (N.Y. Sur. Ct., New York County 1986).

7. Ortelere v. Teachers' Retirement Bd., 25 N.Y.2d 196, 205 (1969); see also In re Estate of ACN, supra, at 970 (quoting Ortelere, supra, at 205) ("[T]he test for contractual capacity includes not only those who do not understand the nature and consequences of their actions, but those 'whose contracts are merely uncontrolled reactions to their mental illness'").

8. See "10 Signs of Alzheimer's," http://www.alz.org/alzheimers_disease_10_signs_of_alzheimers.asp.

9. In re Will of Walther, 6 N.Y.2d 49, 53-54, 159 N.E.2d 665, 668 (1959) (quoting Children's Aid Soc. v. Loveridge, 70 N.Y. 387, 394-95 (1877)).