Wills, Trusts, and Estates

A North Carolina court ruled that an elderly and mentally infirm woman who transferred all of her property to her church could have the transaction repudiated.

Church Law and Tax2000-11-01

Wills, Trusts, and Estates

Key point 4-03. A gift to a church or minister may be challenged on the ground that the recipient unduly influenced the donor into making the gift. There are several factors the courts will consider in deciding whether or not undue influence occurred, including the age and mental health of the donor, and the presence of independent legal advice. Undue influence generally must be proven by “clear and convincing” evidence. Undue Influence

A North Carolina court ruled that an elderly and mentally infirm woman who transferred all of her property to her church could have the transaction repudiated on the basis of undue influence. Upon the death of her husband in 1991, a woman (“Irene”) became the sole owner of a 16-acre tract of land that included her home. In 1994, Irene left the property and began to reside at a retirement home. In 1996 Irene’s mental health began to decline, and she became lucid only part of the time. In April of 1996 Irene signed a deed conveying her property to her church, subject to a life estate in her name. The deed was executed by Irene at the retirement home in the presence of two witnesses and an attorney who were all members of her church. Irene had never retained the attorney to perform any legal services, and he was not acting as her attorney in this transaction.

With the encouragement of her relatives, Irene filed a lawsuit in which she asked a court to set aside the deed of her property to the church on the ground that it had been procured through undue influence and “constructive fraud.”

Undue Influence

The court defined undue influence as “the exercise of an improper influence over the mind and will of another to such an extent that his professed act is not that of a free agent, but in reality is the act of the third person who procured the result.” The court listed the following factors that are considered in deciding whether or not undue influence has occurred:

(1) old age and mental weakness of a party executing the instrument; (2) the instrument is different from and revokes a prior instrument; (3) the instrument favors one or no blood relation; (4) the beneficiary has procured its execution; (5) it disinherits the natural objects of the grantor’s bounty; (6) the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision; (7) others have little or no opportunity to see the grantor.

The court applied these factors to the circumstances of this case, and concluded:

The evidence supporting Irene’s claim in this case tended to show that in April 1996, the date of the deed’s execution, she was aged eighty-seven, and her mental health had begun to fail noticeably earlier that year. In addition, the deed executed in favor of the church contravened a prior contract of sale executed in favor of [another party]. Further [the church and the attorney and two witnesses] alone procured the deed’s execution, with neither attorney nor family present on behalf of Irene …. We conclude that Irene’s evidence demonstrates facts that would satisfy several of the factors bearing on undue influence.

Constructive Fraud

Irene also alleged that the deed should be set aside on the basis of constructive fraud. The court defined constructive fraud as consisting of two elements: (1) the existence of a “special confidential or fiduciary relationship,” and (2) the parties to this relationship entered into a transaction in which the dominant party takes advantage of a position of trust to the weaker party’s detriment. The court concluded that Irene failed to prove a special relationship of trust and confidence with those present at the execution of the deed. Irene later stated that she was not sure if she knew the attorney who was present when she signed the deed. She did recognize the two witnesses who were present, but the court concluded that no special relationship existed between Irene and the witnesses.

Punitive Damages

The court concluded that persons who engage in undue influence
(allegedly the attorney and two witnesses, in this case) are
subject to punitive damages.

Application. Consider the following two points:

1. Undue influence. Family members occasionally challenge gifts to churches by elderly or infirm relatives. In many of these cases, family members assert that the church unduly influenced their relative into making the gift. This case illustrates the factors that the courts generally consider in deciding whether or not undue influence occurred. These factors provide church leaders with a useful checklist to consider in evaluating the possibility of an undue influence claim. In general, the risk of undue influence is all but eliminated in the case of gifts by mentally competent church members, regardless of age, who used an attorney (who was not a member of the church) to draft a deed or will.

2. Punitive damages. One other aspect of this case should be noted. The court concluded that the attorney and two witnesses who apparently had some involvement in the execution of the deed could be liable for punitive damages for their undue influence. This is an extraordinary conclusion. Not only does proof of undue influence result in the cancellation of the deed or will leaving the gift to charity, but it also exposes the individuals who participated in the undue influence to personal liability. Note that punitive damages are not covered under any insurance policy, and they can be substantial. Well-intentioned church members who assist elderly and infirm church members in executing deeds or wills that make gifts to the church may be exposing themselves to personal liability. Once again, it is imperative for church leaders to be familiar with the concept of undue influence to protect not only the church, but also well-meaning members, from liability. Stephenson v. Warren, 525 S.E.2d 809 (N.C. App. 2000).

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay