Wills, Trusts, and Estates

A California court rejected an attempt by heirs to revoke a $1.5 million gift their 85-year-old mother made to her church.

Church Law and Tax2002-07-01

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 California court rejected an attempt by heirs to revoke a $1.5 million gift their 85-year-old mother made to her church. A woman ("Alma") was born in 1910. Although she worked as a school teacher for many years, her estate was worth several million dollars by the late 1980’s. Alma was a long time member of a Baptist church. However, in 1987 she joined a Presbyterian church. She attended services regularly until 1990 or 1991 when a broken hip reduced her mobility. In 1994, one of Alma’s daughters initiated a conservatorship proceeding because she did not believe that her mother could care for herself. Others shared this belief. An independent court-appointed investigator noted that Alma forgot to take her medication, and did not seek medical attention when needed. In 1995 Alma was asked to move out of her apartment because she had started a fire by leaving a stove unattended. Several witnesses testified that Alma had difficulty managing her finances. She frequently forgot to pay expenses, and would try to deposit sweepstakes checks because she thought they were real. Alma’s nephew testified that she was confused with solicitations and contests and thought she could "win big bucks" if she sent a check to them. Medical evaluations established that Alma suffered from mild to moderate dementia and had limited judgment, insight, general knowledge, and poor short-term memory in 1994 (she was formally diagnosed with Alzheimer’s disease in August of 1996).

The conservatorship proceeding was eventually resolved in 1995. The court appointed a conservator over Alma’s estate and person, but granted Alma the ability to change her estate plan, to make a gift of up to $1.5 million to her church, and to execute a charitable trust. Pursuant to this order, Alma executed a charitable trust which gave the Presbyterian church she attended $1.5 million over time and also provided her with an income stream of no less than five percent, or approximately $8,000 per month. The remainder of her estate was to be distributed to her daughters in equal shares upon her death.

Alma died in 1997, and her daughters promptly challenged the validity of the charitable trust. The asserted that their mother did not understand the consequences of her actions and lacked the mental capacity to execute the charitable trust, and that the trust was the result of undue influence or fraud by the pastor of the church. The daughters asked the court to declare the trust to be invalid, and to distribute their mother’s estate to them.

As proof of their mother’s lack of mental competency to execute the charitable trust, the daughters noted that she repeatedly stated the $1.5 million was a loan for the construction of a new church and that she was upset that the church was not paying her interest on it. The daughters also testified that their mother never told them she intended to give the church a substantial sum of money. Both thought such a gift was highly out of character, as their mother was "not a very giving person." However, neither daughter knew the extent of her previous donations to the church.

Other witnesses testified that Alma had told them she planned on making a large gift to her church, and that she never described the intended transaction as a "loan." Alma’s attorney, before drafting the charitable trust, was concerned enough about her mental competency that he had her referred to a geriatric specialist for an evaluation. The attorney ultimately concluded that Alma did have sufficient mental capacity to execute the charitable trust. She told him that she wanted to help the congregation build a new church, one without stairs. The attorney videotaped a meeting with Alma in which she explicitly stated that she wanted to give her church $1.5 million and divide the rest of her estate between her daughters.

A trial court ruled that Alma had sufficient mental capacity to execute the charitable trust one year before she was officially diagnosed as suffering from Alzheimer’s disease, and that the pastor of her church had not unduly influenced her. The daughters appealed.

A state appeals court ruled that Alma had sufficient mental capacity to execute the charitable trust.

alzheimer’s dementia

The court acknowledged that Alma had been diagnosed as having "senile dementia" prior to the date she executed the charitable trust, but it insisted that this did “not render her incapable of executing contracts or transacting business." The court concluded:

Old age alone does not render a person incompetent to execute a deed. Nor will sickness, extreme distress or debility of body affect the capacity of the grantor to make a conveyance if sufficient intelligence remains. Therefore, the issue of competency must be determined from all of the circumstances surrounding the transfer. Moreover, the mental frailties observed by the medical professionals evaluating [Alma] had virtually no relation to the issue of whether she wanted to give the majority of her multimillion dollar estate to her church as opposed to her family. [A psychologist] testified that Alma had mild word-finding problems, mildly impaired access to personal information, minimal knowledge of current events, poor access to general information and displayed limited insight. She was mildly to moderately disoriented to time and place and her memory for newly learned verbal and visual information was severely impaired. The overall evaluation was consistent with mild to moderate dementia, and the facility recommended 24-hour supervision.

The court concluded, on the basis of this evidence, that "no evidence indicates that any medical evaluator asked Alma about the size of her estate and whether she wanted to give any portion of it to the church, or what effect that would have on her monthly income and her family’s inheritance." Therefore, the evidence of Alma’s dementia was not sufficient to overturn the trial court’s ruling upholding the validity of her gift to her church.

inability to live independently

Alma’s ability to live independently was compromised sometime in 1994. Her apartment was unkempt, she did not have necessary medication, she had difficulty preparing meals for herself and she continually accused "in home care providers" of stealing her food and personal property. However, the court concluded, "the test for contractual capacity is comprehension of the particular transaction, not self-sufficiency in everyday life. California case law is replete with examples of individuals who, while unable to care for themselves, nevertheless had the legal capacity to dispose of their financial assets." Therefore, evidence of Alma’s inability to live independently "is not dispositive on the issue of whether she wanted to give her church a substantial portion of her estate as opposed to leaving the money to her family."

short term memory

The appeals court acknowledged that most of the witnesses at the trial testified that Alma had severe short-term memory problems. She often could not remember what she had done the day before. However, it also noted that "substantial evidence established that her desire to make a large gift to the church was longstanding, and did not demonstrate any problems with her long-term memory." Alma’s sister-in-law testified that Alma had told her that she wanted to give the church $2 million for "a number of years." Alma’s long-time accountant testified that she told him she wanted to give the church a "large sum of money," in excess of $1 million, as early as the late 1980s. The court concluded that "there is no evidence that Alma’s gift of $1.5 million was the result of, or affected by, the failings of her short-term memory."

knowledge of heirs

The court concluded that "no evidence suggested that Alma did not know who her family and friends were in 1995. Although the evidence demonstrated that she did not remember meeting new people, no evidence suggested that she could not recognize an acquaintance of longer standing." Further the videotapes made by the attorney at the time the charitable trust was executed reveal that Alma was well aware of her daughters.

size of estate

The daughters claimed that their mother did not comprehend the size of her estate, and this was evidence that she lacked the mental competence to execute the charitable trust. The court disagreed, "It is not necessary that the alleged incompetent immediately understand the nature of his or her finances, so long as the alleged incompetent is made to understand, however long this process might take. For example, in [a recent case] a court found that a woman with senile dementia nonetheless entered valid business transactions which entirely depleted her substantial estate. The woman’s heirs sought, unsuccessfully, to void the transactions due to her mental incapacity. The appellant court affirmed, noting that even the woman’s children testified their mother understood business transactions when thoroughly explained to her." Any misconceptions about the size of Alma’s estate were resolved by her attorney’s representations.

Application. This case illustrates the difficulty heirs often face in attempting to prove that a will or trust was the product of undue influence. After all, this case involved an 85-year-old woman with moderate dementia who was a year away from being diagnosed as suffering from Alzheimer’s disease. Nevertheless, the court rejected the daughters’ claim that their mother lacked the mental capacity to make a $1.5 million gift to her church. While there was ample evidence of Alma’s forgetfulness and short-term memory problems, there was also evidence that she knew what she was doing and the she understood the size of her estate and identity of her daughters. After evaluating all the evidence, the court determined that Alma had sufficient mental capacity to execute the trust in favor of her church. As a result, Alma’s $1.5 million gift to her church was affirmed. Burson v. Presbyterian Church, 2002 WL 498054 (Cal. App. 2002).

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