Gifts to churches by elderly members are common. By some estimates, up to $40 trillion will be passed from the current generation to the next, creating an unprecedented opportunity for charitable giving. In some cases, though, the validity of such gifts is challenged by family members on the grounds of mental capacity or undue influence. With the increasing number of elderly individuals making substantial gifts to their church or favorite charity, these challenges are likely to be raised more frequently.
The resolution of such challenges depends on a careful examination of all the facts and circumstances. A recent decision by the Vermont Supreme Court—Curran v. Building Fund of United Church, 2013 WL 6332676 (Vt. 2013)—provides helpful guidance that will assist church leaders in responding to claims of diminished mental capacity and undue influence. By following the recommendations in this article, church leaders will reduce the risk of gifts being invalidated for undue influence.
Gifts Freely Given—or Coerced?
For more than 60 years, an elderly woman (the "testator") lived with her husband in a small community where both were active in a variety of community organizations and activities. In 1993, after her husband's death, the testator placed her assets into a trust. The beneficiaries of the trust were the testator's brother, sisters, and a niece and nephew. In 2004 the testator amended the trust to delete her brother as a beneficiary, reduce the distributions to some other relatives, and add three local community organizations including her church's building fund as beneficiaries.
Relatives and others who dealt with the testator during the period from 2004 to 2005 observed personality changes and signs of confusion. Her primary care physician diagnosed dementia or organic brain syndrome in 2004, observed evidence of nighttime confusion later that year, and prescribed several medications in 2005 to help arrest the effects of dementia.
In 2004 the testator turned to a longtime friend and neighbor (John) for assistance in helping her pay her bills. She also asked a local probate court to appoint John as her voluntary guardian. An evaluation by a court-appointed psychiatrist found that the testator had mild senile dementia but that "overall she showed no sign of inability to assist in making decisions about her life," had a "fair knowledge of her current business dealings and her financial value," and readily agreed on the need for a guardian to provide some assistance but wished to have a say in who was chosen. Following a hearing the court granted the testator's petition, finding that she understood the nature and consequences of a voluntary guardianship.
The testator died in 2008, leaving an estate valued at $8 million. Three members of the testator's family (the "plaintiffs") whose share of the trust estate had been eliminated or reduced by the amendment, asked a court to revoke the amendment on the ground that the testator lacked sufficient mental capacity to understand what she was doing. The plaintiffs named as defendants the church and other charities that were named as beneficiaries in the trust amendment. The plaintiffs further asserted that the testator's diminished mental condition made her susceptible to undue influence by her guardian, John.
An eight-day jury trial was held in 2012. The plaintiffs called two mental health experts who testified that the testator suffered from moderate Alzheimer's disease which, in their view, undermined her capacity to execute an amendment to her trust. The court found sufficient evidence of "suspicious circumstances" to shift the burden of proof to the defendants to show that the trust amendment was not the product of undue influence.
The court noted that "undue influence occurs when the donor no longer exercises free will, tainting the resulting transaction," and that "the burden of proof shifts to the proponent of a trust when the circumstances connected with the execution of the trust are such as the law regards with suspicion." The court relied on the evidence of the testator's "mental deterioration during the period preceding the amendment and thus her susceptibility to undue influence," her inability to manage her daily life and finances without the assistance of her guardian and caregivers, the substantial increase in the number of beneficiary organizations and size of the bequests, and her guardian's efforts to persuade her to amend the trust to include family members.
The defendants presented the testimony of a mental health expert whose diagnosis of the testator differed markedly from plaintiffs' experts. The defendants' expert testified that the testator's cognitive deficiencies were "relatively mild" and highly situational; they appeared to be worse when she was on her own, and improved after she acquired additional caregivers in the months before she executed the trust amendment. Summarizing his conclusions, the expert concluded that the testator "knew who she would like to give her money to and she knew the amounts and she understood how it happens." The bequests to defendants represented "places that made sense for her, places that she had ties to." The defendants also introduced the testimony of several persons who interacted with the testator on a regular basis during the period in question, who recalled that she appeared to be mentally alert and competent.
The jury found that the testator had the capacity to execute the trust amendment, and that it was not the product of undue influence. The plaintiffs appealed.
The state supreme court agreed with the trial court that the defendants had presented substantial evidence rebutting plaintiffs' portrayal of the testator as highly susceptible to manipulation by her guardian due to mid-stage or moderate Alzheimer's disease. It noted that the defendants' expert neuropsychologist observed that the frequent meetings between the testator and her guardian prior to the amendment to the trust "did not necessarily suggest anything improper, as persons with mild cognitive impairments often require multiple meetings and conversations to understand an issue and make their views clear." The expert concluded: "I think the guardian tried to provide the testator with an environment in which she could make decisions that she felt were the best decisions to make. And I think he revisited it on many occasions not to try to persuade her but to make sure that she understood."
Further, the testator's attorney testified that he had known the testator for 40 years, that she had contacted him about revising the trust, and that he "had no question that she understood what was going on."
The court also rejected the plaintiffs' claim that the testator's gifts to her church and several charities were void since she lacked the mental capacity to know what she was doing. It noted that "the test for testamentary capacity is whether the testator had sufficient mind and memory at the time of making the trust to remember who were the natural objects of his bounty, recall to mind her property, and dispose of it understandingly according to some plan formed in her mind."
Plaintiffs relied on the testimony of their mental health expert who testified that the testator was suffering from moderate Alzheimer's disease which disabled her from understanding the extent of her property and forming a plan for its disposal; the testimony of the testator's primary care doctor who noted signs of dementia as early as 2004, prescribed a number medications, and had reservations about her capacity to execute the trust amendment; the testimony of the testator's former attorney who thought that she had lost her testamentary capacity before executing the trust amendment; and the testimony of family members and others who recounted instances of the testator's confusion during the period preceding the trust amendment.
However, as the trial court observed, the evidence "also contained substantial countervailing evidence—including the testimony of [the defendants' medical expert] who was of the opinion that the testator had the mental capacity to understand the natural objects of her bounty and the extent of her property, and to form a plan for its disposition; the testimony of the testator's attorney whose observation of the testator led him to conclude that she understood the terms of final trust amendment; the testimony of the testator's guardian who interacted closely with the testator and firmly believed that she understood and made all of the final decisions incorporated into the final trust amendment; and the testimony of others from the community who interacted with the testator during this period and saw no evidence of mental incapacity.
The court concluded that "viewed as a whole … the evidence thus does not support the plaintiffs' claim that the verdict on testamentary capacity was "clearly wrong and unjust."
Relevance to Church Leaders
This case is relevant to church leaders because it highlights the way a donor's gift to a church or charity may be invalidated if the donor was "unduly influenced" into making the gift. This rule applies both to direct gifts made during one's lifetime and to gifts contained in documents (such as wills and trusts) that take effect at death.
Family members may challenge gifts to churches by elderly or infirm relatives on the ground that the donor's condition made him or her susceptible to being unduly influenced. But undue influence is more than persuasion or suggestion. It involves dominion and control over the mind of another. As one court noted, "undue influence is that influence which, by force, coercion, or overpersuasion destroys the free agency" of another.
Undue influence generally must be inferred from the circumstances surrounding a gift, since it seldom can be proven directly. Circumstances commonly considered in deciding if a donor was unduly influenced in the making of a gift include the following:
whether the gift was the product of hasty action
whether the gift was concealed from others
whether the person or organization benefited by the gift was active in securing it
whether the gift was consistent or inconsistent with prior declarations and planning of the donor
whether the gift was reasonable rather than unnatural in view of the donor's circumstances, attitudes, and family
the donor's age, physical condition, and mental health
whether a confidential relationship existed between the donor and the recipient of the gift
whether the donor had independent legal advice
The most important factor is the donor's mental condition, since a diminished mental capacity makes a person more susceptible to undue influence. As the Vermont case demonstrates, there often is evidence that both supports and negates undue influence. Most courts have held that undue influence must be proven by "clear and convincing" or "clear and satisfactory" evidence. Proof by a mere preponderance of the evidence will not suffice. This means that in close cases, with credible evidence on both sides, those claiming undue influence often lose.
Reducing the Risk of Undue Influence
Many wills and trusts leaving gifts to churches have been challenged by disinherited heirs on the basis of undue influence. Church leaders who learn that an elderly or infirm person is considering leaving a portion of his or her estate to the church can reduce the risk of having the gift invalidated on the basis of undue influence by ensuring that the person obtains independent legal advice in drafting the will or trust. Ideally, the attorney should not be a member of the same church.