Given our aging population, financial exploitation of the elderly is a growing concern. A recent appellate court decision in Florida can only make matters worse.
The fact pattern in this case—Liz MacIntyre, as Trustee of the Helen M. Wedrall Trust v. Agnes Wedell, 2009 WL 1393375 Fla. App. 4 Dist., May 20, 2009—is all too familiar: an elderly individual, a last-minute change to a long-standing estate plan, and the beneficiary of that change accused of undue influence.
What’s unusual is that the appellate court seemed to say that it’s okay for an elderly person to terminate a trust even if she may have been unduly influenced to do so.
Many years prior to the litigation, a woman by the name of Helen M. Wedrall executed a “pour over” will and revocable trust; she transferred her assets to this trust. The trust directed that, at Helen’s death, its residue was to be divided among her three sisters: Agnes, Dorothy and Liz.
When Helen died, Liz became trustee and promptly filed suit against Agnes. The suit alleged that, just weeks before Helen’s death, Helen withdrew assets from her trust and placed them in an account held jointly with Agnes (which, of course, passed to Agnes by operation of law). The suit also alleged that Helen transferred cash and securities to Agnes. Although the appellate opinion does not explicitly state that Helen revoked her trust as to the transferred assets, this fact is strongly implied.
According to Liz’s complaint, these transfers were made when Helen was suffering from mental and physical ailments and were the result of Agnes’ undue influence.
Agnes moved to dismiss the suit and the trial court did just that, relying upon the Florida Supreme Court’s decision in Florida National Bank of Palm Beach County v. Genova, 460 So.2d 895 (Fla. 1984).
In Genova, a 76-year-old woman named Ann Cleary married a man less than half her age, named Mark Genova, age 32. Ann set up a revocable trust with herself and Florida National Bank of Palm Beach County as co-trustees. Ann and Mark divorced two years later. During the divorce proceedings, the trial court set aside Ann’s transfer of certain assets to Mark, finding that the transfer resulted from undue influence.
Less than three months later the couple remarried, and within five days of being remarried, Ann wrote a letter to the bank stating she wanted to revoke her trust. The bank, knowing of the prior finding of undue influence, did not transfer the funds and filed a petition seeking guidance on the issue.
On appeal, the court ultimately held that the concept of undue influence could not be relied upon to deprive a settlor, who is the sole trust beneficiary, the right to revoke her trust (in the absence of a judicial determination of the settlor’s incapacity).
In the current case, Liz argued that Genova shouldn’t control because the Genova settlor was still alive, whereas Helen was not.
The court also stated that Genova’s holding regarding the availability of an undue influence challenge to a settlor’s trust revocation does not turn on whether the settlor is alive or dead. As a rationale for its decision, the court quoted Genova:
“The courts have no place in trying to save persons such as Mrs. Genova [(Cleary)], the otherwise competent settlor of a revocable trust, from what may or may not be her own imprudence with her own assets. When she created this trust, she provided a means to save herself from her own incompetence, and the courts can and should zealously protect her from her own mental incapacity. However, when she created this trust, she also reserved the absolute right to revoke if she were not incompetent. In order for this to remain a desirable feature of a trust instrument, the right to revoke should also be absolute.” Florida National Bank of Palm Beach County v. Genova, 460 So.2d at 897 (Fla.1984).
The Wedell court distinguished cases in which the trust is created as a result of undue influence (cases which were codified by the Florida legislature in 1992 when it enacted Section 736.0406 voiding a trust, “if the execution is procured by fraud, duress, mistake, or undue influence”).
We believe that this is a distinction without a difference.
Given the holding in Genova (a Florida Supreme Court case), the hands of the appellate court in Wedell were admittedly bound by precedent.
But we cannot help but think that Wedell perpetuates the inherent problems in Genova and the inconsistencies inherent in Florida case law.
Specifically, it appears that Florida courts will undo a trust created as a result of undue influence, yet they refuse to reconstitute a trust revoked as a result of undue influence.
The public policy concerns are obvious, particularly in a state like Florida, to which so many elderly migrate.