THE FAMILY THAT FIGHTS MAKES THE ATTORNEYS A LOT OF MONEY

IF I PUT ALL OF MY MONEY IN TRUST, MY KIDS WON’T BE ABLE TO FIGHT.  WRONG!

No good deed goes unpunished.  Or, in this case, even if you place all of your assets in trust, you cannot stop your family from fighting.

By all accounts, Dad was a good man and a respected attorney in Memphis, Tennessee.  He and Mom recognized the value of placing their assets in trust in order to ensure that their children received adequate funds for their future needs.  A number of trusts were created over the years with the intent of providing for the family.  Dad died in 1994, and the fun began!

Apparently, Son enjoyed life to its fullest.  So much so, that he needed lots of money to live.  Pursuant to the Trust documents, Mom served as Trustee of many of the various Trusts after Dad died.  Sister served as Trustee for some of the Trusts.  At some point, Mom became concerned about Son’s penchant for spending and had the family attorney prepare two amendments to the Trust documents.  Each of these amendments capped the amount that Son received from the Trusts.  Son executed both amendments. 

After Mom died, Son sued his Sister claiming breach of trust.  As a part of his lawsuit, he asked the Court to declare the two amendments to be invalid based upon “undue influence. 

The facts of this story are interesting.  The first amendment was executed by Son at his home in Hendersonville.  He then returned the document to Memphis.  No one, other than Son, was present when that amendment was executed.  Therefore, how can Son claim undue influence?

The second amendment was executed by Son in the presence of Mom, Sister and the attorney.  There is no question that he did so freely.  In fact, Son stated that he did not even read the document.  Again, how can Son claim undue influence? 

As the Court of Appeals explained, the two elements of “undue influence” are (a) a confidential relationship and (b) benefit to the other party.  Mom and Son had a confidential relationship because Mom was the Trustee of the Trusts.  But, the second element is a benefit to Mom.  Mom did not receive any benefit from the amendments – she was not a beneficiary of the trusts. 

But, Sister was also a trustee of some of the trusts when the amendments were executed.  She was the contingent beneficiary upon Son’s death.  Therefore, she satisfied both elements – a confidential relationship and a benefit – because she would receive any funds that Son had not spent.  By all accounts, however, if any arm-twisting occurred, it was Mom doing the twisting. 

That, the court stated, does not matter.  The beneficiary of the arm-twisting does not need to be the one doing the twisting!  Because Sister satisfied both elements, a presumption of undue influence exists.  We then look at the means used, and the effect upon the donor.  If too much means were used and Son can convince the Court that he did not act based upon “free will,” then the amendments are invalid.

THE MORAL OF THIS STORY - IF YOU ARE GOING TO TWIST ARMS, MAKE SURE THAT YOU ARE NOT IN A RELATIONSHIP WITH THE TWISTEE, BECAUSE EVEN IF YOUR MOTIVES ARE PURE, TENNESSEE COURTS ADOPT “FREE WILL.”

For more on this story, see Betty C. GoffCartwright v. Jackson Capital, et al., No. W2011-00570-C0A-R3-CV (Tenn. Ct. App., June 5, 2012). www.tncourts.gov/sites/default/files/cartwrightbopn.pdf