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Undue Influence

Posted Friday, November 29, 2013 by John S. Palmer

Undue influence involves “unfair persuasion that seriously impairs the free and competent exercise of judgment.” A party asserting undue influence has the burden of proving it by clear and convincing evidence.

Earlier this month, the Washington Court of Appeals issued an opinion clarifying how a rebuttable presumption of undue influence may arise when there is a “confidential” or “fiduciary” relationship between the donor/testator and the recipient of the gift or bequest.

The case (Estate of Correll v. Kitsap Bank) involved a Washington Mutual bank teller who befriended one of WAMU’s elderly customers after the customer’s husband died. Their friendship lasted about 12 years and involved meeting about twice a week for lunch or dinner. The teller also visited the customer’s home.

About a year before she died, the customer designated the teller as the pay-on-death (POD) beneficiary of an account she established at Kitsap Bank. The customer communicated directly with a Kitsap Bank employee, who concluded that the customer “was of sound mind and clear about her request” and wanted to make sure friends actively involved in her life, rather than uninvolved family members, inherited her money. About the same time, the customer updated her estate plan with an attorney who concluded that she was “completely coherent” and “knew exactly what she was doing.”

After the customer’s death, her estate challenged the POD beneficiary designation on the grounds that the WAMU bank teller had obtained it through undue influence. The trial court ruled in favor of the teller and the estate appealed.

The court noted that various factors may create a rebuttable presumption of undue influence; in addition to the existence of a “confidential” or “fiduciary” relationship between the parties, the most significant factors to be considered are the beneficiary’s active participation in the transaction and whether the beneficiary received an unusually large share of the estate. Other factors include the age and health of the testator, the nature of the relationship, and the opportunity to exert undue influence.

The court noted that a “confidential relationship exists between two persons when one has gained the confidence of the other and purports to act or advise with the other’ s interest in mind,” and may be established in situations where the testator lived with the beneficiary, was dependent on the beneficiary, or was emotionally or physically vulnerable. The parties need not be related, but the relationship is generally personal in nature and requires “evidence demonstrating that the relationship has placed the beneficiary in a position to overcome the decedent’ s independent judgment.”

On the other hand, a fiduciary relationship is professional in nature, and arises where one party “occupies such a relation to the other party as to justify the latter in expecting that his interests will be cared for”; and in order to sustain a claim of undue influence, the relationship must relate to the asset which is the subject of the claim.

In ruling for the teller/beneficiary, the Court of Appeals found that although she was close to the decedent, their relationship was not “confidential” in nature because the decedent “lived by herself and was capable of managing her own affairs” and there was no evidence the decedent was “in a particularly vulnerable state, either emotionally or physically.” Moreover, there was no “fiduciary” relationship because “bank tellers do not, as a matter of law, enter into fiduciary relationships with their customers.” (Relationships that are fiduciary in nature as a matter of law include attorney-client, doctor-patient, and trustee-beneficiary relationships.)

The Court of Appeals also found that although the teller delivered an envelope to Kitsap Bank shortly after the POD account was created containing a check for $400,000 from the decedent, and most of the funds were deposited into that account, there was no evidence the teller knew the contents of the envelope; and even if she did, mere delivery of the check was insufficient to support a presumption of undue influence, which “requires that the beneficiary actively dictated the terms of transaction, purportedly on behalf of the decedent.” The Court was also unable to conclude that the teller received an unusually large or disproportionate share of the decedent’s estate, because no one presented evidence as to the entire value of the estate.

Finally, even if a presumption of undue influence arose, the Court of Appeals said that it had been rebutted by a significant amount of evidence demonstrating that the decedent was acting independently when she named the teller as beneficiary of the POD account.

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Law Office of John S. Palmer11911 NE 1st St, Ste. B204,Bellevue, WA 98005-3056