Iowa Court of Appeals Affirms Criteria to Rebut Presumption of Undue Influence

The case is In the Matter of the Estate of Helen M. Halter, No. 21-1213 (Iowa Ct. App. Nov. 2, 2022).

On November 2, 2022, the Iowa Court of Appeals affirmed that a niece who added herself to her aunt’s bank accounts failed to rebut the presumption of undue influence. A transfer from a grantor to their fiduciary is presumptively fraudulent. To refute this, the niece had the burden to show 1) that she acted in good faith and 2) that her aunt acted voluntarily. Because the niece instead presented evidence that undue influence was not established, she failed to meet this burden.

Background

In 2013, Helen Halter executed a will naming her daughter-in-law as the executor. Her sister, niece, and church would each receive $5,000 under the will. The residue of her estate would go into a trust for the benefit of her only grandchild, her daughter-in-law’s son. She also named her daughter-in-law as her general power of attorney and health care power of attorney.

Upset Halter named the daughter-in-law as power of attorney, the sister and niece took Halter to Halter’s attorney to talk about changing the power of attorney forms and will in September 2019. After speaking privately with the attorney, Halter stated that she did not want to make any changes.

That same day, the sister added herself to Halter’s bank accounts with a joint right of survivorship. The sister directed the bank not to notify the daughter-in-law of the change. Over the next few months the sister wrote several checks from the account which Halter signed. The next month, Halter’s doctor conducted a cognitive assessment and diagnosed Halter with dementia stating that she was not “capable of making financial or other legal decisions on her own accord.”

By the time Halter passed away, the niece had also been added to Halter’s saving and checking accounts with joint rights of survivorship. After being added, $1,800 worth of checks were issued to the niece or in cash. The niece also worked with her attorney to execute a new power of attorney document for Halter. The new document named the niece as agent and revoked any previously executed powers of attorney. After learning that her power of attorney had been revoked, the daughter-in-law petitioned for a guardianship and conservatorship for Halter. Halter’s sister died in November 2020 and Halter passed away the following month.

As the executor of Halter’s estate, the daughter-in-law petitioned for an accounting and a determination that Halter’s bank accounts were part of the estate. The niece agreed that she had a confidential or fiduciary relationship with her aunt. The court found that this trigged a presumption of undue influence and that the niece failed to rebut that presumption. The niece appealed.

Transfers to Fiduciary while in Confidential Relationship

A transfer from a grantor to a person in a confidential or fiduciary relationship with the grantor is presumptively the product of undue influence. On appeal, the niece argued that she successfully rebutted the elements to establish undue influence.[i] However, the court noted that is not the correct standard. To refute this presumption, the grantee must show that she acted in good faith and that the grantor acted freely, intelligently, and voluntarily. Jackson v. Schrader, 676 N.W.2d 599, 605 (Iowa 2003).

Even if the niece had offered evidence as to either element, the court found that the record weighed against finding in favor of the niece. The sister and niece did not act in good faith but instead hid their actions from the daughter-in-law and tried to stop Halter from having contact with her daughter-in-law.

Additionally, there was no evidence that Halter acted freely, intelligently, and voluntarily. Halter was not informed that her sister and niece would have survivorship rights as co-owners of the accounts. This would directly contradict her plan to leave her estate to her grandson. Therefore, the Court of Appeals affirmed that the niece failed to rebut the presumption of undue influence.