Three Cases Involving Disgruntled Estate Beneficiaries

In this case, two brothers became embroiled in a bitter lawsuit over their mother’s estate and the sale of a tract of real estate.  The issue was whether one of the brothers unduly influenced his mother to disinherit the other brother - the plaintiff in this case.  In 2004, the mother spoke to her attorney about disinheriting the plaintiff and his family and executed documents to that effect. The remaining brother was to be the sole beneficiary of the estate. When the mother died, the plaintiff learned of his disinheritance and promptly sued his brother for unduly persuading his mother to change her estate plan. The trial court found no evidence of undue influence, in this case, and refused to invalidate the 2004 will and trust.

The plaintiff appealed and again argued that his mother was the victim of undue influence. To prove a claim of undue influence, one must prove four elements: 1) that the testator was susceptible to undue influence, 2) that there was an opportunity to exercise that undue influence, 3) that the party had a disposition to unduly influence, and 4) that there was damage done to another solely due to the undue influence. 

On the issue of susceptibility, the appellate court held that the mother was not susceptible. The mother was able to take care of the daily tasks of living on her own, she discussed her options with her attorney and was properly advised about the ramifications of her actions. The mother was described as “strong-willed, forceful, and intense” about her decisions and the evidence strongly showed that the mother was in possession of her mental faculties at the time the documents disinheriting the plaintiff were drafted. 

The appellate court did find that both brothers lived close enough to their mother to have the opportunity to unduly influence their mother. However, “opportunity alone is not enough to establish undue influence.” There was no evidence presented at trial to prove that either brother took advantage of the opportunity to influence their strong-willed mother. 
The appellate court agreed that there was not enough evidence that the brother had the disposition to influence his mother to disinherit the plaintiff.  Finally, the court held that the damage done to the plaintiff was not because of any undue influence.  In re Estate of Dilley, No. 1-296/10-0938, 2011 Iowa App. LEXIS 657 (Iowa Ct. App. Jul. 13, 2011).
 

Here, a childless married couple executed separate wills leaving their assets to each other and then to their surviving siblings, nieces and nephews upon their deaths. The husband died first, and his wife inherited the assets of his estate.  After his death, the wife executed a new will that left her entire estate to one niece, thereby disinheriting her siblings and other nieces and nephews.  Her two brothers didn’t know about the new will, but became concerned about some of her conduct and competency, and asked her attorney for a copy of her latest will.  The attorney refused to provide the will without the wife’s consent.  About a year later, one of the brothers wrote a letter to the disinherited nieces and nephews expressing his concern about the niece’s influence on his sister.  He notified the prior beneficiaries that he suspected that there was a new will disinheriting them. 

Upon the wife’s death, her last will was admitted to probate. The disinherited beneficiaries filed a claim against the estate alleging that the will should be set aside due to undue influence by the niece. The trial court held that the disinherited beneficiaries were notified of the undue influence in the letter and their claim for tortuous interference had accrued at that time.  Because the filed their claim more than five years after the claim accrued, their suit was time-barred.   

The appellate court disagreed with the trial court, and held that the beneficiaries had no actual knowledge that they had been disinherited based on the letter – there was no actual notice that the prior will had been revoked.  So, the disinherited beneficiaries’ claims accrued when the will was admitted to probate and their claim was not time-barred.  In re Estate of Bader, No. 1-091/10-1097, 2011 Iowa App. LEXIS 654 (Iowa Ct. App. Jul. 13, 2011).
 

The issue in this case was whether a son had to reimburse his father’s estate.  The father served as guarantor on his son’s bank loan, and paid it off when the son defaulted.  But, the son argued that his “bailout” was a gift from his father.  What had happened was that in 2008, the son and his father approached a local bank (where the father served as chairman of the board) and borrowed nearly $382,000 to finance the son’s company. The father signed on as “guarantor” of the debt.  In June 2009, the son was arrested for drug abuse and defaulted on the loan.  The father was “terribly distressed” over his son’s actions and failure to make payments, especially since the money was owed to the bank and he owed a fiduciary duty to the board of the bank. The father began operating the business, paid off the loan in full and attempted to sell the son’s business.  Some months later, the father tragically committed suicide.

The father’s will specified that his two living sons were the sole beneficiaries of his estate- “share and share alike, absolutely.” The son who received the father’s bailout claimed that this was a gift.  The estate claimed that this was a loan. There are three requirements to constitute a gift in Iowa: donative intent, delivery and acceptance.  The trial court did not find enough evidence to establish a gift and ordered the son to pay the loan back to the estate, plus interest. 

On appeal, the Iowa Court of Appeals agreed.  The father’s attorney testified that the father never discussed filing a gift tax return and that the loan contract clearly specified that the father was just the guarantor of the debt.  In the loan contract, the son (principal obligor) agreed to reimburse the guarantor in the event of a default. Other evidence indicated that the father did not intend to make a gift to his son.  On prior occasions and financial transactions with his sons, the father prepared promissory notes and expected to be repaid. Even though he did not have the chance to draw up such a document, in this case, the evidence clearly pointed to the arrangement being a loan.  In his attempts to find a buyer for the business, the father clearly indicated that he intended to recover the money he paid towards the son’s loan.  In re Estate of Steelsmith, No. 1-397/10-1784, 2011 Iowa App. LEXIS 633 (Iowa Ct. App. Jul. 13, 2011).