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Undue influence and pay-on-death designations

A caregiver or child who lives closest to an elderly parent may exert influence in an effort to get a larger inheritance. It's a problem when pressure - whether overpersuasion, coercion or manipulation - leads to a change in the terms of a will that favors the influencer.

Litigation over the validity of a will often focuses on this concept of undue influence over a testator (the person who signs the will). In our March blog post, we discussed warning signs that might indicate undue influence. But how does this affect pay-on-death (POD) accounts with beneficiary designations that are generally transferred outside the probate process?

Memory impairment

In a April Colorado Court of Appeals case In re Estate of Owens, the court was asked to address this question. The facts may sound quite familiar if you have an aging loved one.

The decedent (the person who passed away) had received a discharge from a recovery center. A diagnosis of "memory impairment" was the basis for a recommendation to move to assisted living. Instead, the man returned to his home and hired a private caregiver. He passed away about three years later.

His brother was his only living heir. He filed for informal probate and was appointed personal representative. In 2015, the brother asked the court to set aside several nonprobate transfers. His concern was that the caregiver had exerted undue influence to get his brother to list her as the beneficiary on the POD accounts.

Did the District Court have jurisdiction over nonprobate accounts?

The district court found it had jurisdiction to address the issue and imposed a constructive trust over the accounts in question. The appeals court agreed stating that "authority to impose restrictions on nonprobate assets may extend even to property claimed by the estate that may ultimately not belong to the estate."

In a hearing, the court found that the caregiver lacked credibility because of inconsistent testimony. She also attempted to downplay any involvement in the POD designations. Witnesses in her favor had not had much contact with the deceased man and had a financial stake to testify in her favor. An attorney who prepared a will testified that in discussing the POD designations, the man had mistakenly told her he had listed his brother as a beneficiary.

The evidence tended to show that he had been "severely confused" and lacked the capacity to make the POD designations. The district court concluded that a confidential relationship had allowed the caregiver to exert undue influence manipulating him into listing her when making the POD designations.

The funds were already gone

Approximately $140,000 had been drained from one of the accounts. The caregiver was unable to ever get the story straight about what had happened to them. She was placed in contempt when the funds were not repaid. The court of appeals upheld this action as well.

This case offers a remedy for families who learn that a caregiver or another loved one exerted undue influence in regards to POD designations. But these situations require quick action. If concerns come up after the loss of a loved one, speak with an experienced estate administration attorney. 

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