Court rejects undue influence claim regarding account designations

Many assets pass through beneficiary designations. A significant part of my Texas estate litigation practice involves contesting life insurance beneficiary designations and contesting financial account designations. In Fielding v. Tullos, the Beaumont Court of Appeals considered a contest to financial account designations, based on claims of undue influence. The decedent had various financial accounts at UBS. He was widowed and had no children. His legal heirs included six nieces and nephews. A caretaker began working for the decedent and his wife in 1997. She continued working for the decedent after his wife died in in 2004.  In 2004, the decedent executed beneficiary designations for various accounts at UBS.  He named a sister as primary beneficiary, and a brother in law and the caretaker as 50% contingent beneficiaries. In 2011, he changed the designations, naming the caretaker as the sole primary beneficiary. Decedent passed away in 2014.  The independent administrator filed suit against the caretaker to overturn the 2011 designations in her favor.  The suit sought a judicial declaration that the $1.7 million in the accounts belonged to the estate. The claims were based on the allegation that the caretaker unduly influenced decedent to make the 2011 designations. That claim was bolstered by a claim that a confidential relationship existed between the decedent and caretaker, and that she therefore owed him an informal fiduciary duty. The Orange County district trial court granted the caretaker's motion for summary judgment, dismissing the claims. The court of appeals reviewed the summary judgment and affirmed the dismissal. The court of appeals first noted the standard for undue influence:

In Texas, the rules guiding a determination of the existence of undue influence apply substantially alike to wills, deeds, and other instruments. To set aside an instrument based on undue influence, the party claiming undue influence must prove (1) the existence and exertion of an influence; (2) the effective operation of such influence so as to subvert or overpower the mind of the property owner at the time the instrument was executed; and (3) the execution of an instrument that the property owner would not have executed but for such influence.

The court summarized the administrator's evidence of undue influence:

According to the Plaintiff, the circumstances surrounding the execution of the beneficiary designations provides evidence that [decedent] was unduly influenced by [caretaker]. Plaintiff emphasized that in her deposition testimony, [caretaker] explained that she drove [decedent] to UBS on November 30, 2004, when [decedent] executed the IRA Beneficiary Designation Update Form that named [caretaker] as a 50% contingent beneficiary, and where [decedent] and [caretaker] signed the Account Application for the RMA account. According to the Plaintiff, the execution of the May 18, 2011 beneficiary designation for the UBS accounts also demonstrated that [decedent] executed the change in the car in the UBS parking lot while Tullos was in the car . .

Plaintiff argued that [caretaker] worked for [decedent] seven days a week after his wife died, and [decedent] spent holidays and celebrated birthdays with [caretaker] and her family. According to the Plaintiff, the evidence suggested that [caretaker] “desired the funds” in Charles’s UBS accounts because on December 17, 2014, [caretaker] used her power of attorney to take $20,000 out of [decedent's] account and put it into her own savings account; and, on January 16, 2015, she took out $348,081.91 from the UBS accounts, she used $30,000 to buy a new car, she gave each of her children $100,000, she bought new furniture, and she paid her property taxes. According to the Plaintiff, [caretaker] had “unlimited opportunities” to influence [decedent] because: she was at his home every day of the week, she wrote all of his checks, she made his bank deposits, [decedent] left her signed blank checks when he was hospitalized, and he celebrated holidays and birthdays with [caretaker] and her family. Plaintiff also argued that [caretaker's] own deposition testimony shows that [decedent] had multiple medical issues and had undergone seventeen major surgeries, rendering him unable to drive and “totally dependent” on [caretaker].

The court of appeals summarized the caretaker's position as:

The Defendant argued that the evidence demonstrates she did not exert undue influence over [decedent]. She argued that [decedent] had made it clear to his financial advisors that he intended to leave her the funds in his UBS accounts, she cared for [decedent] daily for ten years, he had “no relationship” with three of his nieces and nephews and only a limited relationship with the others, and none of the nieces or nephews had helped care for him According to [caretaker], Fielding admitted in her deposition that she did not have personal knowledge to support the claim of undue influence and Fielding could not provide any examples of how [caretaker] exerted undue influence over [decedent]. Citing deposition testimony of of Gretchen Hargroder and Richard Ridley, two UBS financial advisors, [caretaker] argued that she was not involved in [decedent's] finances, she did not review his bank statements and was unaware of the specifics of the UBS accounts, and she was generally uninterested in the UBS accounts, although she drove [decedent] to UBS so that he could transact business.

The court of appeals also noted testimony from two of the UBS financial advisors. They generally testified that decedent appeared to have good mental capacity during the 2011 time period and appeared in control of his finances. He even explained to them why he did not want certain family members t receive his money. One of the UBS advisors testified that designating the caretaker as beneficiary “was perhaps proper because the relationship seemed to be a very fond relationship.”

Ultimately, the court of appeals concluded that the trial court was not in error in determining the heirs had not presented evidence that the decedent would not have made the designations in favor of the caretaker, but for the exertion of undue influence. My sense is that this case was a fairly close call. An important factual consideration was that the designations did not exclude a spouse or a child of the decedent. It was also not clear that decedent had a particularly close relationship with the nieces and nephews.

In Texas, undue influence claims are typically very fact specific. But the overriding issue is always providing some evidence, even if circumstantial, that the will or beneficiary designation was the result of the influence. If you are looking to contest a beneficiary designation, or are facing a contest of a designation in your favor, it is important to consult a lawyer experienced in handling account designation disputes.