Lessons from S-Town on Estate Planning Issues Affecting Vulnerable Adults

Taxpayer Friendly Federal TransferPop culture sometimes provides us with valuable lessons about the importance of estate planning. For example, as Trusts & Estates magazine pointed out, at the heart of the first season of the hit show Empire was a story of the trials and tribulations of business succession planning, as the head of a record company and family patriarch is diagnosed with a terminal illness.  And now, the podcast S-Town, from the producers of Serial and This American Life, has millions thinking about all of the things that can go wrong after someone dies without proper planning in place.

[Spoilers for the first few episodes of S-Town ahead.]

S-Town tells the story of the unexpected death of John B. McLemore, an antiquarian horologist (a restorer of antique clocks) in the small town of Woodstock, Alabama, and the fallout from his death.  John died without a Will, and was rumored to possess a fortune in gold hidden somewhere on his property.  Among the many issues that arose following John’s death was the fact that neither he nor his elderly mother, Mary Grace, who suffered from dementia, had ever made arrangements for Mary Grace’s care in the event that something were to happen to John.  As the heir to John’s estate in the absence of a Will, Mary Grace was put in a position where she was vulnerable to people who may try to take advantage of her and her rumored fortune.  Additionally, as described in the podcast, a dispute arose over who was best suited to care for Mary Grace.

The attention S-Town brought to the lack of planning for Mary Grace’s care and the vulnerable situation in which she found herself after John’s death is a valuable opportunity to discuss estate planning issues affecting vulnerable adults.  Particularly, this article will discuss whether a person suffering from dementia or other mental decline due to age is legally capable of making gifts and signing a Will, when large gifts or a Will can be invalidated due to undue influence exercised over a vulnerable person, and ways one can plan for incapacity while one is still competent to do so.

Note that this article discusses the laws of Washington State only, and not the laws of Alabama or any other state, which may or may not have similar laws.  For information on how these legal issues are treated in states other than Washington, please consult an attorney licensed in the state in question.

Capacity

Only a person who has “testamentary capacity” can validly execute a Will.  There is a three-part test to determine whether a person has testamentary capacity.  The person executing the Will (known as the “testator”) must be able to:

  1. Understand the transaction,
  2. Comprehend generally the nature and extent of the testator’s property which the testator is contemplating giving away in his or her Will, and
  3. Recollect the objects of his or her bounty. The objects of one’s bounty are often blood relatives, but may also include close friends or caretakers.  A person is free to dispose of his or her assets however he or she chooses, including disinheriting family and friends, but if no rational reason for the action can be found in the circumstances and it seems outside of the person’s known character, an unusual disposition may suggest lack of capacity.

Testamentary capacity is not the same as other measures of capacity.  A person may be incapacitated for the purpose of managing his or her own financial affairs, but still have testamentary capacity.  For example, someone diagnosed with dementia who has a guardian,  trustee, or agent under a power of attorney managing his or her money may have lucid periods in which he or she is able to demonstrate the three required abilities for testamentary capacity, and can legally sign a Will in one of those periods.

Undue Influence

A Will that is executed under “undue influence” is invalid, as is a lifetime gift made under undue influence.  Not all influence over a testator is considered undue.  Undue influence is influence that is coercive to the point that it controls the testator’s volition, interferes with his or her free will, and prevents an exercise of his or her judgment and choice at the time of the execution of the Will.  This can be mental, physical, or emotional coercion.

The person alleging undue influence must show, at minimum, the following three factors in order to raise a rebuttable presumption that undue influence occurred:

  1. The beneficiary who allegedly unduly influenced the person occupied a fiduciary or confidential relationship to the person,
  2. The beneficiary actively participated in the preparation or procurement of the Will or gift document (for example, a deed transferring the person’s home to the beneficiary), and
  3. The beneficiary received an unusually or unnaturally large gift or portion of the person’s estate.

Courts will also consider the susceptibility of the influenced person, for example, his or her age, mental condition, health, and the nature of the relationship between the person and the allegedly influencing beneficiary.

How Vulnerable Adults Can Protect Themselves

If you (or a loved one) are in a vulnerable position, like Mary Grace, or may be in the future, there are steps you can take now to protect yourself.  The most important thing to do is to see a good estate planning attorney while you have capacity.  If there are concerns about capacity or potential undue influence, your estate planning attorney should take the time to meet one-on-one, without other family members, caretakers, or friends present, to carefully explain the effect of drafted documents and ensure that the documents reflect your wishes.  The attorney should make sure that you have a general sense of your assets and wealth, know how the assets are distributed under your documents, and can articulate a reason behind any unusual distribution scheme.

One important component of planning for incapacity is ensuring you have an up-to-date Durable Power of Attorney appointing a trustworthy and reliable person to make financial and health care decisions if you can no longer do so.  Having a Durable Power of Attorney can prevent the type of dispute that arose in S-Town over Mary Grace’s care.

If future incapacity is of particular concern, you may wish to discuss the benefits of a Revocable Living Trust with your estate planning attorney.  A Revocable Living Trust also allows you to name another person to assist in managing assets, but can be more flexible than a Durable Power of Attorney. .  Additionally, many financial institutions are more willing to work with a trustee than they are an agent under a power of attorney, which can make this an attractive strategy when planning for incapacity.

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If the S-Town podcast has inspired you to engage an estate planning attorney to review and update your estate planning documents or draft them for the first time to avoid the uncertainty and drama faced by John B. McLemore’s family and friends, and particularly his mother, Mary Grace, after his passing, please contact Evan Monez or any of the experienced estate planning attorneys at MPBA.

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