When a Neighbor Inherits: Court Upholds Trust Beneficiary's Rights Over Family Claims

This week we wanted to draw your attention to an interesting decision out of the Appellate Division, Second Department which upheld a Lower Court’s Order vesting title in the name of a Trust Beneficiary and confirming that there was no evidence of undue influence exercised by the trust beneficiary.

The relevant facts of, as well as a link to, the case are set forth below.

In February,  2008 the decedent, Pauline DelGatto, died a resident of Queens County leaving a duly executed will dated May 14, 1985 (the “1985 Will”).  At the time of her death, all legatees listed in the 1985 Will had predeceased her, and any right to her estate under the will had passed to two nephews and five grandnieces and grandnephews.  Prior to her death, the decedent resided in her home in Bayside, Queens where her neighbor, Nora Bradley, regularly cared for her until decedent required hospitalization due to an injury.  In January 2008, while in a rehabilitation facility, the decedent contacted her attorney and directed him to prepare a Trust Agreement and Deed transferring title to her home into the Trust with Ms. Bradley named therein as the sole beneficiary of the property.
 
Following her death, one of decedent’s grandnephews filed a probate petition for the 1985 Will and thereafter commenced an action pursuant to SCPA 2103 seeking that the house be turned over to the Estate and distributed pursuant to the 1985 Will on the grounds that the decedent lacked the mental capacity to execute the Trust and Deed and further, that the Trust and Deed were executed under undue influence from Ms. Bradley.  After trial, the jury found in favor of Ms. Bradley and the Court issued an order validating the Trust and Deed and this appeal ensued.
 
In upholding the Lower Court’s decision, the Appellate Court restated the general rule that “the burden of proof in a proceeding to set aside a trust instrument is upon the objecting party as to all issues, including the issue of mental competency” (see Matter of Aronoff, 171 Misc 2d 172, 177 n 5 [1996]; Matter of Roth, 2006 NY Misc LEXIS 5652 [Sur Ct, Suffolk County 2006]). The Court further confirmed that a “trustee has no obligation to demonstrate that the grantor was competent when the trust instrument was executed; the burden on that issue is borne by the objecting party, in this case, the petitioner” (see Carew & Friedman, Surrogate's Practice and Proceedings, NYLJ, Apr. 18, 2007 at 3, col 1; Matter of Aronoff, 171 Misc 2d at 177 n 5).
 
Additionally, “with respect to undue influence, the burden of proof generally lies with the party asserting undue influence (see Matter of Walther, 6 NY2d 49, 53 [1959]; Matter of Caruso, 70 AD3d 937 [2010]).  However, in cases where there is a confidential relationship between the beneficiary and the grantor, "[a]n inference of undue influence" arises which requires the beneficiary to come forward with an explanation of the circumstances of the transaction (Matter of Neenan, 35 AD3d 475, 476 [2006]; see Matter of Bach, 133 AD2d 455 [1987]; Matter of Collins, 124 AD2d 48, 54 [1987]; see also Matter of Henderson, 80 NY2d 388, 391 [1992]).  In the absence of an explanation, the beneficiary has the burden of proving by clear and convincing evidence that the transaction was fair and free from undue influence (see Matter of Gordon v Bialystoker Ctr. & Bikur Cholim, 45 NY2d 692 [1978]; Hearst v Hearst, 50 AD3d 959 [2008]; Sepulveda v Aviles, 308 AD2d 1, 11 [2003]; Matter of Connelly, 193 AD2d 602, 603 [1993]).  After reviewing the record on appeal, the Court determined that there was no indication that the decedent lacked mental capacity or was under the undue influence of Ms. Bradley when she executed the Trust and Deed.
To view this case, click the below link:
https://www.nycourts.gov/reporter/3dseries/2012/2012_06140.htm