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Trust Protectors and Undue Influence

Posted by Thomas Asbury | May 10, 2023 | 0 Comments

Can an independent Trust Protector use undue influence to get a Trust Amendment? Arizona recently had a court case involving this topic. In this instance, Kay and Austin were wed for 57 years. Austin was given a Parkinson's Disease diagnosis toward the end of their marriage. With his caregiver Lindi, Austin developed a romantic relationship. After the divorce between Austin and Kary, Lindi and Austin got hitched.

Paul, Austin's lawyer, was tasked with establishing an irrevocable trust during Kay and Austin's divorce. When Austin passed away, the trust stipulated that Kay would receive 45% of the distributions, their children would receive 45%, and Lindi would receive 10%. The Trust Protector, Paul, was the only one with the authority to change the trust. Paul wasn't Austin's superior in the sense of IRC 672. (c). Austin asked Paul to modify the trust once the divorce was finalized. Paul changed the terms of the will to include a no-contest clause, remove Kay as a beneficiary, designate Lindi as the only beneficiary of Austin's income upon his passing, lower the children's share, and add Lindi's boys as remaining beneficiaries.

Additionally, Lindi met with the corporate Trustees. She advised them to quit and that the trust's provisions ought to be changed. Paul resigned from his position as Trust Protector after she approached him once more to make changes to the trust. In five months, Paul passed away.

Kay and Paul's kids filed a lawsuit, alleging that Lindi had improperly encouraged Austin to ask for the trust changes. According to the lawsuit, Lindi unlawfully influenced Austin to ask for the Trust Protector alterations since Austin was ill and had decreased capacity. As a result, Lindi indirectly contributed to the changes being made to the Trust Protector.

Regarding Lindi's participation in the amendment procedure, Paul filed an affidavit in the lawsuit. Paul reported that Lindi had spoken with him about the adjustments. Austin was then brought into the office by her. While Austin sat motionless, Lindi conducted the conversation and made the adjustment requests. Paul asked Austin for a private meeting. Austin explained to Paul that although he wanted to support Lindi, he did not want to give her a direct distribution.

The lawsuit also claimed that Lindi was serving as Trustee even though Austin had designated a corporate Trustee. She collected rent from tenants and maintained assets. In court, the Trustee's representatives expressed dismay at Austin's "clear incompetence." Although he was unable to talk, Lindi said that she could speak for him because she understood him completely. According to the witnesses for the Trustee, Lindi lost her cool when she learned she wouldn't be receiving trust assets outright.

According to Lindi, the Petitioners only claimed that she improperly influenced Austin and not the Trust Protector. She also made a motion to use the no-contest provision. The trial court granted both of her motions. Petitioners filed an appeal.

A.R.S. 14-10406, which declares that "a trust is defective, in whole or in part, to the extent that its creation was caused by fraud, coercion, or undue influence," is examined by the court in this decision from the Arizona Court of Appeals. The court interpreted that to mean a claimant need not argue one exerted undue influence directly over the Trust Protector. Rather, the statute “broadly states that a trust amendment is void if its creation was induced by undue influence.”

The trust's provisions, which said that Austin's intentions and goals should be taken into account when the Trust Protector acted, were also cited by the court in its decision to rule against Lindi. Therefore, even though the Trust Protector had the last say on whether to accept or reject a change, Austin's opinion was nonetheless important, though not decisive, under the rules of the Trust. The court continued by arguing that if a defendant could avoid liability by "just pressing, intimidating, and abusing a weak person to perform their dirty job," they may defend themselves against an undue influence claim even if they weren't the Trust Protector.

About the Author

Thomas Asbury

Mr. Asbury is a graduate of the Wharton School of Business at the University of Pennsylvania. Before attending law school, Tom worked in the Internet sector as the Webmaster for the NFL’s Jacksonville Jaguars. While in law school, he published a law review article entitled Alternative Sentencing Theory, 3 Fla. Coastal L. J. 41 (2001), which identifies a constitutional framework within which defendants charged with alcohol and drug-related crimes can be remanded to faith-based programs rather than prison for non-violent offences. The logic is quite simple—as sobriety becomes the norm and addictions subside, so too do the often-accompanying crimes. His professional experience includes estate planning, corporate law, compliance law, guardianships, trademarks, probate, trust and probate litigation, including trust and will contests, administrative law, and consulting for business entities. Mr. Asbury has also lectured for NBI Seminars in the areas of Probate, Wills, Trusts, and Estates. Tom has also served on the Penn Admissions Committee for years as an alumni interviewer and is an international lecturer on the focus and philosophy of Ivy League admissions.


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