Many people believe they have boundless time, while some are acutely aware of their limited days. Those in the latter category realize it's imperative to promptly establish or update their estate plan. A serious physical illness is no reason to further delay estate planning duties, because merely being sick doesn't equate to an unsound mind that could invalidate your intended plan or changes to your plan.
But facing the reality of one's mortality often drives people to organize their estate matters, and it’s a worthy motivation. When confronted with grave physical illness, many aspects of life suddenly come into sharp focus. As a result, courts have recognized that a severe physical ailment doesn't hinder someone from crafting or amending an estate plan as long as they are of sound mind and possess mental clarity. An estate plan challenge based solely on physical health won't hold water against the estate's documented intentions.
A case from Maryland involving a man named Eugene Zook offers insight into this situation. Mr. Zook had established a revocable living trust, directing that his assets be distributed to his three children upon his passing. A year later, amid a battle with cancer, Mr. Zook decided to modify his trust and appoint his daughter, Susan, as trustee and allocate a third of the share of another daughter, Mary, into a structured trust. This "spendthrift trust" would distribute Mary's share in 20 installments over 10 years, which Mr. Zook felt was a prudent arrangement for a beneficiary prone to mismanage money or facing financial threats.
A spendthrift trust is a type of trust that is designed to protect the beneficiary's assets from creditors. This is done by restricting the beneficiary's access to the trust assets. Since the beneficiary doesn't have unrestricted access to the funds, neither can their creditors. They become available to creditors only after the funds are released to the beneficiary as specified by terms of the trust.
Another advantage is that the beneficiary can't pledge the trust's assets as collateral for loans or access large sums at a whim. This helps ensure the longevity of the inheritance and reduces impulsive spending.
The trustee can be given discretion over when to make distributions. This might be based on age milestones, life events or even incentives, like completing an education.
A typical example involves a young man known for his reckless spending habits. Hiis parents, fearing he would waste an outright inheritance, established a spendthrift trust. The terms specified that he would receive a modest monthly stipend, with lump sums released at ages 30, 35 and 40. This staggered approach was intended to ensure financial security throughout his life.
In another example, an elderly woman with a spendthrift trust ensured that her daughter, battling drug addiction, wouldn't misuse her inheritance. The trust disbursed funds directly to a rehabilitation facility and later provided a modest living allowance only upon proof of sustained sobriety.
Or, consider a someone with potential exposure to lawsuits. By placing his earnings into a spendthrift trust, he ensures that even in the face of legal challenges, there's a protected pool of resources for his children's future.
A trust amended before the grantor's death can be challenged by a beneficiary. The timing of the amendment, especially if it's close to the grantor's death, can raise eyebrows and lead to legal disputes.
In Mary’s case, she sued to invalidate the amendment to her father's trust and argued to the court that her father was not of sound mind when he signed the amendment document. The court rejected this challenge. The only proof that Mary had to offer the court was Mr. Zook's cancer. The court's ruling made it clear that evidence of a grave physical illness like cancer alone is inadequate to show that a person is not of sound enough mind to make or change an estate plan.
So, being seriously or gravely ill, even if you know you are seriously or gravely ill, is not a barrier to creating or modifying an estate plan. To the contrary, if you have your mental faculties, you can act as swiftly as desired to make sure that you have a plan in place and that your plan is correctly updated. That way, you can be certain that your loved ones will know what your objectives are for your estate. With that accomplished, you can be sure that the legacy you leave is exactly what you wanted.
One of the most common grounds for challenging a trust amendment is the claim that someone exerted undue influence over the grantor. This means that a person close to the grantor manipulated or coerced them into changing the trust in a way that benefits the influencer. If the influencer had an opportunity to exert such influence, especially when the grantor was vulnerable (due to illness, cognitive decline, etc.), and the amendment resulted in an unnatural disposition (for example, disinheriting close family members), a court might find that the amendment was a product of undue influence.
For a trust amendment to be valid, the grantor must have the mental capacity to understand the nature and consequences of their actions. If the grantor were suffering from dementia, Alzheimer's or any other condition that impairs cognitive function when the amendment was made, it might be challenged on the grounds that the grantor lacked the capacity to make an informed decision.
Also, trust amendments typically need to meet certain legal formalities to be valid. If the correct procedures weren't followed — for instance, if the amendment wasn't signed in the presence of the required number of witnesses — it might be invalidated.
If there's evidence suggesting that the trust amendment was forged or that the grantor was tricked into signing it (perhaps under the belief that it was a different document), the amendment can be challenged and possibly voided. If the language of the amendment is unclear or ambiguous, beneficiaries might seek a court's interpretation or argue for a reading that aligns with their interests.
If a beneficiary believes that a trust amendment is invalid, it's crucial to act promptly. Many jurisdictions have time limits for contesting trust provisions. To successfully challenge a trust amendment, the challenger will need to produce evidence supporting their claims, be it medical records, witness testimony or other relevant documents.
Keep in mind that challenging a trust can be expensive, time-consuming and emotionally draining. It's essential to weigh the potential benefits against the costs and consider alternative dispute resolution methods like mediation.
In Mary’s case, she was not pleased with her father’s amended trust that put limits on her inheritance with spendthrift provisions. Her father passed away just 22 days after amending his trust document. The short amount of time between the amendment and her father’s passing led Mary to assert that her father lacked mental clarity when signing the revised document. The court dismissed her claim, emphasizing that her father's cancer wasn't sufficient evidence of his incapacity to make estate decisions.
Despite Mary’s incorrect assumptions, severe illness is not an automatic hindrance to drafting or altering an estate plan. If someone’s cognitive abilities are intact, they should act promptly to ensure their estate plan mirrors their wishes. By doing so, they can help guarantee their legacy is preserved as intended.
Before you start the process of challenging a trust, you must have a valid reason such as undue influence, a lack of capacity by the grantor, fraud, forgery or improper execution of formalities.
To successfully challenge a trust, you'll need substantial evidence supporting your claims. This can include:
- Medical records: If claiming lack of capacity, medical records highlighting the grantor's cognitive condition around the time of the amendment can be pivotal.
- Witness testimony: Individuals who witnessed the trust's execution or had interactions with the grantor around the amendment time can provide crucial insights.
- Documentary evidence: Any written communications, notes or documents that can shed light on the circumstances leading to the amendment can be invaluable.
Trust disputes can be legally complex, so it's essential to hire an attorney experienced in trust and estate litigation. They can provide guidance, help gather evidence and represent your interests in court. Once you have grounds and evidence, your attorney will likely initiate the challenge by filing a petition or complaint in the appropriate probate or civil court. This document will detail the reasons for the challenge and the evidence supporting your claims.
Litigating a trust challenge can be time-consuming and costly. Many trust disputes are settled through alternative dispute resolution methods like mediation or arbitration, which can be faster and less adversarial. If you succeed in your challenge, the court might invalidate the entire trust, just the amendment or certain provisions. If unsuccessful, the trust remains as amended, and you might be liable for legal costs.
Challenging an amended trust is a significant undertaking that requires a clear understanding of the legal landscape, a solid foundation of evidence and the right legal representation. While it's a route that many would prefer to avoid, it becomes necessary when there's genuine concern about the integrity of a trust's amendment. Always approach such challenges thoughtfully and with a clear strategy in mind.