Annapolis, Maryland Wills, Trusts & Estate Planning

Estate Plan Basics You and Your Heirs Cannot Do Without – Annapolis Estate Planning

To really serve its purpose, an estate plan must have the legal documents that will protect you and your heirs, if you should become incapacitated. It’s not a pleasant thought, but it does happen.

It’s true that an estate plan starts with a properly prepared will, and often includes a trust, but that is just the starting point for a complete estate plan. Even transferring assets upon your death, is only one part of an estate plan. Surprised? Many people are, but better to be surprised now than to have your heirs surprised later!

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides a list of items that every estate plan should have. This includes a will (and perhaps a trust), a durable power of attorney, up-to-date beneficiary designations, a letter of intent, a healthcare power of attorney, and guardianship designations.

Let's take a look at each item on the list to see if you’ve left any decisions to chance.

Wills and Trusts. This should be one of the main elements of every estate plan—even if you don't have substantial assets. Wills are documents that make certain property is distributed according to your wishes (if drafted pursuant to state laws). Some trusts also help limit estate taxes or legal issues. But this isn’t enough. The wording of these documents is extremely critical: a will or trust should be written in a way that’s consistent with the way you've bequeathed the assets that pass outside of the will.

Durable Power Of Attorney. A durable POA authorizes an agent of your own choosing to act on your behalf when you’re unable to do so for yourself. Without a power of attorney, a judge may have to decide what happens to your assets, if you’re found to be mentally incompetent. That ruling may not be what you wanted. A POA can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions in your stead (as if he or she were you). This POA is revocable by the principal at a time of his or her choosing, typically at a time when the principal is deemed to be physically able, mentally competent or upon death.

Beneficiary Designations. Some assets can pass directly to your heirs without being dictated in the will (like a 401(k) plan). Therefore, it’s important to have an up-to-date beneficiary, as well as a contingent beneficiary, on these types of accounts. If you fail to designate a beneficiary, or if the beneficiary has passed away or is unable to serve, a judge may decide what to do with your funds. This again may not be what you wanted.

Letter of Intent. This is a document left to your executor or a beneficiary, that defines what you want done with a particular asset, after your death or incapacitation. It can also provide funeral details or other special requests. It’s not a legal document, but it helps inform a probate judge of your intentions and may help in the distribution of your assets, if the will is deemed invalid.

Healthcare Power of Attorney. This appoints another individual (usually a spouse or family member) to make important healthcare decisions on your behalf, in the event of incapacity. If you’re thinking about creating such a document, you should select someone you trust, who shares your views, and who would likely recommend a course of action with which you’d agree. A backup agent should also be named, if your initial pick is unavailable or unable to act at the time needed.

Guardianship Designations. If you have minor children or are considering having kids, choosing a guardian is very important and many times is overlooked. Be sure the individual or couple you choose shares your views, is financially sound and is willing to rear your children. You should also add a contingent guardian as well. Without these designations, a judge could rule that your kids should live with a family member you wouldn't have wanted, and in some cases, the court could require that your children become wards of the state.

It takes all of these documents to make up an estate plan, that protects you and your loved ones in the event of many different situations.

Reference: Investopedia (April 18, 2018) “6 Estate Planning Must-Haves”

Holden & Campbell, LLC – Annapolis Estate Planning

Financial and Estate Planning for Second Marriages – Annapolis Estate Planning

Thoughtful planning will help a second marriage avoid certain issues that didn’t exist the first time around. Most lives are more complex, with children and assets from first marriages.

A second marriage is more likely to succeed, if the couple addresses key questions in advance, especially those concerning finances. You’ll want to have a clear vision of your current financial needs and what you expect the future to bring, according to a recent article in Investopedia, “Second Marriage Financial Matters to Consider.”

Let’s look at some topics of concern:

Assets and Liabilities. Do a complete review of both of your assets and liabilities. Assets include bank accounts, stocks, bonds, house, cars, retirement plans, insurance contracts and other investments. Liabilities are things like your credit cards, student loan debt, car loans, and mortgages. In addition, note that there are rules in community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) where asset ownership is treated differently: in these states, the law presumes that assets will be owned jointly.

Daily Financial Management. You should next think about how’ll manage your financial obligations on a regular basis. Some couples combine their checking accounts, and some keep separate checking accounts. However, you should create a new joint account, into which both parties make a monthly contribution. Joint expenses are paid from the new account, and other personal expenses are paid with individual accounts.

Beneficiary Designations. Your retirement plans—like your IRA and 401(k)—have named beneficiaries. These should be checked regularly. The same thing should be done with your insurance policies and annuities. This is the perfect time to review who is currently designated, because any agreements from your first marriage may potentially inhibit your ability to update your beneficiaries. They should also be reviewed.

Update Your Estate Plan. A will states your final wishes and details how certain property will be distributed to your heirs. It also designates guardians for minor children and your executor, the person you nominate to make sure your wishes get carried out. It is an excellent time to review your will, to see if you should execute a new one or modify the existing one. Blended family dynamics can also have an impact when reviewing your estate plan. If either spouse has children from a previous relationship, adjustments to your plan may be necessary.

Trusts and Trustees. Ask your estate planning attorney about trusts, like a bypass trust, a qualified terminable interest property (QTIP) trust, or a spendthrift trust. One of these or another kind of trust may be a useful way to transfer wealth to children, while imposing some restrictions. Dividing your assets between a surviving second spouse, the children from that marriage, and any children from a prior marriage may result in some tension. One way to avoid this is to give an independent trustee the ability to make adjustments, so everyone is treated fairly and according to your instructions.

Taking the time to clarify these matters before you walk down the aisle, will allow you both to focus on the relationship and starting a new life together.

Reference: Investopedia (May 29, 2018) “Second Marriage Financial Matters to Consider”

Holden & Campbell, LLC – Annapolis Estate Planning

Do I Have to Pay Taxes on an Inherited Annuity? – Annapolis Estate Planning

Yes, there are taxes due on inherited annuities. The amount depends upon your relationship to the deceased and the value of the annuity.

If it seems like everything is subject to an inheritance tax, well, that is often true. In a recent article from nj.com, “Who pays inheritance tax on an annuity?” a beneficiary asks what happens when a Class D beneficiary inherits a qualified annuity.

In this case, which occurred in New Jersey, transfers for less than $500, life insurance proceeds, and certain state and federal pension payments are exempt. However, everything else is subject to the inheritance tax. This includes items controlled by beneficiary designations, instead of a will, like an IRA, 401(k) or annuity.

If it’s an annuity at issue, the date of death valuation must be listed on the New Jersey Inheritance Tax form (IT-R), which is for assets left to Class D beneficiaries. The personal representative (or executor or administrator) of the estate has a fiduciary duty to file the inheritance tax return (Form IT-R). The tax return, along with payment for any taxes owed, is due eight months from the date of death in that state.

The person responsible for paying the tax, depends on the deceased's will. For example, the will could state that all estate or inheritance taxes are paid out of the deceased's residuary estate, which is the part of a deceased's estate that remains after all debts have been paid and specific bequests have been distributed.

If the estate has sufficient funds to pay the tax, the beneficiaries won't owe anything. However, the will could state that all estate/inheritance taxes are paid proportionately by the recipient, even for assets not controlled by the will. That’s the default in New Jersey, when the will doesn’t say how death taxes get apportioned or the deceased died intestate (without a will).

There can be an issue when the beneficiary refuses to pay his or her share. In that case, the executor is still obligated to pay the tax with other estate funds, if any, which will negatively affect the inheritance of other beneficiaries under the will.

In that case, the executor can sue to recover the funds from non-paying beneficiary. If the executor can't pay the tax because there aren’t enough funds in the estate, the state of New Jersey will bring a delinquency claim directly against the non-paying beneficiary.

The best course of action is simply for the beneficiary to pay their share. An executor with an uncooperative beneficiary, should speak with an estate planning attorney to explore their options and protect the estate and the executor.

Reference: nj.com (May 14, 2018) “Who pays inheritance tax on an annuity?”

Holden & Campbell, LLC – Annapolis Estate Planning

Do You Have to Make Financial Planning Part of Your Wedding Planning? – Annapolis Estate Planning

No, it’s not as romantic as planning a honeymoon along a sandy beach. But once you’ve worked through the financial and legal part of planning your new life together, many issues that plague marriages will be resolved. That’s romantic!

The leading cause of stress in relationships in general and marriages in particular are finances, as reported in an article from My Primetime News, “Hearing Wedding Bells? Be Sure Finances are Included in Your Planning,” by Gerald Rome, Colorado Securities Commissioner. As many as a third of people, say that money is the primary source of discord in their partnership. Therefore, why not eliminate the problem by addressing it?

Rome notes that summer is wedding season. Whether you’re taking the plunge later in life—maybe for the second time or advising a young couple about to make the ultimate commitment—much of the thought process is the same. There’s perhaps no topic less uncomfortable, but more important, than finances.

Before you or a loved one say, “I do,” be sure to consider the following:

Transparency. Many divorces stem from a lack of honesty about finances. Before you walk down the aisle, be sure you know everything about your betrothed’s financial past, spending habits, investing philosophy, and goals for the future. That means sharing information on major debts from education, business, and home loans, as well as credit scores and bankruptcy history. If you’re entering a second marriage, be truthful about any alimony being paid to or received from a former spouse.

For those marrying later in life, think about how or whether to merge accumulated assets and how to compromise on handling financial affairs, after what may have been many years of individual decision-making.

Financial Roles. For co-mingled finances, it’s important to be certain that you’re clear on who will handle what. Many financial issues that arise later in life, are due to one spouse not knowing what’s going on and being deluged with a mountain of new information and decision-making, in the event of a spouse’s sudden illness or death.

Prenuptial Agreement. Detailing what will happen to assets if the marriage fails, isn’t about a lack of trust—it’s about being prepared.

Estate Planning. Organize your property to ensure that no matter what happens, your family’s financial needs will be met. This includes drafting powers of attorney, creating or revising your wills, purchasing life insurance policies, revisiting retirement accounts and investment funds, establishing trusts and naming beneficiaries and considering any tax implications.

By dealing with the business side of marriage from the start, you may learn a lot more about your intended than you would if you had avoided the conversation. Once you know what each other’s financial status is, good or bad, you can figure out how to fix it—or enjoy it! By working with an experienced estate planning attorney and getting your estate plan prepared, you’ll be ready to relax and enjoy each other, without any nagging worries about financial or legal mysteries.

Reference: My Primetime News (May 2, 2018) “Hearing Wedding Bells? Be Sure Finances are Included in Your Planning”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

How to Address the Business Side of a Second Marriage - Annapolis Estate Planning

A second (or third) marriage comes with certain legal and financial issues that are best dealt with before you walk down the aisle.

A new marriage feels like a fresh start and a chance to move forward in life.  However, before your wedding celebration, consider these steps recommended in Nasdaq’s recent article, “Getting Remarried? 5 Financial Steps to Take Before Tying the Knot (Again).”

Create a consolidated net worth statement. One fundamental mistake many couples make is failing to look at their combined net worth, until they start talking about how they will pay for their wedding or another big-ticket item. Those who remarry frequently have more complex financial responsibilities, such as child support, liquid and illiquid investment assets, as well as estate planning and tax-planning strategies. The best course is to be upfront from the start to avoid damaging your relationship in the long run. Take time to review your individual financial situations, including liabilities, before you create a consolidated statement of net worth.

Sign a pre or postnuptial agreement. This can be uncomfortable but can be valuable for both parties, if there’s a divorce. A pre or postnuptial agreement is particularly important,  since it's the only way to legally claim specific assets within a marriage. In addition, a prenuptial agreement may ensure that any children within the marriage are financially protected, in the event one spouse dies. It’s also important to remember, even if you're recently married and don't have a formal prenuptial agreement, state law will often have one for you.

Think about all of your kids. Some spouses who were married previously may bring children into their new relationship. This creates many financial issues. Determine as a couple how you’ll financially address major expenses, like health care, child care, and tuition. When you've decided, discuss your plan of action with an attorney to be sure you're considering all potential options and their long-term implications.

Update your beneficiary designations. This is a common error. Assuming you want to name your new spouse as a beneficiary, you should review all your accounts and update the documents.

Review and update your estate plan. This step often gets forgotten in the rush of planning the ceremony, reception and honeymoon. You’ll both need to meet with an experienced estate planning attorney to review your individual wills from the past and prepare new wills, powers of attorney and health care directives to reflect your new status.

Reference: Nasdaq (April 20, 2018) “Getting Remarried? 5 Financial Steps to Take Before Tying the Knot (Again)”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

For Better or Worse, Why You Need to Update Your Estate Plan - Annapolis Estate Planning

Major life events are reasons to update your estate plan, whether they are celebrations or sad events.

These are the top four reasons to update your estate plan: birth, death, marriage and divorce. However, there are other reasons, including bankruptcy or receiving a surprise windfall.

The FDL Reporter recently published an article, “Best reasons to update estate plans include marriage, divorce, move, birth” that discusses life events that can impact your estate planning.

Marital Status. A change in your marital status definitely requires significant changes to your estate plan. If you've recently married, state law on marital property will now apply to the division and distribution of your estate upon your death.  If you've recently divorced, your estate plan should be updated to see that your ex is removed as a beneficiary and fiduciary, as well as any of his or her relatives.

Financial Status. If you're fortunate enough to have won the lottery or received an inheritance, you need to look at your existing estate plan to see that it still satisfies the needs of your now larger estate. If the opposite has occurred and your estate has declined in value, you also need an estate plan review.

Birth or Death of a Beneficiary or Fiduciary. You need to remove the individual's name.  However, if a spouse has died, your plan may need a complete overhaul. If you or a beneficiary have adopted or had a child, you need to add that child.

A Move to a New State. This is one of the most overlooked reasons to update your estate plan. Every state has different probate, tax, and estate laws.

You Don’t Remember the Last Time You Updated Your Estate Plan. The passage of time brings change to others, even if your life has not changed. Are the people you had named as fiduciaries still able to carry out those duties? Is the person you selected to be your executor, still the best candidate? Review your estate plan with your attorney to make sure that it still reflects your wishes and your life.

Reference: FDL Reporter (April 24, 2018) “Best reasons to update estate plans include marriage, divorce, move, birth”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Not Just Your Will Needs to be Updated: Beneficiary Designations - Annapolis Estate Planning

You can update your will twenty times, but if you don’t change the beneficiary designations, the unwanted consequences could be awful for your loved ones.

It happens more than you’d think: a husband thinks he has made all the necessary provisions for his second wife. Then he dies, and during the process of settling his estate, the first wife becomes the recipient of an extremely generous life insurance policy. The ex-spouse is planning a long trip to Europe, while the current spouse can’t do a thing about it.

As WMUR explains in its recent article, “Money Matters: The trump card of estate planning,” depending on state law, beneficiary designations can be the trump card of estate planning. In almost all cases under this scenario, the ex-wife will receive the life insurance proceeds.

That’s why assigning and regularly reviewing your beneficiary designations is a critical part of estate planning. Remember that assets for which beneficiary designations trump wills or estate directives include the following:

• Individual and Group Life Insurance;
• Traditional and Roth IRAs
• Qualified Retirement Plans and 401(k)s;
• Employee Stock Ownership Plans (ESOPs);
• Contractual rights under deferred compensation plans; and
• Employment contracts

It’s vital to remember that a change to your will or your trust doesn’t automatically make changes to all your assets listed in those documents.

Beneficiary designations are effective immediately after death.  Since they override any instructions made in your will, those assets won’t have to go through probate. Be certain that your beneficiary designations are updated and coordinated with your overall estate plan. It’s a good idea to review and update them, after any major life event like a marriage, divorce, or the birth or adoption of a child.

Don’t forget to name contingent beneficiaries as well. If the primary beneficiary passes way, or if you die at the same time, that way you can be sure that the proceeds from the accounts go to the secondary or contingent beneficiaries. This is especially important, if your beneficiaries are over age 50.

Reference: WMUR (April 5, 2018) “Money Matters: The trump card of estate planning”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Under New Tax Law, Roth IRAs are More Attractive - Annapolis Estate Planning

The new Tax Cuts and Jobs Act have made the Roth more attractive as retirement savings vehicles.

Here are the two biggest tax advantages from Roth IRAs: withdrawals are tax free, and you don’t have to worry about required minimum distributions. According to MarketWatch’s article, “How the new tax law creates a ‘perfect storm’ for Roth IRA conversions,” today’s federal income tax rates might be the lowest you’ll see for the rest of your life.

Tax-Free Withdrawals. Unlike traditional IRA withdrawals, qualified Roth IRA withdrawals are federal-income-tax-free and most often state-income-tax-free. A qualified withdrawal is one taken after you, as the Roth account owner, have met both of the following requirements: (i) you’ve had at least one Roth IRA open for more than five years; and (ii) you’ve reached age 59½ or become disabled or dead. To satisfy the five-year requirement, the clock starts on the first day of the tax year for which you make your initial contribution to your first Roth account. That initial contribution can be a regular annual contribution or a conversion contribution.

RMD Exemption. Unlike a traditional IRA, you don’t have to start taking annual required minimum distributions (RMDs) from Roth accounts after reaching age 70½. Instead, you can leave your Roth account(s) untouched for as long as you live if you want. This makes your Roth IRA a great asset to leave to your family, if you don’t need the Roth money to help finance your retirement.

Annual Roth contributions make the most sense for those who think they’ll pay the same or higher tax rates during retirement. Higher future taxes can be avoided on Roth account earnings, because qualified Roth withdrawals are federal-income-tax-free (and typically not taxed at the state level).  However, the downside is you don’t get a deduction for making Roth contributions.

Therefore, if you anticipate paying lower taxes in retirement, you might want to make deductible traditional IRA contributions (if your income allows). That’s because the current deductions may be worth more to you, than tax-free withdrawals down the road.

 What is the other best-case scenario for annual Roth contributions? It is when you’ve maxed out on deductible retirement plan contributions. Annual contributions are limited, and earned income is required. The maximum you can contribute to a Roth for any tax year is the lesser of: (1) your earned income for the year; or (2) the annual contribution limit for the year. Earned income is wage and salary income (including bonuses), self-employment income, and alimony received that is included in your gross income (believe it or not). If you’re married, you can add your spouse’s earned income to the total. Remember, after reaching age 70½, you can still make annual Roth IRA contributions, provided there are no problems with the earned income limitation or the income-based phase-out rule. However, you can’t make any more contributions to traditional IRAs after you reach age 70½.

Roth conversions. Converting a traditional IRA to a Roth IRA, is the fastest way to get a large amount of money into a Roth IRA. This conversion is considered a taxable distribution, since you have received a payout from the traditional IRA. Once that money is deposited into a new Roth IRA, it will trigger a tax bill. However, with federal income taxes so low, now is the time to do this, since you’ll be avoiding the possibility of higher rates on the post-conversion income that will be in the Roth account. You should also remember that if you’ve had at least one Roth account open for more than five years, withdrawals are federal income tax free.

Reference: MarketWatch (March 27, 2018) “How the new tax law creates a ‘perfect storm’ for Roth IRA conversions”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Proper Planning for the Distribution of an IRA – Annapolis Estate Planning

The rules for IRA distributions can be complicated. Unforeseen circumstances can make things even more complex. Understand the rules, so the money goes where you want it to.

What happens if you designate each of your two adult children as 50/50 beneficiaries of your IRA, and then one of them dies? Will the funds go to your grandchildren?

MarketWatch answered that question in its article, “Who gets your IRA when you die? It’s not so simple.” The answer to what happens to the IRA money is dependent upon what the beneficiary designations say and when one of the children passes away. The beneficiary designations state how it will be distributed. However, that may not be what is written in your will.

If the children are alive when the IRA owner dies, and she simply named them 50/50 outright beneficiaries, they will each get half the funds. Each child could do whatever they wanted, including placing the funds in an inherited IRA account and naming their choice of beneficiaries.

However, if either child dies before the parent with the IRA passes away, and she doesn’t update the beneficiary designation before she dies, there are two common default arrangements built into account forms for IRAs, retirement accounts, life insurance policies, annuity contracts, and “transfer on death” arrangements available in some states. One is per capita: if one child is dead at the time of the parent’s death and is still listed as a 50% beneficiary, then 100% of this share will go to the surviving child.

The other common arrangement is per stirpes—Latin for “by the root.” Here, rather than the predeceasing child’s share going to their surviving sibling, the share goes to the deceased beneficiary’s children.

Be sure to obtain a copy of what you filed for your beneficiary designations. You should carefully review the language to be certain that it meshes with your wishes. If you want your assets to flow differently, speak with an estate planning attorney about drafting a custom beneficiary designation. Some people don’t want one of their beneficiaries to inherit outright and have free reign with the funds. An attorney can help protect that person and the money.

If you want to have people who are not “linear” decedents be beneficiaries, such as family friends or spouses of children, you’ll need to sit down with an estate planning attorney to make sure that the legal documents are correctly drafted. You may decide to use a custom beneficiary designation or trusts to achieve this.

Reference: MarketWatch (March 17, 2018) “Who gets your IRA when you die? It’s not so simple”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Undue Influence Found by Appellate Court in Case of Elderly Man and Neighbor - Annapolis Estate Planning

If undue influence can be proven, it is established that a will can be set aside.

A 2013 probate judgment ordering Frank and Angelina Picciolo to return all funds that Mrs. Picciolo received was appealed. The funds were from an annuity transfer that her husband completed, while acting as attorney-in-fact for their neighbor William C. Mallas

The Superior Court of New Jersey, Appellate Division recently decided this in the case captioned “In re Estate of Mallas.” Apparently, before his death, Mallas executed a power of attorney (POA) naming Frank as attorney-in-fact, a new will naming Angelina as a beneficiary and later, a codicil appointing Frank as executor.

Frank used the POA to transfer funds contained in a long-standing Bristol Myers Squibb IRA into two annuities, with the estate as beneficiary. Sometime later, Frank used his POA to transfer the annuities into one annuity with another company and designated Angelina as sole beneficiary.

The sales agent for the annuity transaction testified that Frank directed him to make Angelina, instead of himself, the primary beneficiary, because Frank had an IRS lien against him. The sales agent also testified that he met with Frank and Angelina on several occasions, but he never met with Mallas. When the agent requested to meet Mallas, Frank told the agent it "wouldn't be feasible to go meet him."

At his deposition, Frank testified that the annuity sales agent met with Mallas in his home. At trial, Frank changed his testimony and said he confused the sales agent with a bank employee who handled the elderly man’s accounts. At trial, Angelina admitted she "had very little contact with Mr. Mallas," and "never set foot in his house."

After Mallas died in 2010, Frank filed to probate the will and codicil. Two of Mallas’s nieces challenged the decedent's will, codicil, POA and the annuity transaction. The Chancery Division found that Mallas had the required capacity to execute each document and the benefit of independent counsel. The court upheld the POA, will, and codicil, but found that Frank "failed to prove . . . that no undue influence was exerted" upon Mallas regarding the purchase of an annuity, which designated Angelina as sole beneficiary. As a result, the court ordered Angelina to disgorge all related benefits and ordered the beneficiary changed to "the Estate of William Mallas."

The court also concluded that Frank "failed to properly account" for his actions using the POA. The court also removed him as executor because, "[a]s a result of this [c]ourt's decision, the Estate of William Mallas has substantial claims against him."

On appeal, in a per curiam opinion, Judges Reisner, Hoffman, and Mayer of the Superior Court of New Jersey, Appellate Division wrote that the concept of undue influence connotes "mental, moral, or physical exertion of a kind and quality that destroys the free will of the testator by preventing that person from following the dictates of his or her own mind as it relates to the disposition of assets . . ." This is generally accomplished "by means of a will or inter vivos transfer in lieu thereof."

The challenger of a will typically maintains the burden of proof in showing undue influence, but the Court explained that the burden shifts when a beneficiary "stood in a confidential relationship to the testator and if there are additional 'suspicious' circumstances" present. A confidential relationship exists when "the testator, 'by reason of . . . weakness or dependence,' reposes trust in the particular beneficiary, or if the parties occupied a 'relation[ship] in which reliance [was] naturally inspired or in fact exist[ed].'"

The Appellate Division judges said that similar principles apply for setting aside inter vivos gifts and property transfers on the grounds of undue influence. To establish a presumption of undue influence and shift the burden of proof, a challenger must show either that "the donee dominated the will of the donor or . . . a confidential relationship exist[ed] between [the] donor and donee.”  However, here there’s no requirement that the challengers show suspicious circumstances to set them aside.

To rebut the presumption after the burden switches, the beneficiary must prove "not only that 'no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well understood.'"

In this case, the Appellate Division found that the trial judge reasonably determined that a confidential relationship existed between Mallas and Frank and that as to the suspicious circumstances surrounding the execution of each of the challenged documents in the case, the judge concluded that Frank met his burden of proving there was no undue influence exerted by him in connection with the estate planning documents and beneficiary designations.

 However, with the annuity, the trial judge said that Frank and Angelina failed to carry their burden of proving the absence of undue influence. The appellate court said there was sufficient evidence in the record of the confidential relationship between Mallas and Frank and the highly suspicious circumstances surrounding the annuity transaction.  However, the record contained no credible evidence to rebut the presumption of undue influence, they said.

The trial judge crafted an equitable remedy that accounted for the lack of credible evidence that the annuity transaction had been authorized by Mallas, stated the Appellate Division. It also found that there was no credible evidence that Mallas intended to have that transaction nullify his will and codicil, which was done with the benefit of counsel.

Reference: Superior Court of New Jersey, Appellate Division (March 6, 2018) “In re Estate of Mallas”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys