Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, June 26, 2007

Capacity to Create a Trust

Anne is an elderly widow with two children, Mari and Al.  In February of 2000, she executed a will that left her entire estate to her son Al and expressly disinherited her daughter Mari. Later that year, Anne suffered an acute stroke and was hospitalized. When she was released, Mari and her family moved in with her to take care of her. Mari found the will that disinherited her and told her mother that she would not take care of her “for nothing.” Mari arranged for several meetings between her mother and her mother’s attorney. At their conclusion, Anne had Mari appointed her agent for both property management and health care. Also, Anne executed an irrevocable trust appointing Mari as trustee and leaving Anne’s home and the bulk of her estate to Mari. Anne’s attorney recorded the execution of the trust in which Anne orally acknowledged what she was doing. Anne later sued to have the trust rescinded, and the trial court found that “at the time of the creation of the Trust, Anne did not have capacity to enter into a complicated legal document and that she was unduly influenced by [her daughter Mari].”


In Hunter v. Klimowicz, 2007 WL 1599221 (Ind. Ct. App. 2007), the Court of Appeals of Indiana upheld the trial court’s decision de novo. Anne’s physician testified that while Anne could have made simple decisions, such as where to go to eat, or completed simple tasks, such as writing a check, the complexity of the Trust and other legal documents put them beyond her range of competent understanding. In reviewing the doctor’s testimony, the court explained that,


[h]er attending physician * * * testified that although Anne became more alert and cooperative during her rehabilitation, she was still struggling with understanding written and spoken language [at the time the trust was executed]. Dr. Simaga attested that based on Anne’s neurological condition and the medications she was taking, she was unable to appreciate and understand a complicated legal document at that time.


The court then held that,


Although Anne’s statements recorded at the time of the Trust could be viewed as evidence of her mental capacity, we find them to be ambiguous and note that, at a later date, she could not recall the meeting at all and was perplexed when shown the documents bearing her signature. * * * Under these circumstances, we conclude that the trial court properly ordered that the Trust be rescinded.


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