When is there a presumption of undue influence in estate planning?
Sometimes California law presumes that a gift or transfer stated within estate planning documents was a result of undue influence. Generally, there are two categories of transfers where there may be a presumption of undue influence:
- Transfers to people involved in the writing of your estate planning documents (and related people) and
- Transfers to care custodians of dependent adults.
California Probate Code Section 21380
Probate Code Section 21380 lays out the law regarding transfers that are presumed to be a product of fraud or undue influence:
(a) A provision of an instrument making a donative transfer to any of the following persons is presumed to be the product of fraud or undue influence:
(1) The person who drafted the instrument.
(2) A person who transcribed the instrument or caused it to be transcribed and who was in a fiduciary relationship with the transferor when the instrument was transcribed.
(3) A care custodian of a transferor who is a dependent adult, but only if the instrument was executed during the period in which the care custodian provided services to the transferor, or within 90 days before or after that period.
(4) A person who is related by blood or affinity, within the third degree, to any person described in paragraphs (1) to (3), inclusive.
(5) A cohabitant or employee of any person described in paragraphs (1) to (3), inclusive.
(6) A partner, shareholder, or employee of a law firm in which a person described in paragraph (1) or (2) has an ownership interest.
(b) The presumption created by this section is a presumption affecting the burden of proof. The presumption may be rebutted by proving, by clear and convincing evidence, that the donative transfer was not the product of fraud or undue influence.
(c) Notwithstanding subdivision (b), with respect to a donative transfer to the person who drafted the donative instrument, or to a person who is related to, or associated with, the drafter as described in paragraph (4), (5), or (6) of subdivision (a), the presumption created by this section is conclusive.
(d) If a beneficiary is unsuccessful in rebutting the presumption, the beneficiary shall bear all costs of the proceeding, including reasonable attorney’s fees.
There are, however, exceptions to this presumption, even where a gift is made to a person who drafted the estate planning document in question or to a care custodian of a dependent adult. These can be found in California Probate Code Section 21382:
Section 21380 does not apply to any of the following instruments or transfers:
(a) A donative transfer to a person who is related by blood or affinity, within the fourth degree, to the transferor or is the cohabitant of the transferor.
(b) An instrument that is drafted or transcribed by a person who is related by blood or affinity, within the fourth degree, to the transferor or is the cohabitant of the transferor.
(c) An instrument that is approved pursuant to an order under Article 10 (commencing with Section 2580) of Chapter 6 of Part 4 of Division 4, after full disclosure of the relationships of the persons involved.
(d) A donative transfer to a federal, state, or local public entity, an entity that qualifies for an exemption from taxation under Section 501(c)(3) or 501(c)(19) of the Internal Revenue Code, or a trust holding the transferred property for the entity.
(e) A donative transfer of property valued at five thousand dollars ($5,000) or less, if the total value of the transferor’s estate equals or exceeds the amount stated in Section 13100.
(f) An instrument executed outside of California by a transferor who was not a resident of California when the instrument was executed.
The most relevant of these exceptions are likely to be parts (a) and (b), which carves out an exception for when the recipient of the gift is a close relative of the person making the gift.
Certificate of Independent Review
Finally, if are concerned that a gift that you want made in your estate planning documents may later be attacked for a reason mentioned above, you may be directed to obtain a "Certificate of Independent Review" from a separate attorney to certify that your intended gift is not the result of undue influence.
Although laws aren't perfected, they are often intended to protect us when we are most vulnerable. Gifts made to the person who is drafting our estate planning documents or gifts to caretakers of dependent adults are two such scenarios where you might be acutely susceptible to excessive pressure.