An Arizona appeals court rules that beneficiaries of a trust may challenge the trust protector’s amendment of the trust by alleging that the grantor’s wife exerted undue influence over the grantor to induce the trust protector to amend the trust. Bates v. Bates (Az. Ct. App., Div. 1, No. CA-CV 19-0845, May 11, 2021).
Austin Bates suffered from Parkinson’s disease and was in the process of getting a divorce when he hired attorney Paul Deloughery to create a trust for him. The trust provided distributions to his ex-wife, daughters, and his caretaker. Mr. Bates selected a professional trustee and designated Mr. Deloughery as trust protector. The trust protector could alter or amend the trust consistent with Mr. Bates’s wishes. Once his divorce was final, Mr. Bates married his caretaker, Lindi Bates. After meeting with Mr. and Ms. Bates, the trust protector amended the trust in two ways: adding an in terrorem clause, which invalidated the interests of anyone who objected to the trust, and eliminating the distribution to Mr. Bates’s ex-wife and to provide income to Ms. Bates for her life, making Mr. Bates’s daughters remainder beneficiaries.
Mr. Bates’s daughters sued to invalidate the trust amendment due to undue influence. Ms. Bates moved to dismiss the undue influence claim, arguing that the daughters alleged she influenced Mr. Bates, but that Mr. Bates had no ability to amend the trust. The court dismissed the undue influence claim and enforced the in terrorem clause. The daughters appealed.
The Arizona Court of Appeals reverses, holding that the undue influence claim should not be dismissed because Ms. Bates could be found to exercise undue influence over Mr. Bates, and because although Mr. Bates didn’t have authority to amend the trust, the trust protector had to follow Mr. Bates’s wishes. According to the court, state law “does not require a claimant to allege the defendant exerted undue influence directly over the person with final authority to amend the trust; instead, it broadly states that a trust amendment is void if ‘its creation was induced’ by undue influence.”
For the full text of this decision, go to: https://www.azcourts.gov/Portals/0/OpinionFiles/Div1/2021/1%20CA-CV%2019-0845%20-%20Bates%20v.%20Bates%20-%20FINAL.pdf
For a discussion of the case by the Tucson, Arizona, firm of Fleming & Curti, click here.
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