The MLO Minute: By, Jessica Wilson, Esq. and Dennis McAndrews, Esq.
Pennsylvania law regarding issues of testamentary capacity (the cognitive ability to properly execute a will) and undue influence in providing large lifetime gifts or bequests under a will has long been seen as complex and confusing. These issues involve unique considerations related to “confidential relationships” (where one individual has a close relationship to another involving substantial trust and reliance upon another) and “undue influence” (which requires proof of a weakened intellect of a donor or testator) to secure a substantial lifetime gift or a bequest under a will. The Pennsylvania Superior Court in a case entitled In Re: Klionsky recently clarified the legal distinctions involved in challenging lifetime gifts as opposed to bequests made under a will.
Dr. Bernard Klionsky had four children including his son, Daniel, whom Dr. Klionsky nominated to serve as attorney-in-fact under a durable power of attorney, and as personal representative of his estate. All four children were named beneficiaries in equal amounts pursuant to Dr. Klionsky’s last will. But before his death at age 92, Dr. Klionsky gifted Daniel $256,000. Following Dr. Klionsky’s death, the remaining children petitioned to compel Daniel to account of his activity as attorney-in-fact and for return to the estate of the gifted proceeds. These siblings alleged that Daniel unjustly enriched himself through undue influence and took advantage of his father’s weakened intellect. Daniel filed an account, and after a bench trial the lower court concluded that, although a confidential relationship of trust and reliance existed between Daniel and his father, the siblings failed to prove the remaining element of weakened intellect related to undue influence.
An appeal followed. The Pennsylvania Superior Court vacated and remanded. The court held that the trial court applied the incorrect standard when assessing the validity of the inter vivos (lifetime) gifts. It held that trial court improperly placed upon the siblings a burden-shifting standard applicable only to testamentary transfers under a will; however, in a challenge to a lifetime gift made during a decedent’s lifetime, the court held that the siblings need only have established that Daniel was in a confidential relationship with his father before the burden shifted to Daniel to prove the large gift from his father was not tainted by undue influence. Because the siblings did not have the burden to show Dr. Klionsky suffered from a weakened intellect, the court remanded to allow Daniel to attempt to show the transfer was made intelligently, of Dr. Klionsky’s own free will, and therefore was not the product of undue influence.