Bates v. Bates No. 1 CA-CV 19-0845

  

Bates v. Bates

The appeal in this case concerns an irrevocable trust that granted a trust protector sole authority to amend the terms of the trust, and the question is whether an undue influence claim can be pled under Arizona Revised Statutes §14-10406 against a beneficiary who allegedly exerted undue influence over the trust’s elderly settlor to induce the trust protector to amend the trust. 

Petitioners, who are the settlor’s children and former wife, sued respondent, the settlor’s wife at the time of his death, in probate court, alleging she exerted undue influence over the settlor to cause the trust protector to amend the trust in her favor.  Respondent moved to dismiss the undue influence claim under Rule 12(b)(6) arguing petitioners only alleged she unduly influenced the settlor, rather than the trust protector, and the settlor had no power to amend the trust.  The court dismissed the claim and removed petitioners as beneficiaries under the trust’s in terrorem clause.  The appellate court reversed in part, vacated in part, and remanded for further proceedings.

The trust protector amended the trust twice within six months of its creation.  At issue in this case is the second amendment which eliminated the settlor’s former wife as a beneficiary, made his current wife the sole income beneficiary of the trust at the settlor’s death, and authorized the trustee to distribute the trust’s assets to the settlor’s current wife as “advisable for any purpose.”  The second amendment also reduced the settlor’s three daughters to remainder beneficiaries upon the current wife’s death, and added the current wife’s sons from a prior marriage as remainder beneficiaries. 

The appellate court ruled beneficiaries of a trust may challenge a trust protector’s amendment of the trust by alleging undue influence over the grantor to induce the trust protector to amend the trust.  

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