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Factual Background:

In 1995, Christine Loetel executed an irrevocable trust agreement.  The Trust specifically prohibited her from exercising a power of appointment in favor of her father, purportedly because he had little contact with her and was a financially unstable alcoholic, in addition to other personal reasons.  Christine was physically limited by cerebral palsy at the time of execution, but she suffered from no mental impairment.  Christine’s mother and attorney discussed the provisions of the trust with Christine and Christine made changes to the document to better reflect her wishes.  However, though it was discussed, she never disputed the provision that prevented her from exercising a power of appointment in favor of her father.  The Trust included a bequest to Christine’s sister and provided that remaining funds be used for charitable purposes; a bequest to Christine’s mother in the amount of $1 was removed at the mother’s request.

In 2003, while visiting her father, Christine drafted a letter to a Florida attorney expressing unhappiness with the way the Trust was set up.  After a meeting with Christine, the attorney drafted a will for her that contained a power of appointment to her mother, father, and sister.  The attorney told Christine the appointment to her father might not be effective because of the provision in the Trust and recommended she consult with a Missouri attorney about following the procedures in the Trust or revoking the Trust.  Christine declined this advice.  Christine died in 2005, and thereafter the Co-Trustees learned about the 2003 Will purporting to exercise a power of appointment in favor of her father.  The Co-Trustees filed a declaratory judgment action to ascertain the legal effect of the 2003 Will.  Christine’s father, David Loetel, filed a counterclaim and cross-claim alleging the Trust had been created as a result of undue influence or mistake and that the Trust had been amended by the 2003 Will and that Christine had validly exercised her power of appointment in his favor.

Held:

The Circuit Court of Greene County denied David Loetel’s claims and determined that Christine’s subsequent exercise of her power of appointment in David’s favor was invalid.  David Loetel appealed.

On Appeal:

Affirmed.  Where there is no evidence that a person having a confidential and fiduciary relationship with the settlor received a pecuniary benefit because of a trust’s creation, there can be no presumption of undue influence in the creation of the trust.  It follows that if the trust is not a creation of undue influence or mistake, then a subsequent provision in a will that violates the terms of the trust will be invalid.

Rationale:

A presumption of undue influence arises when a party presents substantial evidence of: 1) the existence of a confidential and fiduciary relationship; 2) a benefit being conferred upon the fiduciary; and 3) some additional evidence from which undue influence may be inferred.  Before a presumption of undue influence can arise, there has to be evidence that a fiduciary received a pecuniary benefit as a result of the trust being created.  When a fiduciary’s only possible benefits are an unexercised power of appointment that might be exercised in her favor and settlement of a disputed claim by the Co-Trustees twelve years after the trust was executed, those are not benefits that resulted from the creation of the trust.

For a provision in a trust to be regarded as included by mistake, the evidence must show that the provision does not accurately reflect the settlor’s intent at the time of execution of the trust.  Where the evidence shows that the settlor was actively involved in the creation of the provisions of the trust, was explained the provisions and allowed to make changes, and never expressed disagreement with a particular provision, that provision will not be considered included by mistake.  Subsequent manifestations of vague “unhappiness” with the trust are not sufficient evidence of mistake to permit posthumous reformation of the trust.