§ 15.3 Trust Contests

• Library: Administering Trusts in Oregon (OSBar) (2018 Ed.)

§ 15.3 TRUST CONTESTS

§ 15.3-1 Generally

Generally, a trust may be set aside because of undue influence, duress, coercion, incapacity, or a material mistake that is instrumental in creating the trust. A trust induced by fraud, duress, or undue influence is void. ORS 130.175. If the settlor does not reserve a power of revocation, a voluntary trust may be set aside only on a showing of one of these grounds.

PRACTICE TIP: When the settlor expressly reserves in himself or herself, or in a third party, the power to revoke the trust, the settlor can revoke the trust in the manner in which and to the extent to which he or she has reserved such a power. Thus, if the power to revoke exists, it may obviate the need to resort to any action to rescind the trust based on fraud, duress, undue influence, mistake, or lack of capacity. A trust also may be set aside when all parties in interest are ascertained, are under no incapacity, and consent to the revocation. ORS 130.200(1). See generally Trusts, Am Jur2d §§ 73-94 (2d ed 1998) (updated periodically).

NOTE: Because of the paucity of case law in Oregon regarding trust litigation, lawyers usually rely on analogous cases dealing with setting aside wills and contracts for grounds such as undue influence, incapacity, and mistake. The general rules regarding the effect of these grounds in the context of wills and contracts are helpful in determining the effect of those grounds on trusts. See George G. Bogert, George T. Bogert & Amy Hess, The Law of Trusts and Trustees § 44, at 447 (3d ed 2000) (updated periodically). See generally Contract Law in Oregon (Oregon CLE 2003 & Supp 2008); Administering Oregon Estates (OSB Legal Pubs 2012).

For discussion of will contests and litigation, see Administering Oregon Estates chapter 15. See also Stephen L. Griffith, Litigation Issues Relating to the Choice Between a Will and Revocable Living Trust, OSB Est Plan & Admin Sec Newsltr, Apr 2000, at 1-3.

§ 15.3-2 Undue Influence

The seminal Oregon case discussing undue influence is In re Reddaway's Estate, 214 Or 410, 329 P2d 886 (1958). In this case, the court explained that the focus of the undue-influence inquiry is on the conduct of the influencer, not on the will or lack thereof of the settlor. The court cited the following principle of law as governing the analysis: "Undue influence does not negative consent by the donor. Equity acts because there is want of conscience on the part of the donee, not want of consent on the part of the donor." In re Reddaway's Estate, 214 Or at 420 (quoting W. H. D. Winder, Undue Influence and Coercion, 3 Modern L Rev 97, 100 (1939)). Although In re Reddaway's Estate and its progeny generally discuss undue influence in the context of will contests, the same analysis applies to trust contests.

Influence is permissible; "undue" influence is prohibited. As the Oregon Supreme Court explains, "Every will is the product of some kind of influence. But the undue influences against which the law inveighs are the improper influences to control the disposition of one's property." In re Sessions' Estate, 217 Or 340, 350-51, 341 P2d 512 (1959) (internal citation omitted).

In the absence of fraud, influence gained by kindness, advice, gratitude, affection, esteem, or legitimate persuasion is permissible. In re Reddaway's Estate, 214 Or at 425; In re Hill's Estate, 198 Or 307, 334-35, 256 P2d 735 (1953); In re Andersen's Estate, 192 Or 441, 461, 235 P2d 869 (1951).

The analytical framework established by In re Reddaway's Estate is as follows: a confidential relationship coupled with suspicious circumstances creates a presumption of undue influence, which the donee must then overcome by the presentation of sufficient evidence. In re Reddaway's Estate, 214 Or at 420.

A confidential relationship is one in which the donee has a position of dominance over the settlor. In re Reddaway's Estate, 214 Or at 420-21. It has been described as "a fiduciary relationship, either legal or technical, wherein there is a confidence reposed on one side with a resulting superiority and influence on the other. It may be a moral, social, domestic or merely a personal relationship." In re Pletz's Estate, 22 Or App 248, 252-53, 538 P2d 962 (1975) (quoting In re Comegys' Estate, 204 Or 512, 522, 284 P2d 758 (1955)). Moreover, the requisite dominance or superiority does not require bullying or subjugation; it can be in the form of suggestion, persuasion, or fostering a sense of dependence. Knutsen v. Krippendorf, 124 Or...