After more than 20 years, the Superior Court has redefined the fraud analysis in Will contests. In 1996 a panel of the Superior Court of Pennsylvania adopted a “test” to determine whether or not an individual fraudulently induced a testator/decedent into making certain amendments to his or her Will. In Re: Estate of Glover, 669 A.2d 1011 (Pa. Super. 1996) ultimately defined fraud as requiring proof that: (1) the testator had no knowledge of the concealed or misstated fact, and (2) the testator would not have made the same request had he/she known the truth.
Saling, Litvin & Hambleton was appointed as guardian ad litem on behalf of two minor beneficiaries to an inter vivos irrevocable Trust that was subject to an attack by one of the original settlors/beneficiaries. The Superior Court sitting en banc was presented with a question as to whether or not the Trust was induced by fraud. In advancing the discussion as to why fraud did not take place, the Superior Court rewrote the “Test” adopted by the Glover Court. See, In Re: Passarelli Family Trust, 2019 Pa. Super. 95 (Pa. Super. 2018). The Superior Court sitting in special session noted that the Glover framework entirely omitted the concepts of knowledge/recklessness, justifiable reliance and injury in its analysis of whether or not fraud occurred.
As to whether or not fraud occurred in the inducement of the irrevocable trust in the instant appeal, the Court noted that a stricter standard should apply in the framework of a fraud analysis where an irrevocable trust is at issue. The Superior Court drew its standard from case law concerning common law fraud, the Restatement of Trusts and the Restatement of Property. The Court noted that an aggrieved party must demonstrate: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was approximately caused by the reliance.
The representation and/or statements must be actively made. Allegations that a party failed to properly disclose or identify each and every aspect composing the res of the trust is insufficient. The underlying Petitioner sought to have the Trust set aside based upon an allegation that her husband failed to properly identify certain parcels of real estate which were owned by a corporate entity which entity was transferred into the Trust. The Superior Court found that that alleged failure to identify those parcels of real estate did not constitute a fraudulent misrepresentation where an attached schedule to the Trust provided a sufficient description and identification of the particular assets contributed to the Trust. As the Court noted it is the identity of the fund, not of the pieces of coin or bank notes, that controls. Id., citing In Re: Vosburgh’s Estate, 123 A.2d 813, 815 (Pa. 1924).
This matter has a direct effect on the intersection between estate planning on divorce litigation. In part 2 of this blog we will delve into how that intersection has become more complex than ever.