Confidential Relationship Existence

An Undue Influence Case Often Turns on Whether There Exists a Confidential Relationship between Donor and Donee

While the Multi-Party Claims Act (N.J.S.A. 17:16I-5) creates a presumption of validity of the naming of beneficiaries of a joint, POD or in trust for account, the terms of the statute can be overcome upon establishing that the naming of beneficiaries of the account was the product of undue influence.

Courts have found that once a confidential relationship is established between the owner of the account and the named beneficiary, the burden of proof shifts to the beneficiary of the account to establish that the account was the product of the owner’s free will.

In analyzing the question of a confidential relationship, the Ostlund decision is directly on point. Estate of Ostlund v. Ostlund, 391 N.J. Super. 390 (App. Div. 2007). And the factors to be considered in analyzing whether a confidential relationship exists include:

  1. whether trust and confidence between the parties actually exist;
  2. whether they are dealing on terms of equality;
  3. whether one side has superior knowledge of the details and effect of a proposed transaction based on a fiduciary relationship;
  4. whether one side has exerted over-mastering influence over the other; and
  5. whether one side is weak or dependent

Ostlund also requires a showing of a “reposed confidence and dominant and controlling position of the beneficiary of the transaction” in order to establish a confidential relationship. Ostlund, 391 N.J.Super. at 402. And the mere existence of a business and family relationship is not sufficient to show an inequality between the parties. Id. at 403.

The above test proves crucial in evaluating the merits of an undue influence case in the context of joint, POD and in trust for accounts.