Master in Chancery Finds that Decedent had Capacity and was not Unduly Influenced, however, that Executor Failed to File an Appropriate Inventory

In the Matter of the Estate of John Joseph Fahey, ROW Folio No. 177536 LW (October 31, 2022)

           This case involved exceptions filed to an estate inventory. John J. Fahey (the “Decedent”) died on March 24, 2021 leaving a Will. In his Will, the Decedent named his sons, Mark Fahey (the “Respondent”) and Michael J. Fahey, Sr. as the co-executors of his estate. Michael predeceased the Decedent, as a result, the Respondent was the sole executor of the Decedent’s estate. Michael has three children, Michael J. Fahey, Jr. (the “Exceptant”), Stacie N. Fahey (“Stacie”) and Paul Fahey (“Paul”).

           The Exceptant filed two exceptions to the Respondent’s inventory of the Decedent’s estate: (i) Schedule D of the Inventory, “jointly-held property”, and (ii) Schedule E of the Inventory, “miscellaneous property”. On the first exception, Respondent claimed that the Decedent lacked the mental capacity to change the beneficiary designation on the Decedent’s IRA account, or, alternatively was unduly influenced by the Respondent to do so. On the second exception, Exceptant argued that the Respondent failed to list all household goods and acted surreptitiously to dispose of such property without proper notice or documentation.

           Prior to his death, Decedent suffered a slip and fall, and was admitted to a rehabilitation hospital. Upon his admission to the hospital, staff described the Decedent as needing minimal assistance with daily activities of daily living. On February 4, 2019, staff noted that Decedent was having “some cognitive issues.” Over the course of his stay at the hospital, the Decedent was given several cognitive tests with varying results of between 90% understanding and 50% understanding, sometimes fluctuating with tests performed on the same day. On February 5, 2019 a medical professional at the hospital noted that the Decedent showed signs of mild dementia. After approximately two weeks of rehab at the hospital, the hospital determined that Decedent was “back at his baseline,” and the Decedent was discharged on February 14, 2019, and transferred to an assisted care facility. On his discharge paperwork, the hospital noted that the Decedent had a history of “progressive decline in cognitive function.”

           The day following his release from the hospital, the Decedent and his sons went to Wells Fargo together to transfer his various accounts, including an IRA, from Morgan Stanley to Wells Fargo. Prior to the transfer, the Decedents' sons were to inherit the IRA account per stirpes, following the transfer, the per stirpes portion of the designation was removed. On January 23, 2020, Decedent and Respondent went to Wells Fargo to execute a change in relationship application, naming the Respondent as a joint owner of the Decedent’s personal bank accounts.

           Decedent lived in the assisted living facility from February 14, 2019 until December 2020, when the Decedent fell ill with COVID and was taken to the hospital. Many family members, including the Exceptant’s brother, Paul, testified that, during his time at the assisted living facility, the Decedent was very active in the community and had rational conversations with them, both over the phone and in person, and that they had no concerns about his mental capacity. The Court also noted that, importantly, the Exceptant did not have personal knowledge of the Decedent’s mental capacity during the relevant time period. Exceptant never visited the Decedent at the hospital, and only visited once while the Decedent was living in the assisted living facility.

           Following the Decedent’s death, Respondent admitted his Will to probate and received letters testamentary. The Respondent traveled to Decedent’s house to clear out property and prepare it for sale. Respondent claimed that he gave the Exceptant and his brother and sister the first opportunity to claim any of the Decedent’s personal property from the home. Exceptant and Stacie claim that when they were able to go to the Decedent’s home to select items of personal property, much of the Decedent’s property was already gone. Respondent further claimed that most of the Decedent’s personal property was not very valuable, save some oil paintings done by the Decedent. After every beneficiary had a chance to select items of personal property, the Respondent took everything else to an estate company and sold some items for $300, and threw away everything the company didn’t want. Importantly, the Respondent never created an itemized list of items that had either been claimed by family members, sold or trashed.

           Under 12 Del. C. § 1905, the Respondent as the executor of the estate, was required to file an inventory “contain[ing] all good and chattels of the decedent, a list of all debts and credits due or belonging to the decedent or to the decedent’s estate, and a statement setting forth a general description of every parcel or real estate in the State of which the decedent died.” Further, each item on the inventory needed to be separately valued at its fair market value as of the date of death of the decedent.

           In determining whether a decedent has capacity, an individual has a presumption of capacity, and the burden lies with the party who challenges capacity to overcome that presumption.[1] A decedent will be considered to lack capacity if the decedent was “incapable of understanding the nature and effect of the transaction,” or the decedent’s mental faculties were so impaired as to “render him unable to properly, intelligently and fairly protect and preserve his property rights.”[2] Further, the elements of under influence are: (1) a susceptible testator; (2) the opportunity to exert influence; (3) a disposition to do so for an improper purpose; (4) the actual exertion of such influence; and (5) a result demonstrating its effect.[3] The party claiming undue influence has the burden of proof, but the burden is not met if the evidence supports two equally plausible explanations for a late change of beneficiary, one of which is undue influence.

           In addressing the Exceptant’s challenge to capacity, the Court notes that timing is key. The challenged transactions occurred on February 15, 2019 and January 23, 2020, so the Court focused its inquiry on the evidence of capacity around those dates. The Court weighed the evidence from the hospital of the Decedent’s declining cognitive function and the testimony of the Decedent’s family as to their belief about his mental state. The Court found that the Exceptant did not meet his burden, and the evidence did not support a finding that the Decedent did not appreciate the nature and effects of the transactions. The Court did find that, as an initial matter of the undue influence challenge, that the Decedent was susceptible to undue influence based on his weakened mental capacity. However, the Exceptant did not show that the Respondent actually asserted undue influence upon the Decedent with respect to the transactions.

           As to the Exceptant’s exceptions to Schedule E, regarding the miscellaneous property, the Court found that the only item of miscellaneous property listed in Schedule E of the inventory was the Decedent’s car. The Respondent failed to list any household goods, including furniture, paintings, or other items remaining at the property. The Respondent allowed himself, Exceptant, and other beneficiaries of the estate to take what they wanted from the property without itemization of such items. The Court found that the Respondent failed to provide a proper inventory, and any items still in the Respondent’s possession should be appraised, sold and added to the estate account. Furthermore, the Respondent needed to list the items already sold with their sale price. Finally the items given or thrown away should be assigned a reasonable value and contain a notation regarding to whom they were given or when and where they were disposed of.

           For the foregoing reasons, the Court overruled and dismissed the Exceptant’s exceptions to Schedule D of the inventory, and sustained the exceptions to Schedule E, requiring the Respondent to prepare a new inventory.