4.2.3.1 Presumption of validity of gift/bequest. If a confidential relationship can be shown, an inter vivos gift is presumed invalid and the donee has the burden to establish, by clear and convincing evidence, that there was no abuse of confidence. Figgins v. Cochrane, 403 Md. 392 (2008). With testamentary bequests, however, the existence of the confidential relationship is simply one suspicious circumstance to be considered. There is no presumption of invalidity. In Upman v. Clarke, 359 Md. 32 (2000), the Court of Appeals held that a gift to take effect at death contained in a revocable trust is testamentary and not inter vivos for the purpose of the presumption.
4.2.3.2 Indeed, the traditional caveat grounds of undue influence (and, presumably, capacity) apply equally to wills and revocable trusts. Geduldig v. Posner, 129 Md. App. 490 (1999). In, the Court refused to permit an action for tortuous interference with an expected inheritance because an equitable action to set aside the revocable trust would afford complete relief:
In actions to set aside wills or trusts, equity focused on rectifying a situation wherein the testator or the settlor was not able to dispose of his or her estate freely and did not focus on harm to those who were left out. The correction of that harm was a result of righting the wrong to the testator or settlor. The premise of the equitable action was that a person should be free to determine his or her distribution of assets.
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Synthesizing the above, we conclude that the Court of Appeals would recognize the tort if it were necessary to afford complete, but traditional relief. In the case before us, no reason is given as to why recognition of the tort is necessary other than that damages are sought which are not otherwise available, specifically, damages for emotional distress, harm to reputation, and punitive damages. We decline to recognize the tort where the sole reason is an expansion of traditional remedies, as opposed to a situation, not before us, where the traditional remedies might be insufficient to correct the pecuniary loss.
Geduldig, at 508-9. See, however, Drummond v. Freeland, 360 B.R. 108 (Bankr. Md. 2006) where a state court award of punitive damages based on a fraud count involving an inter vivos transfer of a bank account was held not to be dischargeable. That case, however, was a default judgment but it may stand for the proposition that careful pleading may carry the day. The state court case pled conversion, unjust enrichment, and civil conspiracy based on fraud.
4.2.3.3 Probate Exception to Federal Jurisdiction. Under the “probate exception” to federal diversity jurisdiction, federal courts will not probate a will or administer an estate. But see Marshall v. Marshall, 126 S. Ct. 1735 (2006) (The Anna Nicole Smith bankruptcy case). This exception does not necessarily apply to revocable trusts. Sianis v. Jensen, ___ F.3d ____, (8th Cir. 6/21/02): Markham v. Allen, 326 U.S. 490 (1946); Aston v. Paul, 918 F.2d 1065 (2d Cir. 1990). See Steve Leimberg’s Estate Planning Newsletter, Commentary #433 (2002).
4.2.3.4 It is increasingly popular to put binding arbitration clauses in trusts. Such a provision is an attempt by the settlor to require all parties – including beneficiaries – to arbitrate rather than to sue. A Maryland unreported case held that a binding arbitration clause is not binding on beneficiaries regardless of whether such beneficiary received distributions from the trust. Butler v. Revels, Court of Special Appeals No. 718 (September Term, 2006) (2008).
