Non-probate transfers of assets can be tough to attack.  First, they’re often hard for estate beneficiaries or heirs to find out about.  Second, even if they do know about them, in Georgia they’re often wrongly challenged in probate court or there’s a probate court ruling or order that makes them difficult to challenge in the appropriate forum. 

That’s why a case like Prainito v. Smith is unusual.  In this case, the Georgia Court of Appeals affirmed a jury verdict that a decedent’s grandson exercised undue influence and committed actual fraud with regard to a securities account to which the grandson was a joint tenant with the decedent and a certificate of deposit on which the grandson was a payable on death beneficiary.

The appellate court’s failure to flesh out some more of the underlying details of the case and failure to fully address the undue influence claim, however, make the decision one that may create some issues down the road.

After Zina Cachia died, her heirs contended that the assets in a securities account and a certificate of deposit were actually part of her estate.  Cachia’s grandson, Dean Prainito, had obtained sole possession of the assets in the accounts as a joint tenant with survivorship rights in the securities account and as the payable on death beneficiary of the certificate of deposit.

A jury found that Prainito had exerted undue influence over Cachia and had engaged in actual fraud in connection with the accounts, and the Court of Appeals affirmed.

At the outset, the Court of Appeals failed to set out the relevant statute concerning JTWROS accounts, which establishes the difficult burden one has in challenging such an account.  Under the Georgia statute,  sums belonging in such an account belong to the surviving account holder absent “clear and convincing evidence of a different intention at the time the account is created.”   Kind of a big deal.

With that background, let’s look at how the appellate court viewed the undue influence and fraud claims.

Undue Influence

Here, the appellate court only looked at part of the equation – whether a confidential relationship existed.  The court found that there was evidence of Cachia’s depression, loneliness, and increasing dependency upon Prainito on matters including investing and certificates of deposit that allowed for a finding that the two had a confidential relationship. 

Okay, fair enough, and while a confidential relationship may raise a presumption of undue influence, the court never got to the next step – whether there was evidence that Prainito actually substituted his own will for that of Cachia’s or whether Prainito failed to rebut a presumption of undue influence.  The evidence may have been implicit in other parts of the opinion, but the court probably should have closed the loop on the undue influence claim.

Fraud

There was evidence of actual fraud insofar as there was evidence that Cachia intended for the money she placed in the securities account and certificate of deposit to be divided between her five grandchildren, notwithstanding that Prainito had been named joint tenant or beneficiary of the accounts.  There was also evidence that Prainito advised Cachia with regard to the accounts, was evasive when asked about the accounts, and denied the existence of the accounts when asked about them.  Taken together, a jury could conclude that Prainito misrepresented to Cachia that he would divide the money in the accounts among the grandchildren in accordance with her wishes.