McKenna v. McKenna (In re Estate of McKenna)

• Decision Date: 30 June 2016
• Docket Number: No. ED 103054,ED 103054
• Parties: In the Estate of William J. McKenna, Deceased. Karen L. McKenna, Appellant, v. Karen Lynne Hilgert McKenna, Kevin J. McKenna, Paul Sheridan, S.J., Trustees of the William J. McKenna 1993 Trust, et al., Respondents.
• Court: Missouri Court of Appeals

500 S.W.3d 850

In the Estate of William J. McKenna, Deceased.

Karen L. McKenna, Appellant,
v.
Karen Lynne Hilgert McKenna, Kevin J. McKenna, Paul Sheridan, S.J., Trustees of the William J. McKenna 1993 Trust, et al., Respondents.

No. ED 103054

Missouri Court of Appeals, Eastern District, DIVISION THREE .

Filed: June 30, 2016
Motion for Rehearing and/or Transfer to Supreme Court Denied August 15, 2016
Application for Transfer Denied Nov. 1, 2016

For Appellant: Charles Appleton Redd, John R. Munich, Neal Bryant Griffin, 7700 Forsyth Boulevard, Suite 1100, St. Louis, Missouri 63105, Rudy D. Beck, 2777 West Clay, St. Charles, Missouri 63301.

For Respondents: Michael Wayne Bartolacci, Maria Gabrielle Zschoche, One US Bank Plaza, Suite 3500, St. Louis, Missouri 63101, David S. Slavkin, 221 North Broadway, Suite 3600, St. Louis, Missouri 63102.

OPINION

James M. Dowd, Judge

Karen L. McKenna (“Widow”) appeals that part of the trial court's judgment which denied her petition to set aside transfers by her spouse, William J. McKenna (“Decedent”), of various assets into his trust (the “McKenna Trust”) that she claims were made in fraud of her marital rights, and that part of the judgment which ordered that she receive no elective share of Decedent's estate under section 474.160.1(1)¹ because despite the challenged transfers, she received from Decedent upon his death an amount of money and property that under section 474.163² completely offset the share of the estate Widow would otherwise have received under section 474.160 as a result of her election to take against Decedent's will.

Widow contends that the trial court erred (1) by giving effect to the unenforceable prenuptial agreement she and Decedent had entered into just before their wedding; (2) by misapplying the law when

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it ruled that Decedent satisfied his marital duty of candor in connection with the transfer of his Goldman Sachs accounts into the McKenna Trust; (3) by failing to apply the equitable principle of undue influence in connection with Widow's challenge to Decedent's transfers of their home and condominium into the McKenna Trust; and (4) by calculating Widow's beneficial interest in the “Marital Trust,” a trust funded by the McKenna Trust, to be equivalent to the total value of its assets.

We deny Widow's claims of error and affirm.

Factual and Procedural Background

Decedent and Widow were married on August 6, 1988. They remained married until Decedent's death on October 23, 2011. Widow met Decedent while they worked at Kellwood Corporation in St. Louis, Missouri. Decedent was President of Kellwood and Widow worked in Kellwood's accounting department.

Widow was aware that Decedent was a widower and that he had four children from his prior marriage to Jean McKenna, who died in 1985. When Decedent and Widow became engaged to be married in March 1988, Decedent advised Widow that he wanted her to sign a prenuptial agreement to protect the interests in his estate of his four children from his prior marriage. Thus, on July 7, 1988, Decedent and Widow executed a prenuptial agreement.

The Prenuptial Agreement

At the time the prenuptial agreement was executed, Decedent's net worth was approximately $9 million. The prenuptial agreement provided, inter alia, that in exchange for Widow's waiver of “all rights which, by reason of the marriage, she may acquire in [Decedent's] property or estate,” she would receive $1 million in consideration from his estate if he predeceased her. Widow testified that she felt pressured to sign the agreement because Decedent refused to keep their wedding date if she did not sign, and she did not want to face the shame and embarrassment of a cancelled wedding. Widow also testified that both before and at the time of signing the agreement, she did not receive any independent legal advice regarding the prenuptial agreement; she did not understand or receive an explanation of her marital rights under Missouri law; and she did not have the opportunity to fully and carefully read the agreement. In light of this testimony and the circumstances of the prenuptial agreement's execution, the trial court found the agreement to be unenforceable because the court was “unable to make ... a finding” that the agreement was “not unconscionable.”

Nevertheless, from the time the prenuptial agreement was executed until Decedent's death, both Widow and Decedent considered the agreement—under which Widow waived her marital right to an elective share of Decedent's estate upon his death—to be enforceable. Thus, when Decedent made the asset transfers Widow challenges here, he did not believe that he was depriving her of any interest in such property, since the prenuptial agreement provided that she would not acquire any interest in those assets as a result of their marriage, but would instead receive $1 million as consideration for waiving her marital rights to any interest in such property.

The McKenna Trust, the Marital Trust, and the Challenged Transfers

On December 20, 1993, as part of his estate plan, Decedent created the McKenna Trust. The McKenna Trust designated Widow and one of Decedent's sons, Kevin McKenna, as successor trustees upon Decedent's

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death. The McKenna Trust directed that upon Decedent's death, Widow would receive from the trust $1 million outright, representing the consideration under the prenuptial agreement; “all interests” in the real estate used by Decedent and Widow as their primary residence at or shortly before Decedent's death; and a beneficial interest in a “Marital Trust” worth $3 million and funded by the McKenna Trust. The McKenna Trust named Widow as the sole trustee and primary beneficiary of the Marital Trust upon Decedent's death, with their two children as residuary beneficiaries. The McKenna Trust provided that “the trustee” of the Marital Trust, Widow, “shall pay to [Widow] the income of the [Marital Trust] and in addition shall pay to [Widow] such amounts of the principal of the [Marital Trust] as from time to time shall be reasonably necessary for the support, maintenance and health of [Widow].”

Over the course of the following two decades, Decedent transferred various assets into the McKenna Trust. Between 1993 and 2007, Decedent transferred his Goldman Sachs accounts into the trust. And on February 8, 1995, after obtaining Widow's signature on the deeds of transfer, Decedent transferred their jointly-owned Chesterfield, Missouri home and Innsbrook, Missouri condominium into the McKenna Trust.

On July 24, 2007, Decedent executed a restatement of the McKenna Trust. The restatement named Paul Sheridan, S.J., Decedent's friend, as the third successor trustee upon Decedent's death. Further, the restatement altered some of the distributions Widow would receive from the McKenna Trust upon Decedent's death. Under the restatement, Widow would receive “all interests” in her and Decedent's primary residence at or near his death as part of the Marital Trust. She would also receive “all interests” in the Innsbrook condominium as part of the Marital Trust, in addition to a beneficial interest in a separate $5 million in the Marital Trust reduced by the value of any life insurance benefits, retirement accounts, or employee benefit plans payable to Widow or the Marital Trust upon Decedent's death.

Widow's Knowledge of Decedent's Estate Planning and the Challenged Transfers

Widow knew, at least since 1993, that Decedent had a trust as part of his estate plan. As early as 1994, she attended meetings with Decedent's estate planning attorneys during which the provisions of the McKenna Trust were discussed, and she was present for the July 24, 2007, signing and explanation of the provisions of the restatement of the McKenna Trust.

From July 2007 onward, Widow had access to a copy of the restatement of the McKenna Trust. Moreover, Widow received and reviewed copies of Decedent's Goldman Sachs account statements, which subsequent to Decedent's transfer of the accounts into the McKenna Trust reflected that the title of the owner of the accounts had switched from him to the trust. And Widow was aware before Decedent transferred their home and condominium into the McKenna Trust that he was going to do so; she does not dispute that she signed the deeds of transfer prior to the conveyance.

There is no indication in the record that during Decedent's life, Widow objected—or, accordingly, that Decedent was aware of any objection by her—to his creation of the McKenna Trust; to its terms; to its restatement; or specifically to any of the transfers Decedent made into the McKenna Trust of his interests in the various assets he conveyed, on the grounds that

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the conveyance in any way infringed upon or defrauded Widow of her marital rights.

Widow's Inheritance from Decedent Upon His Death

Widow received the following distributions from the McKenna Trust upon Decedent's death: $1 million outright as consideration under the prenuptial agreement; the Marital Trust worth more than $4.5 million, which includes the home and the...