In the Estate of William J. McKenna, Karen L. McKenna v. Karen Lynne Hilgert McKenna, Kevin J. McKenna, Paul Sheridan, S.J., Trustees of the William J. McKenna 1993 Trust
500 S.W.3d 850
| Mo. Ct. App. | 2016Background
- William J. McKenna (Decedent) and Karen L. McKenna (Widow) married in 1988; they executed a prenuptial agreement in which Widow waived marital rights in exchange for $1 million if Decedent predeceased her. The trial court later found the prenup unenforceable.
- Decedent created the McKenna Trust in 1993 (restated in 2007) and transferred substantial assets into it over time, including Goldman Sachs accounts and real property (their home and a condominium). Widow signed the deeds transferring the real property.
- Both spouses for ~23 years believed the prenuptial agreement was enforceable and that Widow’s marital rights were waived; Widow had access to trust documents and account statements and attended estate-planning meetings.
- Upon Decedent’s 2011 death, Widow received $1 million, a Marital Trust (valued > $4.5M, including the home and condo), a $1.7M IRA, joint accounts, life insurance, and household items; remaining trust assets (~$27M) went to Decedent’s descendants.
- Widow elected against the will and petitioned to set aside transfers into the McKenna Trust as fraudulent transfers defeating her marital rights, seeking to include those assets in the elective-share estate; the trial court denied the petition and concluded Widow’s elective share was fully offset by property she received.
Issues
| Issue | McKenna (Plaintiff/Widow) Argument | Respondents (Defendants/Trustees) Argument | Held |
|---|---|---|---|
| Whether transfers into the McKenna Trust were fraudulent as to Widow’s marital rights | Transfers were made to defeat Widow’s elective-share rights and should be set aside | Decedent did not intend to defraud because both spouses believed the prenup waived Widow’s marital rights | Denied — transfers not proven fraudulent; shared belief in prenup negated fraudulent intent |
| Whether the trial court improperly relied on an unenforceable prenuptial agreement | Court effectively enforced an unenforceable prenup by treating transfers as non-fraudulent | Court relied on Decedent’s and Widow’s long‑standing belief (a factual circumstance) to infer lack of fraudulent intent, not to enforce the prenup | Denied — court did not enforce prenup; belief in its enforceability was relevant factual evidence |
| Whether Decedent breached marital duty of candor in transferring Goldman Sachs accounts | Decedent secretly transferred accounts without candid disclosure; secrecy is a badge of fraud | Decedent reasonably believed Widow had waived rights; Widow knew of trust and reviewed account statements; no secrecy or lack of courage to submit matter for mutual consideration | Denied — trial court reasonably found Decedent satisfied duty of candor; badge of fraud not shown |
| Whether Widow’s beneficial interest in the Marital Trust was overvalued when offsetting elective share | Widow’s access to principal is limited (only as reasonably necessary after exhausting other resources), so interest is less than full trust value | Trust language requires trustee (Widow) to pay herself income and to pay such principal as is reasonably necessary for her support — indicating an intent to provide full support from the trust; thus beneficial interest can equal trust value | Denied — trial court reasonably treated Widow’s beneficial interest as effectively equal to the trust’s value for offset purposes |
Key Cases Cited
- Nelson v. Nelson, 512 S.W.2d 455 (Mo. App. 1974) (recognizes spouse may not transfer property to defeat marital rights; discusses badges of fraud)
- Estate of Fleischmann v. Fleischmann, 723 S.W.2d 605 (Mo. App. 1987) (enumerates badges of fraud relevant to transfers between spouses)
- In re Estate of LaGarce, 532 S.W.2d 511 (Mo. App. 1975) (factors for inferring fraudulent intent; consider all facts and circumstances)
- Citizens Nat’l Bank of Maryville v. Cook, 857 S.W.2d 502 (Mo. App. 1993) (discusses presumption that one intends the necessary consequences of one’s own acts)
- Potts v. Potts, 303 S.W.3d 177 (Mo. App. 2010) (discusses unconscionability indicators in prenups)
- McDonald v. McDonald, 814 S.W.2d 939 (Mo. App. 1991) (timing and circumstances of transfers determine intent to defraud marital rights)
- Winkel v. Streicher, 295 S.W.2d 56 (Mo. 1956) (interprets language directing trustee to pay so much as necessary for support as indicating intent to provide full support)
- Nationsbank, N.A. v. Tegethoff, 18 S.W.3d 22 (Mo. App. 2000) (distinguishes trustee-discretionary principal invasions from mandatory support gifts)
- Estate of Bernskoetter, 693 S.W.2d 249 (Mo. App. 1985) (secrecy about assets can be a badge of fraud when spouse is unaware of transfers)