Walter draining sanity while holding umbralla

This is entirely expected because this perk never applied to equipped items; his sanity is affected by an equipped Umbralla just like it would be a Dark Sword or the like. He can, however, stand next to an active Umbralla on the ground unaffected because that actually does have a sanity "aura."

Thank you for the comment. My mistake he does lose sanity when equipping dark swords, night armor, etc.