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Protecting the Elderly and Vulnerable: When Can a “Gift” Be Set Aside?

Philip D'Arcy

Partner Philip D'Arcy, head of our Dispute Resolution team and an expert in disputes involving wills, trusts and probate, tackles the question "when is a gift not a gift?

Financial abuse of the elderly is on the increase. Two articles appeared in the Times the other day under the headlines “Doctor ‘took £188,000 in gifts from elderly widow’ ” and “Carer fleeced Brittan’s brother to fund holidays”. In the first case the widow was left with only £2,000 when she went into a care home having made” gifts” of almost all her savings  to her GP.  In the second a trusted helper allegedly tricked an elderly and vulnerable man out of about £117,000 to fund her own lifestyle.

The elderly can be vulnerable for a number of reasons. Often they will have physical needs and are reliant on others   People who have been strong and self-reliant when younger can find themselves more easily manipulated as they get older. Certainly dementia can often bring a reversion to a more child-like outlook.  They may be lonely. They may have few friends or family they can turn to. Equally they may have significant wealth, sometimes income in excess of their outgoings and no immediate need for their capital.

Many cases involve family members who are looking to receive their inheritance early, trying to avoid inheritance tax on the death and sometimes trying to ensure they receive the lion’s share rather than the estate being divided out in accordance with any will.

Although a crime may well have been committed, prosecutions are relatively rare. It can be very difficult to prove “beyond reasonable doubt “that a fraud or theft has taken place.

Obviously the law will interfere where such transactions are procured by the threat of violence, but outright duress is rarely involved.  Much more common are circumstances where a vulnerable person is persuaded to part with their assets and the recipient claims it was a gift.  

Undue Influence

To help to protect the vulnerable, the law has developed the concept of undue influence.  Where this applies then the gift can be set aside and the property restored to the true owner or their estate.  The principle is that if it was not the result of the vulnerable person’s own free will then the law will not permit the transaction to stand.

Where an elderly and vulnerable person is exploited, finding evidence of actual undue influence can be difficult, certainly where the injured party has since died. As a result the law has developed the idea of “presumed” undue influence.  

Presumed undue influence

There are two key elements in establishing the presumption of undue influence; that a relationship of influence exists between the parties and that there has been a transaction that “calls for an explanation”.  The purpose is to ensure that the influence of one person over another is not abused. 

The relationship

In certain relationships the law assumes influence. These include solicitor and client, doctor and patient and parent and child.  In these cases it is not necessary to prove that a relationship of influence existed.  That is a given. In the case in the paper involving the doctor above that rule would apply.

In other cases it is necessary to show that there is a relationship of influence which has been described as one of “trust, confidence, reliance, dependence, vulnerability on the one hand and ascendancy, domination or control on the other.”   If such a relationship is established then the next question is whether the transaction itself calls for an explanation

The suspect transaction

An explanation is called for where “…. given the circumstances and nature of the transaction, it says to the unbiased observer that, absent explanation, it must represent the beneficiary taking advantage of his position.”

In Hammond v Osborn a neighbour took a 72 year old man who was in ill health “under her wing”. As his health declined she took greater responsibility for his care. He signed a mandate to allow her to use his current account and later told her he wanted to give her his investments.  She arranged for these to be sold and some £297,000 was paid into her account. This was clearly a transaction that called for an explanation.

Explanation needed

Once an explanation is required then the party seeking to keep the gift has to be able to provide valid evidence of the free intention of the vulnerable person as a result of “full, free and informed thought”.

In the case above as the elderly man had not been informed of the sums involved nor received any advice on the wisdom of giving away over 90% of his assets; the neighbour couldn’t overcome the presumption of undue influence and so had to repay the money.

A combination of many small transactions can give rise to the presumption. In Aldridge & Hunt v Turner, a father had income of less than £2,000 a month but there were 62 transactions on his account totalling some £25,000. The son could show that some of the transaction were legitimate, but had to account for all the unauthorised withdrawals and those held to be as a result of his undue influence.

In considering this, the court will consider in particular whether appropriate wholly independent advice was given which enabled the person concerned to reach a decision knowing the nature and consequence of what they were doing.

Gifts by Will

The position in relation to gifts under a Will is very different. Although a Will that is procured by undue influence can also be set aside, there is no presumption of undue influence in relation to wills, actual undue influence must be proved. This is normally very difficult.

This different rule can seem quite harsh.  In an old case of Parfitt v Lawless a large part of an estate was left to a priest who had been the old lady’s confessor. The disappointed beneficiary sought to argue that because of his position he should have to disprove undue influence.  However the Court held that where a will is concerned undue influence can never be presumed. The priest was allowed to inherit. Had this been a lifetime gift it would almost certainly not have been allowed to stand.

Accepting a gift

Before accepting a significant lifetime gift from an elderly or potentially vulnerable person where it may be argued you are in a position of influence, it is always advisable to ensure that they receive independent legal advice.  If they get such advice and then make a free and fully informed decision to make the gift, then it will be very difficult for anyone to seek to set aside that gift at a later date. In the absence of such advice the rules on presumed undue influence could well result in the gift being overturned.

For further information or legal advice, please contact philip.d'arcy@blandy.co.uk.