Having your inheritance stolen owing to financial abuse with Forbes Solicitors

What is financial abuse?

Financial abuse usually involves a vulnerable adult who has money or property stolen, is defrauded, put under pressure in relation to money or property, or has money or other property misused.

Why is this issue important?

The risk of financial abuse is increasing due to economic factors, social isolation, and advances in technology.  Risk factors include the poor physical and mental health of the victim, their dependency on another for accommodation, financial and emotional support, relatives having limited time for care due to work commitments, social isolation because of physical or mental incapacity or owing to loss of friends and family members and a lack of funds to pay for care.

There are also negative consequences for the those who expect to receive an inheritance from the estate of the victim only to find after their death that their wealth has been misappropriated during the lifetime of the deceased by an unscrupulous third party.  The Institute of Fiscal Studies (“IFS”) has reported that inheritances have grown as a share of national income since the 1970’s.  This trend looks set to continue as generations of older ages hold more wealth than their immediate predecessors, but younger generations have no higher incomes than the generation born just before them.

The IFS predict that:

• Inheritances compared to lifetime income are projected to be almost twice as large when compared to the value of inheritances for those born in the 1960’s. For example, the IFS say that whilst on average inheritances will be worth 9% of non-inheritance household lifetime income for those born in the 1960’s, this rises to 16% for those born in the 1980’s.
• Among those born in the 1980’s, the average lifetime inheritance receipt for households in the bottom fifth will be around £150,000, and for those in the top fifth will be around £390,000.
• More people expect to receive an inheritance rising from 72% of those born in the 1960’s to 81% of those born in the 1980’s. The expectation of receiving an inheritance will result in more people saving less in anticipation of inheriting.

This means that inheritances can hugely increase lifetime incomes for all of us right across the socioeconomic spectrum and is extremely important in maintaining living standards particularly as we get older and in retirement.  Inherited wealth is likely to have its biggest impact on living standards later in life given failing incomes and because more people will save less in anticipation of receiving an inheritance.

The legal position – Remedying financial abuse

The phases of remedying financial abuse involve:

1. Investigating what abuse (if any) has taken place.
2. Stopping the abuse and taking back control of decisions about the victim’s property and financial affairs.
3. Seeking a recovery of the assets that have been misappropriated.

The following are important when thinking about these three phases:

1. Early intervention is important whenever financial abuse is suspected or discovered. Too often financial abuse is not picked up until after the victim has died when  it might be more difficult to unravel a lifetime transaction or assets have been dissipated not to mention the impact upon the victim during their lifetime.
2. An important question early on when determining what steps can be taken will be whether the victim has or had capacity to decide about their property and financial affairs. This is crucial when deciding what legal options are available.
3. The identity of alleged perpetrator of the financial abuse is also important in shaping what can be done. Common defendants are appointees, attorneys, deputies and executors or trustees.  Different claims may arise, and different remedies are available.
4. The alternatives to litigation and the ability of various agencies to intervene should always be considered with a view to gathering evidence, bringing the abuse to an end, and remedying the situation. This includes the local authority adult social services department, the Office of the Public Guardian if the perpetrator is an attorney or deputy and/or the police.

Making a recovery

The basis of a challenge to the validity of a lifetime gift is usually that:

• the victim lacked the capacity to make the gift; and/or
• the gift was procured by means of undue influence.

The degree of capacity required by the person making the gift is relative to the particular transaction.  In all cases, they must understand that they are making a gift, what it is they are giving away and who they are giving it to.  However, where the subject matter and the value of the gift are not trivial, the person making the gift must possess a higher degree of understanding including the potential adverse consequences for them and for those persons who might reasonably expect to inherit from their estate.

Proving actual undue influence is notoriously difficult.  Positive evidence of undue influence is rare because it is usually covert.  In most cases direct evidence does not exist, and an inference must be drawn from other proven facts.  Beneficiaries will need to weave a complex tapestry of evidence, but the more the circumstantial evidence is strong and aligned in one direction, the less likely it is that the court will be as exacting in requiring direct evidence of undue influence and for a beneficiary to prove the precise mechanism by which undue influence was brought to bear.  Evidence important to establishing the gift was procured by means of undue influence could include showing the recipient of the gift:

• Saw an opportunity to procure the gift via undue influence.
• Was motivated by previous family history to seize the opportunity and greed.
• Had become hugely interested in the victim’s property and financial affairs.
• Had leverage over the victim because the victim was dependant upon them.
• Has a domineering character.
• Acted as a gatekeeper to communications with the victim.
• Poisoned the victim’s mind against the beneficiaries of their estate.
• The character of the alleged perpetrator is one of a person who would engage in undue influence.
• There is no other credible reason that exists to explain the gift.
• The victim was a weak and vulnerable person at the time the gift was made.
• The victim’s previous wishes were that their beneficiaries should inherit the asset gifted.

Crucially, beneficiaries looking to unravel a lifetime transaction are however helped by the fact that a presumption of undue influence may arise where:

• a relationship of influence exists between the person who made the gift and the person who received the gift; and
• the gift in question is one that calls for an explanation.

The presumption effectively reverses the burden of proof which is upon the alleged perpetrator to establish that the gift was not procured by means of undue influence.  An example of when the presumption could apply is in the context of the transfer of a person’s home to their attorney.  The nature of the relationship is one that would clearly persuade a court that the victim had placed trust and confidence in their attorney and the transaction is clearly suspicious and one that calls for a credible explanation.

Remedies

The remedy for financial abuse is rescission.  This means that the gift is rendered null and void and the parties to the gift must be restored to their original position as far as it is reasonably practicable to do so.  This means that the gift must be returned to the victim by the perpetrator.