Challenging Lifetime Gifts
The loss of a relative, in particular a parent, is a stressful and traumatic time for families but when this then leads to a dispute regarding the estate administration this may require the need for Court proceedings. Our specialist Inheritance and Wills Disputes Department have experience in dealing with such matters.
What is a lifetime gift?
A lifetime gift, as opposed to a gift made in a Will after a person’s death, is often a gift of money, property or assets which is made during a person’s lifetime, often to relative or friends.
In some cases, gifts or transactions are made intentionally by the person making the gift (‘the Donor’) for many reasons. People often choose to make gifts during their lifetime to assist a relative in financial need or for a celebratory occasion. Gifts may also be made to reduce any future Inheritance Tax liability.
Grounds to challenge a lifetime gift include:
However, in some cases, lifetime gifts can be challenged after the Donor’s death if the gift was not made in accordance with the wishes of the Donor or were procured when the Donor lacked capacity, by undue influence or by fraud.
- Where the Donor lacked mental capacity to be able to make the gift
- The gift was made as a result of undue influence over the Donor.
- When a person who has Power of Attorney for the Donor’s financial affairs and makes a gift outside of their authority under the Power of Attorney.
How to challenge a lifetime gift
Often lifetime gifts are challenged after the Donor has died. This is often because the transactions made from the Donor’s account only come to light when the bank accounts are looked at after death. This could be when a beneficiary under the Will who is due to receive a share of the Deceased’s estate, discovers that they receive less or nothing at all, due to large withdrawals which have been made from the Donor’s bank accounts, during their lifetime.
For a lifetime gift to be valid, the Donor making the gift must have capacity to do so. The extent of the capacity required to make a valid gift was determined in the case of Re Beaney. This case established that the Donor must be able to understand the nature of a specific gift and its effect.
If the Donor who made the gift did not have the required capacity when the gift was made, then the gift will be declared void. Challenging a gift based on capacity will require capacity evidence confirming that at the point the gift was made the Donor was unable to understand the nature of the gift and its effect.
Where a lifetime gift is made, it is possible to set that gift aside if it can be established that the Donor was subject to actual undue influence or, in certain situations, presumed undue influence.
A presumption of undue influence can arise when the beneficiary of the gift, is in a position of trust of confidence to the Donor in relation to the Donor’s finances, such as parent and child.
The case law in respect of lifetime transactions is found in the case of Etridge -v- RBS [2001], in which it was established that if a person bringing the claim can show that there was a relationship of trust and confidence between the person alleged to have been unduly influenced and the alleged undue influencer, together with there being a transaction which requires an explanation, then without a satisfactory explanation, the transaction can only have been procured by undue influence.
A Donor may have prepared a Lasting Power of Attorney (LPA) for Property and Financial Affairs which appointed someone to act as their Attorney in relation to their finances. The Attorney would then have access to the Donor’s bank accounts.
Section 8 of the LPA explains the legal rights and responsibilities of an Attorney acting under an LPA and the duties of an Attorney are governed by the Mental Capacity Act 2005 and the Code of Practice.
An Attorney is a person who is in a position of trust and confidence and has a duty to act in accordance with the powers granted to them and to act in the best interests of the Donor.
An Attorney has limited statutory authority to make gifts from the Donor’s bank accounts or otherwise to use the Donor’s funds for the benefit of others. Any such gift made by the Attorney during the donor’s lifetime must have met the criteria set out in the Mental Capacity Act 2005 (MCA 2005), namely:
- be given on a customary occasion for making gifts between family and friends
- to someone related or connected to the person or a charity the person supported or might have supported, and
- of reasonable value, taking into account the size of the person’s estate.
These gifts/transactions may only come to light after the Donor has died. Our Inheritance and Disputes Department can assist you in dealing with claims to challenge lifetime gifts made by an Attorney, outside of their legal rights and responsibilities.
Why Pearson Solicitors
At Pearson Solicitors and Financial Advisers Ltd we take pride in being approachable and hardworking, so that we can deliver the best results to our clients. Our solicitors have a proven track record and expertise in resolving complex inheritance disputes and helping clients with compassion and understanding.
We are recognised as a UK leading law firm by the Legal 500 and rated excellent in client care by The Law Society.
Our Inheritance and Will Disputes Department will advise on how to obtain the relevant evidence to bring a claim and they will discuss funding options available, including whether your case to challenge a lifetime gift is suitable to conduct on a No Win, No Fee basis.
How can we help?
Challenging lifetime gifts made by the Donor can be complex and time consuming. For dedicated legal advice on contesting a lifetime gift or disputing lifetime transactions contact our Inheritance & Will Disputes Department on 0161 785 3500 or email enquiries@pearsonlegal.co.uk.
