In the legal context, a gift has to be transferred voluntarily from one individual to another individual and with the free will of the party who is making the transfer. In addition, during the gift transfer, there cannot be any possibility of undue influence.
The concept of undue influence is that another individual wrongfully influences the donor in a way that results in the donor being talked into providing the influence with the gift. An individual can prove undue influence in several ways, including examining the statements or behavior that were made by the recipient or the individual receiving the gift.
There are certain acts that can undermine the willpower or free agency of the donor, including:
- Physical coercion
- Moral coercion
In other words, a donor may be made to feel that they are being compelled or forced to give the gift. With gift giving, the basic test for whether or not undue influence occurred is whether the donor acted:
- With free agency
How Is Undue Influence Determined?
As noted above, undue influence may be determined in several different ways. When an individual is trying to show that there was undue influence in a gift transfer before a court, a judge will typically examine the surrounding facts of the case.
Several factors may show undue influence that the court will examine, including the following:
- Whether other parties knew about the gift.
- Whether the gift was the outcome of hastily made decisions or actions.
- Whether the individual who benefited from the gift took some type of questionable action in securing it.
- Whether the gift was consistent with the prior plans or statements that the donor made before giving the gift.
- The donor’s background, such as their:
- mental capacity
- physical condition
- other factors
- The type of relationship between the donor and the recipient, such as whether they are relatives or friends or if their relationship is more professional or confidential in nature.
- Whether the donor received independent advice from an individual other than the recipient before making the transfer.
- The motive of each of the parties in giving and receiving the gift.
The court may have to examine the totality of the circumstances to determine whether or not undue influence occurred during the gift transfer. It is important to note that each case’s outcome may differ because the court’s decision will depend on the facts of the case and the background of the parties involved.
What Are Some Undue Influence Examples?
A court will often grant undue influence as a legal remedy because the legal system has an interest in ensuring wronged parties are made whole and that vulnerable parties are protected. There are numerous examples of the types of relationships in which undue influence may occur, including the following:
- Familial relationships: One of the most common occurrences of undue influence being exerted over a vulnerable party is when the parties are related.
- For example, close or distant family members may take advantage of the elderly member of their family in order to get some financial gain. In fact, financial exploitation of the elderly is very common and is reported by one of every twenty older adults.
- Other close familial relationships include the following:
- husband and wife
- parent and child
- Legal relationships: Another common example of when undue influence occurs is when the two parties have a legal relationship.
- For example, attorney-client relationships or trustee-beneficiary relationships can both give rise to the presumption of undue influence when the attorney or trustee takes advantage of the party to which they owe a fiduciary duty.
- Doctor-patient relationships: Similar to legal relationships, a doctor also owes their patients numerous different fiduciary duties, including:
- The duty of loyalty
- The duty of care
- The duty of good faith and fair dealing
- The duty of competence
- The duty to avoid conflicts of interest.
In addition to the relationships discussed above, undue influence may also arise when one party is more knowledgeable or educated than the other. They take advantage of that fact to coerce the party into entering a contract or giving a gift. The court will have to determine that one of the parties was vulnerable and the other individual took advantage of that vulnerability and their position of superiority to coerce the other individual.
What Happens to a Gift if Undue Influence Was Involved?
In the majority of cases, a gift transfer that is based on undue influence is generally considered revocable. This means that the donor may be able to take back their gift, or, in the alternative, the recipient may be required to return the gift to the donor if possible.
If a situation occurs where a gift has been lost, destroyed, altered, or cannot be located, the recipient may be required to reimburse the donor through monetary payments. For example, suppose a party can show that the recipient persuaded the donor to change their will so that they could receive a particular bequest or gift. In that case, the court may invalidate the will and order the recipient to return the gift to the estate of the donor.
The amount the recipient would be required to pay is calculated in accordance with the fair market values at the time of the transfer. For example, suppose a recipient talked a donor into giving them their mountain house, and they throw a party that destroys the entire house. In that case, the recipient will be responsible for paying the donor or the donor’s estate the fair market value of the home when it was transferred to them.
In addition, the recipient may also be required to pay damages for any losses that resulted from the transfer, for example, hiring a real estate appraiser to determine the cost of the gifted mountain house.
Do I Need to Hire a Lawyer for Help With Undue Influence in a Gift Transfer?
The transfer of a gift can be a very sensitive subject for some individuals because they commonly involve aspects and items that are personal in nature that may affect both the donor and the recipient as well as their relationship. For example, it would be incredibly difficult to handle a situation where one of several children wrongfully influenced their parents to give them all their money and not to give their siblings any.
When a recipient takes advantage of a donor by wrongfully influencing them to transfer a gift, the law allows them to hold the recipient accountable for their actions. These situations, however, have to be handled with extreme care because taking legal action may also negatively affect the parties’ relationship.
If you have any issues, questions, or concerns related to any issue involving undue influence and gifts, it may be in your best interests to consult with a will lawyer for advice. Your lawyer can help you navigate what can be a very tricky situation.
Your attorney can advise you of the issue’s possible outcomes and help you file a lawsuit against the recipient if necessary. In addition, your attorney can represent you in court if you have to appear and will help you recover any losses you suffered as a result of the undue influence.