Challenging Gifts and Transfers of $$$ Caused by Lack of Capacity, Financial Exploitation and Undue Influence
Introduction to Challenging a Gift and Transfer of Money Because of Elder Financial Abuse, Lack of Capacity and Undue Influence
Incapacity and lack of capacity are the most frequent claims made when allegations of fraud and involuntary gifting are asserted. Claims of elder abuse and elder financial exploitation are often made because of the elderly person’s physical or mental incapacity or the undue influence of another person.
What Does Capacity or Lack of Capacity Mean?
While doctors and lawyers define the term “capacity” or “lack of capacity” differently, it is agreed that capacity involves the ability to understand and process information, so that a reasoned and rational decision can be made and communicated. New Jersey defines an ‘incapacitated individual” as “an individual who is impaired by reason of mental illness or mental deficiency to the extent that he or she lacks sufficient capacity to govern herself or himself and manage his or her affairs”. The law in New Jersey also defines an “incapacitated individual” as “an individual who is impaired by reason of physical illness or disability, chronic use of drugs, chronic alcoholism or other cause(s) (except being underage) to the extent that he lacks sufficient capacity to govern himself and manage his affairs”.
One important point must be emphasized when the issue of capacity and the elderly is brought up. Each case stands on its own facts. The law is the same but with different fact patterns. The decisions made based on these facts and the actions taken by the elderly person require different standards of capacity. Let’s look at each one.
- Donative Capacity (the making of a gift while alive) – the term donative capacity is broader than the term testamentary capacity (gifts made upon death) or contractual capacity. An unusual, ill-timed gift may indicate that the person making the gift lacked capacity to understand the nature and effect of their gifting.
- Testamentary Capacity – Testamentary means a bequest/gift made under a will or trust upon the death of an individual. A person must be capable of generally understanding the purpose of their will, or trust and recognize who his or her beneficiaries are and (generally) the extent of his or her property.
- Contractual Capacity – a person must be capable of understanding his/her decisions and the consequences of his or her action when a contractual agreement is signed. Contracts require a higher standard of capacity than do wills. For contractual capacity, a person must “possess the ability to comprehend in a reasonable manner, the nature and effect of the contract. A common example of contractual capacity or the lack thereof is when an elderly person signs a magazine clearinghouse contract which obligates him or her to one (1) year’s order of magazines on topics no senior would be interested in. Another example is cold calls that “sign up” a person to a terrific “limited time deal”.
The above definitions may seem complicated and in fact… they are, both legally and medically. As a result, many times a determination cannot be made until medical proofs are established. If you have questions about the topic of capacity because you believe elder financial abuse and exploitation may have taken place, please contact me, Fredrick P. Niemann, a New Jersey lawyer experienced in cases involving elder abuse and financial exploitation. I can be reached toll-free at (855) 376-5291 or email firstname.lastname@example.org. Let’s meet and discuss your concerns.
What is Undue Influence & How Does it Apply When Contesting Gifts and Transfer of Money ($$$) Because of Undue Influence and Similar Grounds?
Sometimes gifts are made, money given away, wills signed, and trusts funded because a person exercised undue influence over an elderly and vulnerable person. But what does the term “undue influence” mean under New Jersey law? Let’s find out now.
Undue Influence is Comprised of Three Elements in New Jersey.
- The use of influence over a person that is significant and not casual. (i.e., a mere allegation that certain decisions were not rational is not enough).
- The influence must overpower and compromise a person’s mind at the time the will or trust was signed, or a gift was made.
- That influence caused the person to execute a will, trust or make a gift that he or she would not have made but for the undue influence.
In effect, undue influence consists of either, mental, moral or physical coercion that causes a person to do something that he or she would not have normally done. Because of undue influence, the will or gift reflects the wishes and desires of the influencer (dominant person) not the person making the gift (weak person).
What is Undue Influence and How Does it Apply to Elder Abuse and Financial Exploitation
How Do You Prove Undue Influence in New Jersey?
When addressing the possibility of undue influence, it is important to obtain information regarding the beneficiary(s). This evidence may show motive or the opportunity why the beneficiary(s) may have attempted to exert undue influence over the testator/donor at the time the will/trust or power of attorney was executed or over the donor at the time the gift was executed.
Not all influences are “undue” influence, however, and this is an important point to understand, to be “undue”, the influence must be such that it destroys a person’s free will and compels him or her to make an involuntary transfer of his or her property. Each case is governed by the facts and circumstances surrounding the execution of the will, trust, or power of attorney, or the making of the gift under a power of attorney or guardianship and the actions taken by the parties who took part in the gifting to determine if coercion or undue influence was exhibited.
Diseases Commonly Associated with Decreased Capacity Which Might Support a Claim of Undue Influence
The following physical illnesses are generally recognized as diminishing one’s mental capacity:
- Huntington’s disease (also known as chronic chorea) – Huntington’s is a degenerative brain disorder, affecting people between the ages of 30-50. Involuntary muscle movements in the limbs are also associated with the disease. Huntington’s disease is usually hereditary.
- Depression – Medical depression, common in the elderly and disabled, is a mental illness, not merely an emotional state. It tends to occur periodically, reactively or cyclically and may last years.
- Alzheimer’s/Dementia disease – Alzheimer’s is a progressive and degenerative disease. A person can be diagnosed with the disease and still retain the capacity to execute legal documents in the early stages. While there is no cure, there are medications available to slow the disease’s progression. It should be noted that a positive diagnosis of Alzheimer’s cannot be made until after death. See www.alz.org
- Parkinson’s disease – Parkinson’s disease is a progressive and degenerative disorder, which attacks the central nervous system and impairs motor skills. Many patients suffering from Parkinson’s disease also suffer from dementia. www.Parkinson.org
- Multi-Infarct Dementia (MID) – MID also is known as vascular dementia. While it can be treated, there is no known cure. MID is a result of small strokes in the brain.
Contesting “Gifts” and Transferring of $$$ Based on Undue Influence
To be a valid gift and make a voluntary transfer of money in New Jersey, four elements must be found to exist:
- A voluntary action is taken where actual (or symbolic) transfer of something of value is made.
- There is an intention by the person making the gift or transfer to give a gift to another.
- An acceptance of the gift.
- Actual physical release of ownership and possession over the subject matter of the gift/transfer.
If a person does not have donative capacity, then a gift cannot be made. A strategy to defend a “gift” can include reliance upon a general durable power of attorney (POA) providing the agent with gifting powers, including the specific power to make gifts. This power will allow the agent to effect gifts that the person may no longer be able to legally make or effect on his or her own.
Recognizing Situations Where the Existence of Undue Influence is Often the Equal of Fraud
A presumption of undue influence arises in situations where there is a confidential relationship and a dominant person in that relationship has gained a unique financial benefit due to that confidential relationship. In a will contest, trust dispute, power of attorney or guardianship fight, a presumption of undue influences arises when both a confidential relationship and “suspicious circumstances” exist.
Situations where a presumption of undue influence may be found:
The disinheritance of a family member or a disproportionate distribution of an estate in favor of a person can be grounds to suspect undue influence. For example: Where one child asks an attorney to prepare a will that disposes of a parent’s estate in a manner highly favorable to that child to the exclusion of his/her siblings; there may be a presumption of undue influence found to exist.
Do you have a question regarding financial elder abuse not addressed here? If so, contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at email@example.com to schedule a consultation about your particular needs. He welcomes your calls and inquiries and you’ll find him very approachable and easy to talk to.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Elder Abuse Attorney
Introduction to Challenging a Gift Under a Will, Trust, Power of Attorney or Guardianship Involving Elder Financial Abuse and Lack of Capacity
Elder Abuse and Guardianship | Financial Abuse of the Elderly