28 November, 2023
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.
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:
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 phases of remedying financial abuse involve:
The following are important when thinking about these three phases:
The basis of a challenge to the validity of a lifetime gift is usually that:
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:
Crucially, beneficiaries looking to unravel a lifetime transaction are however helped by the fact that a presumption of undue influence may arise where:
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.
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.
For more information contact John Lambe in our Contesting a Will department via email or phone on 01772 220 235. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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