It is common for individuals as they get older to look to family members to take over management of their finances, whether formally or informally, by allowing access to bank accounts and assets. They may also want to make gifts to their family and friends during their lifetime.
However, it is sadly not uncommon for disputes to arise where there have been such informal arrangements in place and ‘gifts’ made.
In the recent Court case, the claimant – an elderly woman – allowed her daughter-in-law to manage her finances for her on an informal basis. She gave her daughter-in-law access to her bank accounts and later claimed her daughter-in-law had taken advantage and without authorisation, transferred large sums of money to her own son. The woman had also signed documents transferring ownership of her own home to another family member and had contributed thousands to the purchase of her daughter-in-law’s parents’ house. The defendants argued that these were gifts.
The Court found that the defendants had abused the woman’s trust and that the ‘gifts’ could not possibly have been considered as gifts as they were made without her knowledge and intention.
This is a sad case and while it may not have provided complete protection from this financial abuse, if the claimant had executed a formal Lasting Power of Attorney, additional safeguards could have been put in place to protect her, including the ability to ask the Office of the Public Guardian to investigate any abuse.
In this case, the Court detailed the importance of ensuring that parties to a gift know and understand that the transaction is intended as a gift. Without proof of the full knowledge and intent of all parties, the gift can be challenged.
The best approach if considering making a substantial gift is to seek advice from a solicitor who will advise on the consequences of the gift and then prepare a Deed of Gift to sign. If the gift were to be challenged later, the solicitor can confirm they gave advice and that the person making the gift understood the consequences and made it of their own free will.
There can also be estate planning advantages to the use of a Deed. Many people look to minimise inheritance tax payable on their estate by making gifts of assets during their lifetime. A Deed allows individuals to keep a clear record of lifetime gifts so they can track when and to whom a gift was made.
Napthens has a wealth of experience in relation to drafting Deeds of Gift, Lasting Powers of Attorney and dealing with any disputes that may arise in relation to financial abuse.