Recognizing and Avoiding Undue Influence
Litigation among families is likely to increase over the next several decades as enormous wealth is transferred from one generation to the next. Of particular concern is the potential for conflict arising from financial exploitation of the elderly: the misuse of a vulnerable adult’s income or other financial resources. While elderly persons are subject to multiple financial swindles, family or other trusted caregivers also pose a potential threat. Examples of financial exploitation by family are commonplace: a son uses a power of attorney to re-title his father’s assets; a niece takes care of her uncle’s finances and uses a debit card for personal purchases; a caregiver persuades her elderly patient to change his will late in life or to alter long-standing beneficiary designations.
A Case Study
The issue of financial exploitation and undue influence was illustrated by a case recently tried in Greensboro. The son of a successful businessman discovered at his father’s death that another family member (“the defendant”) had taken steps during his father’s last years to effectively disinherit the son.
The father was vulnerable to influence as he suffered from alcoholism and was grief stricken after the death of his wife. The defendant, who the father trusted, took advantage of the vulnerability by telling the father and others that the son had stolen money from the family business. According to other caregivers, the defendant frequently disparaged the son and alleged that he was a spendthrift and generally undeserving.
Under these pretexts, the defendant coaxed the father into providing her with a power of attorney with broad authority. She also enticed the father to modify his bank accounts such that she became a joint tenant with the right of survivorship. Approximately three weeks before the father died (and after he was diagnosed with terminal cancer), the defendant arranged for the father to consult with an attorney whom he had never met. Although the father already had a will, which left his entire estate to the son, father ultimately signed a new will leaving substantially everything to the defendant.
The son learned of the new will after his father’s death and immediately pursued a “caveat,” a proceeding in North Carolina that challenged the validity of the will on the basis that the defendant had unduly influenced the father to execute it. The son then learned that before his father died, the defendant had withdrawn substantial sums of his father’s money from the joint bank accounts to pay her personal expenses and mortgage debt. Even though the power of attorney did not authorize gifts, the defendant claimed that the father had given her the funds.
While the case was settled prior to a jury verdict, the case illustrates the nature of claims that will follow when one caretaker asserts dominance and control over an elderly person to the exclusion of others.
Signs Suggesting Undue Influence
The existence of undue influence is determined by a consideration of a wide range of facts and circumstances. Age, cognitive abilities and physical conditions are pertinent factors. Yet, as the case above illustrates, the following issues are also probative of undue influence:
The elderly person’s actions are inconsistent with longstanding values or practices. In the case above, the father was a Depression-era investor who had never splurged on any material or consumer goods. He built his own home and for years had even resisted the purchase of a washer and dryer. This lifestyle was completely inconsistent with the defendant’s contention that the father “gave” her significant sums to spend on consumer goods.
The elderly person makes sudden changes in financial management that benefit only the caregiver. It is not unusual for an elderly person to request assistance with paying bills or balancing a checkbook. However, these tasks do not require a wholesale change in the manner in which accounts are titled. In the case discussed above, the father’s bank accounts were combined, his investment account was liquidated, and all of his cash assets were re-titled into an account naming the defendant as a joint tenant with the right of survivorship. Changes like these are also suspect when their effect is to benefit (either by will or otherwise) a person who is not the “natural object of his bounty.”
The entrusted caregiver directs the elderly person to new professionals and away from professionals with a historical relationship. The specter of undue influence might arise when an elderly person suddenly and without explanation retains new financial or legal advisors. In the case above, after the defendant obtained her power of attorney, she ended the father’s longstanding relationship with one bank and moved his accounts to her bank. She retained her bookkeeper to prepare the father’s taxes, and she directed the father to an attorney with whom he had never had a relationship to consult about a new will. The retention of new professionals isolated the father from his former bankers, lawyers and accountants, the very persons who knew him best and might suspect undue influence.
The caregiver restricts access to or communication with elderly person. While dependence on caretakers is to be expected, a relationship built on restrictive control and dominance by the caretaker is not healthy. Questions to consider include: Does the caretaker accompany the elder to all financial transactions? Is the elder ever left alone to speak privately with others? Does the elder develop a mistrust of others, particularly about financial decisions? The defendant in the case above instructed the father’s home care nurse to immediately call her should the son communicate with his father. The defendant accompanied the father to doctor’s appointments and would show up and interrupt private conversations between father and son. The defendant also took advantage of the father’s impaired hearing by conducting transactions for him either in person or by telephone.
Wills, trusts or other documents are altered to favor the new caretaker. Elders may want to show appreciation for a caretaker’s assistance; yet doing so by altering longstanding documents regarding the disposition of property should be eyed with suspicion. This is especially true if the older person gives or devises assets to the caretaker in exchange for the promise of lifelong care. The timing of the changes to documents is also a consideration. Was the elder sick, hospitalized, or in a depressed or grieved state when the documents are changed? In the case above, the father executed a new will only three weeks before his death and after he was diagnosed with terminal cancer. The new will left almost all of his probate estate to the defendant and revoked a prior will that he had executed years before in conjunction with his wife that had left everything to his son.
No one welcomes litigation after the death of a loved one. However, certain precautionary steps can be taken—by the elderly person and by others—to minimize the prospect that family will start suing each other later. Consider the following:
- Be wary of a caregiver who rationalizes ways to limit or exclude the elder from her finances. If the caretaker gives assurances that the credit card bill was paid, such that no one else needs to review the statement, perhaps there is something on that statement they do not want others to see.
- The elder should consult with professional advisors, particularly lawyers, alone. They should not be pressured to include family or caregivers in these private meetings. Attorneys are capable of explaining options about legal documents—and the consequences of the options—and the elder should make those decisions alone.
- Similarly, the elder should establish a relationship with an attorney who specializes in elder law. She should discuss how she wants to structure her assets and who she wants to assist her in old age. Elder law attorneys in whom an elder confides are likely to see “red flags” if someone else shows up later asking questions or requesting changes.
- Authority under a power of attorney should be limited in scope. In the absence of a compelling reason, an attorney-in-fact should not be authorized to make gifts of the elder’s property to herself (or even to others). Consider naming two persons as joint attorneys-in-fact. Require that the persons serving as the attorneys-in-fact account to the elder and to someone else such as another family member, an attorney or accountant. Require that duplicate copies of account statements be sent to someone other than the attorney-in-fact.
- Be cautious of joint tenancy, or accounts that identify the elder and the caregiver as “joint tenants with right of survivorship.” If one joint tenant dies, her share generally passes automatically to the other joint tenant by right of survivorship. A will has no effect on assets held by joint tenancy. Often there are compelling tax or probate reasons to title assets in this way, but the elder should be fully advised about the meaning and effect of joint tenancy.
- Be wary of changes in lifestyle or habits of the caregiver. Does she drive a new fancy car? Does her lifestyle become more grandiose the longer she cares for the elderly person?
- Finally, watch for changes in lifestyle or habits of the elder. Is the caregiver precluding him from pursuing his hobbies or interacting with others? Is the elder isolated or does the caregiver prevent communication? These may be early signs of improper influence or control by the caregiver.