In order to make a valid gift, an individual must first have the capacity to make the gift. The level of capacity needed to make a gift was established in the long-standing case of Re Beaney, which requires an individual to have the ability to understand the nature of a specific gift and its effect.
The level of capacity one is expected to have will therefore vary depending on the size and nature of the object being gifted. This is further reinforced by the Mental Capacity Act 2005 which reaffirms the general test for capacity is always decision-specific. The point in time for assessing capacity should be at the time the individual makes a gift or asserts that a gift is to be made.
Challenging a lifetime gift
Gifts are open to being challenged at a later stage if there are concerns the person making the gift either lacked capacity or, made it as a result of undue influence.
Challenging a gift based on capacity will require capacity evidence confirming that at the point the gift was made the individual was unable to understand the nature of the gift and its effect, rendering the gift void.
Undue influence is established – by law – either by proving acts have been committed to put improper pressure or coercion on another individual (actual undue influence), whereas some relationships (e.g. carer/patient) give rise to a presumption that there has been undue influence (presumed undue influence) in which the relationship of trust has been abused.
Where presumed undue influence may have taken place, the burden of proof lies with the influencer to show that he/she has not exercised it. In alternate cases, the person making the allegation must show actual undue influence has taken place.
An example of undue influence can be seen in Pesticcio v Huet and others  EWCA Civ 372. In this case, the Claimant had gifted his property to his sister who later sold the property to another and bought another house with the proceeds. Due to the Claimant’s level of capacity, his brother was appointed as the receiver (the old term for a modern-day deputy) and was authorised to bring proceedings against his sister to set aside the gift. The Claimant, through his receiver, alleged that the gift to his sister was a result of undue influence and should therefore be reversed.
The Court held the sister had abused her relationship of trust and confidence leading to the gift being made, but not a result of any specific act of coercion. The transaction was, therefore, set aside and the Claimant was awarded a charge over his sister’s property, as the third party purchasing the property from the sister was protected.
This case confirms that undue influence does not always need a specific act but the conduct of an individual can be sufficient.
For attorneys and deputies, it is important to consider the protected party’s complete estate and particular attention should be given to previous gifts which seem suspicious. However, before bringing a claim to seek declaratory relief, you will need to seek permission from the Court of Protection and it is often necessary to seek counsel’s opinion on prospects. If you have concerns, a previous gift was made without capacity or as a result of undue influence, please do contact a member of the contentious probate team.
How can Nelsons help
If you have concerns, a previous gift was made without capacity or as a result of undue influence, please contact Stuart or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.Contact us