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From Separation to Succession: Protecting your Pets
Lucy Bluck
We sometimes receive enquiries from people asking whether it is possible to challenge a gift which has been made previously.
Of course, giving someone a ‘lifetime gift’ (i.e. where money or assets are given away during a person’s lifetime) can be an efficient estate planning mechanism but, may be subject to challenge if the donor lacked the capacity to make an informed choice or, has been unduly influenced into making a gift.
We usually see this within the scope of a gift of money or a property, but similar principals apply to collectables and other chattels.
Did the donor transfer the legal title of a collectable
One of the key differences with lifetime gifts of collectables rather than immovable assets is that there must be some act of delivery or change of possession which unequivocally demonstrates that the donor has transferred possession and title to the donee. This was discussed in the case of Re Cole [1964] in which a husband purchased a property and all its’ furnishings and, subsequently, his wife claimed that those furnishings belonged to her. In this case, although the husband intended to make a gift and his wife had physical access to the furnishings, the husband did not perform any act amounting to delivery, nor was there any act that could be interpreted as unequivocally transferring possession or control to the wife. Her mere enjoyment or use of the furnishings did not amount to legal possession.
Therefore the first consideration is whether someone has, for example, been admiring a priceless piece of artwork hanging on the wall of the donor’s house or whether the artwork has been taken down from the wall and handed to the donee, or some other actual or constructive action has taken place transferring title.
Undue influence and capacity
Whether someone made a gift of their own free will is also something that will need to be considered when assessing whether a gift may be set aside. In summary, the donor must have truly gifted an item of their own will, and with capacity to understand what they were doing.
Undue influence arises where someone’s consent is obtained by another person coercing them into giving that consent. Mere persuasion is not enough, it must be a threat or coercion that overbears the donor’s will. While normally the burden of proving undue influence is on the person making the claim, where there is a relationship of trust and confidence between the parties (i.e. parents and children or husband and wife) and the gift is of a size and nature that calls for an explanation, then the burden is on the donee to prove that the donor acted of their own free will.
In order to have capacity to make the gift, the donor must be able to understand the nature and effect of the gift. The level of understanding required is relative to the significance of the transaction. For small gifts, a low degree of understanding may be sufficient, but for gifts that dispose of the donor’s main asset, a higher degree of understanding is necessary.
While undue influence and capacity are separate issues, the reality is that where a party is vulnerable because of, for example, a cognitive disease then that person is more likely to be at risk of being unduly influenced.
A gift made where the donor lacks capacity is void, unless made by someone formally authorised to act on their behalf in compliance with applicable rules, or authorised by the Court of Protection. A gift made under undue influence is voidable and may be set aside.
What safeguards can be put in place to protect the parties?
It can be more difficult to demonstrate that the donor intended to give a gift after the event and, potentially, when the donor has passed away. Because of its’ nature, people are less minded to formally record when a gift is given and, particularly if that item is a collectable high value item rather than ‘bricks and mortar’ for example.
However, it is always important to try to keep contemporaneous documents which demonstrate that the donor acted independently. For example, obtaining legal advice or speaking to an independent professional about gifting valuable items is useful. It is also possible to enter into an agreement which shows that the gift is being given by the donor to the donee in case of any future disputes.
Looking Ahead
With an aging population and an increase in the diagnosis of cognitive conditions these types of issues are also on the increase. People have diversified their asset holdings into collectables, rather than simply property, and this can introduce further complexity. It is therefore sensible to properly record decisions made by a donor to gift items which can be produced should anyone ever question whether a gift was properly given to a donee.
For those involved in lifetime gifting it is important to ensure independence, document intentions, and seek advice. These steps remain the most effective safeguard against challenge and preserve both assets and relationships.
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