Protect Your Aging Loved Ones From Undue Influence
Following the death of a loved one, close family members are sometimes surprised to learn that they didn’t receive the inheritance they were expecting, and that the deceased instead left most of their estate to an individual they only recently met, who wasn’t even a relative. While it’s not always the case, in some situations this can mean your loved one was taken advantage of by a bad actor, who manipulated him or her into cutting out close family members from their plan and leaving assets to the bad actor instead.
This is called “undue influence,” and it’s not only unethical, it’s illegal and considered a form of elder abuse. Given the growing number of seniors, the prevalence of diminished capacity associated with aging, and the concentration of wealth among elderly Baby Boomers, we’re likely to see a serious surge in the number of cases involving undue influence in the coming years.
Undue influence can have a disastrous effect on your aging parents and other senior relatives’ estate planning. To this end, we encourage you and your family to be aware, educated, and empowered in knowing what risks are for your elderly loved ones—and for your future inheritance.
With this in mind, here we’ll discuss what constitutes undue influence, and list some common red flags to watch for that may indicate your loved one is being taken advantage of. From there, we’ll also explain how you can prevent such abuse with proactive communication and planning.
What Is Undue Influence?
Undue influence occurs when one individual uses their position of authority or advantage to coerce another individual into making decisions or performing an act that they otherwise would not. This often involves the leveraging of emotional ties or power dynamics, and it can take the form of deception, threats, harassment, isolation, or a number of other actions. The perpetrator is most often a family member, but it could also be a close friend, caregiver, professional advisor, business partner, or even someone the person just met.
In estate planning, undue influence typically occurs during the creation or revision of wills, trusts, or other estate planning documents. For example, a son may use threats and lies to pressure his elderly father to change his will or trust to grant him more inheritance, while reducing his siblings share of the estate.
To illustrate what undue influence looks like in real life, consider the following court case, which was included in an article from the American Bar Association analyzing how the definition of undue influence has evolved in California’s legal system.
Undue Influence Case Example
A daughter was living with her father who was in his 80s and in poor health. She convinced him to give her $8,000 per month because, “I’m taking care of you.” She would not allow the other children to visit, saying their father was too ill and weak to receive visitors. She also told her father, “Well, the other kids won’t help. They never visit. I’m the only one who cares about you. You’d end up in a nursing home if I wasn’t here.”
After the father died, the surviving family discovered that the daughter had induced her father to make a will leaving the family home to her as well as all his stocks and bank accounts. A will contest took place. A jury found that undue influence had taken place, but that the father would have wanted to leave something to his daughter. Eventually, it was determined that the assets should be split between the four children.
Identifying Undue Influence
Undue influence can be difficult to identify because it often takes place behind closed doors. And unless you are in frequent communication with a loved one about their estate planning, you may not even know they have changed their plan until they have passed away or become incapacitated. This can be especially challenging if you have elderly loved ones who live far away, leaving you unable to regularly visit them and with little knowledge of their daily lives and interactions with others.
To complicate matters further, not all influence is undue, and some influence is perfectly fine—the mere fact that someone was influenced by another individual to change their estate plan to increase their inheritance isn’t necessarily enough to throw their plan into question. Additionally, adults have the legal right to make their own decisions (even bad ones), and they can spend or give away their money in whatever manner they choose, provided they haven’t been deemed incapacitated.
Undue influence isn’t just about one person influencing another or merely expressing their opinion; it’s about a person in power manipulating someone who is vulnerable to the extent that they are unable to exercise their own free will. Although undue influence can be difficult to spot, there are some common warning signs.
Red Flags For Undue Influence
Some of the most common actions that are red flags that someone may be attempting to unduly influence your parents or other elderly loved ones include the following:
- Preventing communication between the victim and family members.
- Isolating the victim from family and friends.
- Withholding documents from family members.
- Encouraging the victim to make financial gifts or offer other benefits to people he or she only recently met.
- Naming recently-met connections as attorney-in-fact under a financial power of attorney or agent on medical power of attorney, or as a joint owner on financial accounts, real estate, and other assets.
- Giving financial or estate planning advice that is not in the victim’s best interests, but rather in the interests of the advisor.
- Excessive involvement of a recently-met connection with the victim’s estate planning efforts, such as help with creating or updating key estate planning documents.
- Significant inconsistencies between previous versions of the victim’s estate plan and the latest versions. This is especially true if the estate plan suddenly includes new beneficiaries or excludes previous ones.
Should you notice any of these behaviors or other signs that a loved one may be a victim of undue influence, it’s critical that you immediately take steps to investigate the situation, whether that means getting the proper authorities involved or confronting the abuser directly. Time is of the essence in such cases, so the earlier you step in the better.
There have been far too many cases where family members waited too long to take action, and by the time they did, the damage was already done: savings were depleted, family homes were sold, and in the worst cases, senior victims were placed in substandard nursing homes and assisted living facilities against their wishes.
Given these risks, it’s vital to get in front of the situation as early as possible, not only to prevent financial mismanagement and exploitation, but also to ensure your loved ones’ overall health and safety.
Prevent Undue Influence With Proactive Communication & Planning
One of the most effective ways to prevent the possibility of undue influence is to be proactive when it comes to communicating with your parents and other elderly relatives about their estate planning goals and desires. By talking with your loved ones early and often about how they want their affairs handled, you can help reduce the chance for surprises down the road.
Additionally, your loved ones should always work with an experienced lawyer like us to create their estate plan. As your Artisan Law, we can support them to put in place a number of different estate planning vehicles, such as revocable living trusts, irrevocable trusts and power of attorney documents, that would allow you or another trusted family member to intervene and help them in a time of crisis, without the need for court intervention.
To this end, we can support your aging parents and other senior family members develop a comprehensive incapacity plan, customized with the specific planning vehicles to match their unique needs, family dynamics, and life situation. Bring your parents or other relatives in to meet with us for a Life & Legacy Strategy Session to learn more about how this would work.
That said, your deduction is limited to 30% of your adjusted gross income. And if the donation exceeds that limit, you can carry over any excess into subsequent tax returns for up to five years.
Again, profits from appreciated assets sold by the trustee aren’t subject to capital gains taxes while they’re in the trust. Plus, when the trust assets finally pass to the charity, that donation won’t be subject to estate taxes either. Such hefty tax breaks can seriously add up, so if you have the means to set such a trust up, they can be quite beneficial for all parties involved, so if you think such a trust might be right for you, definitely meet with us to discuss your options
It’s important to note that the beneficiaries will pay income tax on income from the CRT at the time it’s distributed. Whether that tax is capital gains or ordinary income depends on where the income came from—distributions of principal are tax free.
Don’t Go It Alone
Of course, if you notice any red flags or other suspect behaviors, you should immediately contact Artisan Law at 212-548-4874 to address the issue. While there’s no way to prevent age-related dementia and other forms of cognitive decline, make sure your parents and other senior relatives know that they can use estate planning to have control over how their lives and assets will be managed if it does occur.