Lifetime gifts

A lifetime gift can be set aside due to either actual undue influence or presumed undue influence, the manner of proof being the distinction between the two.

Actual undue influence

Actual undue influence applies where there are overt acts of wrongdoing. The individual subject to the influence has been coerced or improperly pressured into doing something. For example the individual subjecting the influence may have made unlawful threats. Generally, the burden of proving an allegation of undue influence falls to the person claiming to have been wronged.

Presumed undue influence

There is a presumption of undue influence for lifetime gifts where there is:

  1. a relationship of trust and confidence (such a relationship) is assumed in some incidences, namely that between parent and child, solicitor and client, medical practitioner and patient or trustee and beneficiary; and
  2. a transaction is of such a size or nature that it calls for an explanation.

Once these requirements have been satisfied, the burden of proof shifts to the person seeking to uphold the transaction to show that on the balance of probabilities the transaction was entered in to by the influenced person independently and free from influence. If undue influence is proved then the transaction is declared void.

The case of Paull v Paull [2018] EWHC 2520 (Ch) involved a property transfer from an elderly father, Neville Paull, to his son, Bradey Paull. Neville had transferred his home to Bradley in 2010 and sought to have the transaction set outside on the grounds that he had been unduly influenced by him.

Neville was reported to be “frail and vulnerable” and submitted that he had only agreed to transfer the property to Bradley on the basis that he was allowed to remain living there (with his partner) for the rest of their lives and that Bradley would be responsible for looking after the property for him. He told the court that the transaction had been his son’s idea.

Bradley said that the transaction came about so as to prevent his partner’s children from different relationships benefiting after his death and to avoid the property being sold by the local authority in due course to pay care home fees. He sought to rely on the fact that his father had received legal advice from the solicitor instructed in the transaction as to the consequences of the transfer.

Master Bowles said:

This is not the case of a wealthy man disposing of surplus assets, in old age, to procure fiscal, or other benefits. This is the case of an elderly man giving away the home in which he lived and which, objectively, reflected over half's assets, at a time when he was without income, other than any income derived from his other assets and where those other assets, far from being surplus were the assets upon which Neville relied to live.”

He considered the legal advice given to be insufficient and concluded

.. this is a case where Neville entered into the transfer without the full understanding of the implications, or effects, of the transfer which is….. a necessary precondition before a court can be satisfied that the presumption of undue influence has been debuted and the presumed influence dissipated. In those circumstances, the transfer cannot stand”.

A significant gift made by an elderly and/or vulnerable individual, particularly where that gift is substantial in the context of the individual’s other assets is often a red flag in these types of cases. Gifts made to unexpected beneficiaries seemingly without good cause may also ring alarm bells, or to a close family member to the detriment of other close family members.