Can You Set Aside Pre-Death Deed and Account Transfers

A person dies, and it emerges that their house or bank account is not a part of their estate, because it was already transferred to someone. Or, someone was named as a beneficiary on a bank account or a life insurance policy. The beneficiary of the transfer maintains that the decedent gave them the asset. The opponents don’t buy the story, and claim that the decedent was tricked or manipulated into transferring the property. This is a common scenario. Who would win depends on a number of questions being answered in their favor:

• Did the senior have the mental capacity to make the gift?
• Was the beneficiary financially exploiting the senior?
• Did the beneficiary take any other money or property from the senior while the senior was alive?
• Was the beneficiary the decedent’ relative?
• Was the beneficiary the decedent’s friend?
• Was an attorney involved? Was it the beneficiary’s or the senior’s attorney?
• Was the property transfer performed correctly?
• What was the relationship like between the beneficiary and the senior?
• How long did the beneficiary and the senior know each other?
• How did they meet? For example, was it a random stranger, a neighbor, a caretaker, or a long-time friend?
• What was the relationship like between the senior and the people trying to set aside the transfer?
• Were there any witnesses to the property transfer or any conversations surrounding it?
• Was the decedent under any duress or coercion when making the transfer?
• Were there any changes to the decedent’s financial circumstances or relationships around the time of the transfer?
• Were there any documents, such as a will or a power of attorney, that might shed light on the decedent’s intentions regarding the transfer?
• Was the property transferred in accordance with the decedent’s state’s laws on gift-giving or property transfer?
• Did the decedent have a history of making gifts or transferring property?
• Did the decedent have a history of mental or physical health issues that might have affected their capacity to make decisions?

Was it a Voluntary Gift?

Not all deed transfers can be set aside. Not all deed transfers are a result of undue influence and fraud. People do transfer their assets to a person they like more than the others, and exclude other people. It happens all the time. If a person who transferred the property did not have diminished mental capacity, and if the person who received the gift did not take advantage of or manipulate the person doing the gifting, then the court would consider the property transfer to be valid.

Or was the Gift a Result of Manipulation, Fraud and Undue Influence?

People frequently exploit vulnerable seniors for their own financial gain. Seniors often have diminished capacity to make decision. They can suffer from Dementia and Alzheimers, and are home-bound or challenged in many other ways, making them easy to exploit.

Seniors often transfer property without wanting to do so, or not realizing the full extent of what they did. Some people are so sick that they can be easily convinced to do anything. Some are so dependent on others that they are easily persuaded. Some are just slipped papers and told to sign them without knowing what they are signing. Some are misinformed about family or financial circumstances, made believe certain things that makes them transfer the property to someone they trust.

In a New York case, Sepulveda v. Aviles, the court explains how a person can set aside a deed based on undue influence. In that case, an elderly 81 year old lady met a 35 year old man in a  bank, and he promised to take care of her for the rest of her life if she transferred her building to him. After the lady died, her family sued the man to set aside the deed transfer based on fraud and undue influence. The court held that the deceased old lady’s family does not have to prove undue influence. It was actually up to the man who got the building to prove that he did not unduly influenced the old lady.

In that case, the trial testimony established that at the time of the transfer, the old lady was an 80-year-old woman in declining health who had recently suffered a traumatic crisis resulting from a fire in the building next door, requiring her to vacate the premises for two months. The testimony of her social worker established that by December 1995, only 16 months after the conveyance, the old lady was totally homebound and dependent on others, especially the young man who took her building, to do her banking, shopping and to provide her with transportation to medical appointments. She also was suffering from significant memory impairment by that time. This evidence of the old lady’s mental condition was corroborated by the medical testimony.

The old lady’s dependence on the man was further confirmed by the testimony of two disinterested witnesses, who testified that the man told the old lady shortly before the sale that if she transferred the building to him, he would take care of her for the rest of her life. In addition, that the old was represented at the closing by an attorney she had never met before and who was referred by the man is a circumstance noted in many prior cases as raising a serious question of improper influence

Additional clear and convincing evidence reveals a series of transactions permeated by undue influence. The man’s unfettered use of the old lady’s funds and credit cards, which the man admitted at trial, provides convincing evidence that he was exploiting the old lady’s impaired condition for his own financial gain.

In that case, the deed transfer was set aside by the court, and the building was returned to the old lady’s estate and to her biological family.

Or maybe this was a “Straw-Man” arrangement?

Rarely, people can transfer property to others in an attempt to avoid creditors or divorcing spouses, to avoid taxes, or to qualify for Medicaid. When a property is transferred for various avoidance reasons, the person who transfers the property orally tells the one getting the property that they are just a “straw-man,” keeping the property in title but really owning it for the benefit of the person who transferred it. In such cases, the person receiving the property promises the person giving the property to be a proper “straw-man,” to let the person who owned the property benefit from it during their lifetime and to distribute it to the owner’s heirs after the owner’s death.

When a pre-death property transfer is discovered, the person whom the property is transferred to claims that it was a gift, and the people who are left out claim that the recipient is merely a “straw-man”, or that fraud or duress took place.

It is up to the one wishing to undo the transfer to prove why the transfer should be undone. However, if it can be proved that the recipient of the asset was in a position of trust with the one who transferred the asset, the burden of proof can shift towards the recipient.

If you are involved in pre-death transfer of real estate or bank accounts and wish to speak with an attorney, we at the Law Offices of Albert Goodwin are here for you. You can call us at 212-233-1233 or send us an email at [email protected].