Unconscionable Procurement: Setting Inter-Vivos Gifts Aside

Unfortunately, when a person nears the end of their life, it’s not uncommon for family members or close friends to exploit the situation for financial gain. This can involve exercising undue influence on the will-writer to leave large gifts in their will, or misleading them into changing their will to reduce or exclude someone else’s inheritance. Affected beneficiaries may be able to challenge a will if interference caused it to misrepresent the writer’s true wishes. But, what about gifts given under similar circumstances before the will-writer passes?

Unconscionable Procurement

The doctrine of unconscionable procurement protects the intentions of the gift giver in significant wealth transfers. The courts can void transfers if the gift giver didn’t fully understand the decision or if the recipient misled them. For the courts to void a wealth transfer due to unconscionable procurement, it must be shown that:

• The person receiving the gift obtained a significant benefit 

And

• The person receiving the gift played an active role in arranging the transfer of the gift

The courts will consider the value of the gift, and the level of involvement the receiver had in arranging the transfer. Examples of over-involvement in the arrangement of the transfer include:

• If the gift receiver prepared documents for the gift giver to sign;
• The gift receiver arranging for the gift giver to meet with a lawyer who has already received instructions; 
• Driving the gift giver to meet with a lawyer regarding the transfer, or to a bank to make a withdrawal

Recent Case Argues Unconscionable Procurement

While the doctrine of unconscionable procurement had fallen out of use, it was recently argued successfully in the 2019 case, Gefen v. Gaertner, (2019). In the case, two brothers sought to void several wealth transfers between their mother and another brother. Their father had already passed away, and the estate assets were left entirely to their mother. The three sons were meant to inherit equal ⅓ shares of their parent’s assets upon their mother’s death. However, through numerous inter-vivos gifts, their mother had gifted a significant portion of the remaining estate assets to one son. These gifts significantly decreased the value of the remaining ⅓ shares for the other two.

The two brothers used the unconscionable procurement claim to undo the wealth transfers and place the assets in trust. Placing the assets in trust would ensure that the issue couldn’t happen again. The court sided with the two brothers, ruling that the third brother had unconscionably procured the gifts. Evidence showed that he actively arranged the transfers, prepared documents for his mother to sign, and gained significant financial benefits.

Key Takeaways From the Case

The successful argument of unconscionable procurement in this case is important, as it opens a new avenue for voiding inter-vivos gifts in estate claims, where the more common approaches of claiming undue influence or lack of capacity might fail. In Gefen v. Gaertner, the Court noted that a doctor had assessed the mother, and she had legal capacity to make the transfers. The court also did not find the transfers were voidable as a result of undue influence, however they were voidable due to the unconscionable procurement of the gifts.

3 Approaches to Voiding Inter-Vivos Gifts

Courts can make inter-vivos gifts voidable under certain circumstances, like in the case of Gefen v. Gaertner. People usually challenge these gifts with claims of undue influence or lack of capacity. How do these types of claims differ?

1: Undue Influence

These claims can render gifts voidable in situations where “A person is pressured to perform a legal act, and where that person does not truly wish or intend to perform that act.”

•  For example, if the receiver of the gift threatens the gift giver to pressure them into making a wealth transfer, the wealth transfer may be ruled voidable.

2: Lack of Testamentary Capacity

This renders gifts voidable if the gift giver did not have legal capacity at the time of the transfer. 

• A common example of gifts being voidable due to lack of capacity are gifts given by a parent or grandparent who suffers from severe memory loss. 

3: Unconscionable Procurement

This principle makes transfers voidable if the gift giver was mislead into making the transfer, or otherwise did not understand the effects of their actions. The gift receiver must have been directly involved with arranging the transfer.

• For example, in Gefen v. Gaertner, the court ruled that the brother unconscionably procured the assets because the gift giver didn’t fully understand her actions, and the brother went to great lengths to arrange the transfers.

If you suspect that a loved one has been mislead or unduly influenced to give a large gift that they may have not intended or wished to, contact an experienced estate lawyer today.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.