The Downside of Gifting
Mary is a planner. She worked conscientiously with her estate planning attorney to prepare for any incapacity including development of an Advance Directive for Healthcare and a durable Financial Power of Attorney in which she nominates her only child to speak on her behalf in the event she cannot.
Despite deliberate planning, when Mary developed dementia, her daughter was devastated to watch Mary’s carefully laid plans unravel.
Nothing devastates incapacity planning like dementia. Dementia progresses over time, and the changes can be subtle. As Mary goes out with friends, buys groceries and pays her bills, friends and family start to notice memory loss, personality changes, or other idiosyncrasies.
Shortly after her diagnosis, Mary purchases her daughter a new car – a gift she wanted to see her daughter enjoy during her lifetime. Mary’s dementia progresses further. Her judgment starts to fail and she becomes increasingly confused about the world around her (paying a stranger $40,000 for the replacement of her roof – twice) and becomes susceptible to suggestions by others (donating generously to every solicitation that arrives in the mail).
While the power of attorney gives Mary’s child the ability to act on Mary’s behalf, it does not prevent Mary from giving money to these unscrupulous individuals. Ultimately, Mary’s daughter decides to seek a conservatorship to stop the predators.
During the conservatorship proceeding, the Court reviews all of Mary’s recent spending and faces a dilemma. The Court must determine Mary’s capacity at the time she made gifts to her adult child. Did Mary intend to purchase her adult child a new car, or is the adult child a predator who took advantage of her mother? In an abundance of caution, the Court decides not to follow Mary’s directives and names the county as Mary’s conservator, thereby stripping all of Mary’s daughter’s previously assigned rights.
Becoming a ward under a county conservator is the downside of gifting.
Despite Mary’s careful planning, a third-party’s bad actions (the stranger and the solicitor) caused the Court to question all of Mary’s spending, including the end-of-life gifts to her only child. Ironically, Mary’s plans to avoid a county conservatorship land her in that exact situation, and the adult child who filed the conservatorship petition to protect her mother now finds herself unable to carry out her mother’s wishes.
To avoid the downside of gifting, Mary needed to carefully document her intent and capacity at the time she gave her gift.
- Mary could have worked with her attorney to document the gift of the automobile and the intent for making each subquent gift to her daughter. She could have drafted a letter documenting the gift and its purpose and mailed a copy of the letter to herself. The postmark on the letter would document when she sent the letter.
- Mary could have asked someone who is not a beneficiary of the gift to record her wishes by video.
- Mary could elect to provide medical records verifying her capacity at the time of gift giving.
In each circumstance, Mary should have taken care to document that she knew the gift giving was voluntary and not a product of coercion, duress, or the influence of a bad actor.
Gifting to a family member should be pleasurable and uncomplicated. However, in the case with someone who has dementia, it is especially important to ensure that the person making the gift has the capacity to make the gift and to be able to show a court that the person had that capacity. A bit of intentional planning can make gifting the enjoyable experience it is meant to be.
Weinberg Elder Law, LLC can help you choose the legal option to offer the most appropriate level of protection for the seniors you love. Call us today at 494-969-5648 for a consultation.
