Undue Influence – Avoid an Undoing

I had a pastor many years ago who often said, “If it weren't for people…”. We've all seen situations where vulnerable individuals have been pressured or made to feel uncomfortable about providing financial assistance or housing, for a family member or friend.

The influence exerted by these family or friends can come in the guise of being “helpful”. This could be acting as driver, caregiver, or even informal banker.

A vulnerable state can occur at any age and for different reasons, such as a life event or health change. It is most common though, to think of vulnerability in the aging process.

As financial advisors, we often work with adult children assisting their aging parents and elderly clients being assisted by their adult children. That means we see both sides of such situations.

How do you recognize someone in a vulnerable state?

Undue Influence is said to have occurred when there is an improper use of power or trust in a way that deprives a person of free will and substitutes another’s objectives.

Whatever the objective of the individual exerting this influence (“influencer”), it is usually for selfish gain, such as seeing a quick fix to their own problems. Someone in a weakened or vulnerable state needs time and patience.

You can't always see who might be coercing or putting pressure on the vulnerable person, but you might recognize some circumstances. The subject of working with vulnerable persons is a growing matter for professionals in the legal and financial communities. When lawyers are preparing wills today, they're particularly cognizant of the potential of undue influence when receiving instructions.

As financial advisors, we tend to spend more time with clients than lawyers, and we need to be vigilant that the client has the continuing capacity and ability to make independent decisions.

Top-of-mind for lawyers and financial advisors are these questions:

■ Is the individual dependent on a beneficiary for emotional and physical needs?

■ Is the individual socially isolated?

■ Is the individual experiencing recent family conflict?

■ Has the individual experienced recent bereavement?

■ Has the individual made a new will that's not consistent with prior wills?     

■ Is the individual making testamentary changes at the same time as other legal documents, such as a Power of Attorney?

■ Is the individual making any sudden financial changes?

■ Is the individual making any unusual withdrawals from their bank account, or even frequent withdrawals from the ATM machines?

■ Has there been difficulty reaching the individual, or has their mailing address changed?

■ Physically speaking, are they exhibiting abnormal behaviours – skittish, withdrawn, secretive or vague? Is there a change in this individual's appearance or demeanour – have they normally been outgoing, and now seems to be withdrawing? (Sometimes a change in behavior is less sinister; it could be due to a change in medication or imbibing more than normal.)

Are there suspicious circumstances?

If there were suspicious circumstances in the relationship between a testator and a beneficiary, the presumption of undue influence arises and the burden shifts to the beneficiary to establish that the testator made the gift without influence; of their own free and informed mind.

The effect of improper decision-making in a vulnerable state usually comes to light after the individual has died, in the form of a will challenge. In the case of Hall vs. Hall, it was found that the proof of undue influence does not require evidence to demonstrate that a testator was forced or coerced by another to make a will, under some threat or other inducement. One must look at all of the surrounding circumstances and determine whether or not the testator had a sufficiently independent operating mind to withstand competing influences. Mere influence by itself is insufficient to cause the court to intervene but the will must be the offspring of the testator’s own volition and not the record of someone else. ([1868} 1 L.R.481 (Probate Div.)).

So how do we assist our friends and loved ones?

Let's set out the principles of a good caretaking relationship.

Principle #1 Put the vulnerable individual at the forefront. Encourage their independent decision-making as much as possible. Do not be offended if they take a meeting with their legal advisor on their own.

Principle #2 Be honest and transparent. Don’t make assumptions about the other party’s thoughts or feelings, ask questions and be frank.

Hold a family meeting and encourage an honest outlet and information exchange. If the focus is on the vulnerable individual's financial affairs and well-being, remember that their finances are their finances. Do not look for ways to hasten the movement of the person’s monies to potentially future heirs. Future health care costs are unknown, as is the ability to pay for them.

Principle #3 Seek independent, third-party advice. Don’t be shy about paying for a professional’s advice. At this stage, it’s important to know you’re doing the right thing. Utilize the proper legal channels to document working relationships such as acting as power of attorney. Do not provide or accept the personal identification number of a bank card, unless you are the individual. Only after proper vetting at the bank may someone other than the account owner access the bank account. Remember that acting in the position of an attorney, that person is stepping into the other person's shoes. Invite a professional to your family meeting. This could be a doctor, lawyer, or financial advisor.

Principle #4 Document meetings and key decisions – especially if they involve money or care. You never know when this will come back into question. Be sure to include the scope, purpose and agreements of the meeting.

If all else fails, contact the RCMP and the Public Guardian and Trustee – they have the responsibility to look out for all British Columbians. 

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