Undue Influence and the Transfer of Property

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Rising farm prices and rifts among family members seem to be combining more frequently to produce lawsuits over the transfer of property from one family member to another.

Rising farm prices and rifts among family members seem to be combining more frequently to produce lawsuits over the transfer of property from one family member to another. A frequent claim made in these cases is that the family member receiving the property had a fiduciary relationship with the family member who gave away the property and that undue influence caused the transfer of the property.

For example, an elderly parent may reside with one of his children and depend upon that child for shelter and support. If that parent gives property to that child by a will or a deed, other family members may attempt to set aside the transfer of property. Those family members may claim that a fiduciary relationship existed between the parent and the child and that the child used undue influence to, in essence, force the transfer of the property.

In Illinois, a fiduciary relationship exists where a parent places trust and confidence in a child who, as a result, gains influence and superiority. Factors to be considered in determining whether a fiduciary relationship exists include the degree of kinship, disparity of age, health and mental condition, and the extent to which a parent entrusted the handling of his business and financial affairs to his child.

If a fiduciary relationship is established, the law requires the child to show by clear and convincing proof that there was good faith, that the trust and confidence of the parent was not betrayed, and that the transaction was essentially fair. The factors the court considers in determining whether a transaction is fair include a showing that the child made a free and frank disclosure of all the relevant information he had, that there was adequate consideration or value given for the property, and that the parent had competent and independent advice before completing the transaction.

If a court decides that the transfer of property is made with full knowledge of its nature and effect and that it was the deliberate and voluntary desire of the parent, the law allows the transfer to stand. However, if the court finds that the influence of the child was such that it destroyed the free will of the parent, the transfer will be set aside.

A recent case handled by Jeffrey Rock addressed these very issues. An aging and frail mother deeded a substantial amount of land to her daughter. At the time of the deed, the mother was living with the daughter and dependent upon the daughter for all her necessities. Another family member challenged the transfer of the farm land, claiming that the daughter had exercised undue influence over her mother. Jeff defended the daughter from this claim.

At the trial of the case, the judge found that the daughter who received the property was a fiduciary because the mother depended upon the daughter for her housing, food, and care. The trial court found that the daughter, as a result of having a fiduciary duty, had the burden to prove by clear and convincing evidence that the mother’s decision to deed the property was fair and equitable and not the result of undue influence.

At trial, a number of witnesses were called in support of the daughter’s position. These witnesses testified regarding statements made by the mother regarding her wish that her daughter receive the farm land. The treating physician of the mother as well as two attorneys who had interviewed the mother testified that the mother was competent to make her decisions and had expressed her desire that the daughter receive the property. The trial court found that the daughter had, by clear and convincing evidence, proven that the deed was fair and equitable. The trial court also ruled that the transfer was voluntary and made with full knowledge of the effect of transferring the property. The family member appealed the trial court decision but the Appellate Court rejected that appeal finding that the transfer of the land should not be set aside.

If an elderly or infirm person wishes to convey a substantial amount of property to another, precautions must be taken to insure that the transfer will not be set aside. For example, with an elderly parent or a parent who is disabled in some way, one should consider obtaining a report from the treating doctors regarding the capacity of the parent to understand and appreciate the effect of transferring property. It is also wise to have the parent consult with an attorney, preferably one who is familiar with the parent, to ensure that the parent has been given appropriate legal advice. Sufficient time should be allowed for the parent to consider and evaluate the effect of giving away substantial amounts of property.

If precautions are not taken prior to the transfer, the person receiving the property may well be subject to a claim that there was undue influence and that the transaction should be set aside.