The elderly donor and gift planning – Laura West
The following article is excerpted for Hilborn Charity eNEWS readers from the June, 2013 issue of Gift Planning in Canada.
The Canadian population is aging and this trend is expected to continue for the next several decades. Senior members of the population can often have specific physical or mental challenges that make them potentially vulnerable to others. As a result, care must be taken when dealing with elderly and potentially vulnerable donors, during the gift planning process.
Elderly donors may make gifts to charities either during their lifetimes or upon their deaths through the provisions of their wills. Such gifts can be challenged following the donor’s death or during the donor’s lifetime by disappointed beneficiaries or executors of the donor’s estate, attorneys or guardians acting for the benefit of an incapable donor, or other interested parties. As a result, gift planners need to be aware of certain legal issues that can arise when dealing with the elderly donor population in order to enable them to take proactive steps to protect the charitable gifts made by such donors from challenge.
The question of capacity
For example, in order for either a testamentary charitable gift or an inter vivos charitable gift to be valid at law, the donor must have the requisite legal capacity to make the gift. It is important to remember that there is no one legal test for capacity – someone may have the legal capacity to make one type of decision but not others. In addition, capacity can fluctuate, in that a person can have capacity at one point in time to make a specific type of decision and not at another point in time.
Legal issues relating to property and decision-making can differ from province to province, but generally, for the purposes of the common law, a person has the capacity to make an inter vivos gift - i.e., a gift during lifetime - if the donor knows and appreciates the nature and consequences of the transaction he or she is carrying out. In certain circumstances, courts have required a testamentary capacity standard for donors making certain types of inter vivos gifts – particularly substantial inter vivos gifts that represent a significant portion of a donor’s estate. Again, generally for the purposes of the common law, a person has testamentary capacity (i.e., the capacity to make a will) when the person understands the nature and effect of a will and the nature and extent of his or her property, is aware of the claims of those who might be expected to share in his or her estate and is under no disorder of the mind or delusions that affect his or her testamentary decisions.
Proactive assessment an option
Some of the circumstances that should alert gift planners to the idea that capacity may be an issue include donors with intellectual impairments or memory problems or donors who are unable to identify assets or family members or who are relying too heavily on others. The existence of any of these circumstances will not necessarily be determinative but will likely warrant closer attention being paid to issues of capacity. If, after careful scrutiny, there is still uncertainty with respect to whether a potential donor has the capacity to make the gift in question, then before the gift is made, consideration should be given as to whether the capacity of the donor should be confirmed by means of a capacity assessment obtained from a trained professional. Other proactive steps gift planners can take in such circumstances include encouraging donors to seek independent legal and professional advice, ensuring detailed notes are kept of discussions with donors, and documenting the terms and conditions of gifts made by donors in written agreements.
Gifts made by elderly donors can also give rise to challenges based on claims of undue influence. Generally, undue influence will be found when it can be shown that a gift was made because of undue pressure on the free will of the donor such that the gift was one that the donor did not truly intend or would not have made but for the pressure. Gift planners should be on the lookout for donors who appear to be overly susceptible or reliant on others, who have recently suffered emotional or physical upheaval and/or whose personal circumstances give rise to reasonable suspicions of undue influence. Proactive steps, such as the ones described above for donors with capacity issues, can also be undertaken by gift planners in such circumstances.
Laura E. West: B.A., J.D. is a partner with Fasken Martineau DuMoulin LLP engaged in a general practice in the areas of estates, trusts, charity and not-for-profit law. She has taught wills and estate planning at the University of Toronto, Faculty of Law, as an adjunct professor, and she also lectures and writes frequently on estate planning and charity law issues. Contact her at lwest@fasken.com.
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