Financial Gifts – Potential Pitfalls

The recent case involving Mr Leonard Taylor, which was widely reported in the press, highlights the importance of being careful when considering making gifts during your lifetime.

72 year old Mr Taylor had lived with Doris Luker as her partner, for 15 years. Under the terms of her will she left Mr Taylor her home, the contents and £28,000. The residue of her estate was divided between the British Heart Foundation and Cancer Research.

A week before Mrs Luker died she gave Mr Taylor a cheque for £61,000. This had the effect of reducing the available residue in her estate to very little. In response the executor of the Estate (with the support of the charities) challenged the payment through the Courts. Last month the Court of Appeal ordered Mr Taylor to repay the £61,000 to Mrs Luker’s Estate. The Court case lasted 8 years, with Mr Taylor now facing a costs bill of over £100,000.

One of the key elements of this case was how the law was applied to financial transactions between cohabiting couples as compared to those between married couples. As Mr Taylor and Mrs Luker were unmarried the presumption was that the payment of the £61,000 would be repaid by Mr Taylor as effectively he was holding it on trust. If they had been married then the Court may well have found that the payment of the £61,000 was a gift as that is the presumption that applies to payments made between close family members.

Another factor of this case was the Court’s finding that the gift to Mr Taylor was invalid due to undue influence as a result of his “forceful personality”. Ultimately Mr Taylor was unable to produce evidence sufficient to persuade the Court that the £61,000 was a gift to him.

If you are considering making lifetime gifts of significant sums of money or of items of value then it would be advisable to record those gifts in writing setting out your reasons for making them. It may also, in certain circumstances, be appropriate to obtain an assessment from your GP of your capacity to make the gift if you are concerned that the gift may be challenged following your death.

These steps will not prevent someone challenging a gift that you have made but they will be very useful evidence for your executors and the person who has received the gift to make use of when dealing with any challenge.

The Private Client team at Kitsons, which has offices in Torquay, Newton Abbot, Plymouth and Exeter can advise you further on these issues.