Berge & Berge, LLP Blog

Monday, February 22, 2016

Complications Involving Gifts to Caregivers in California

What difficulties arise when an individual makes a caregiver a beneficiary? 

The California Probate Code, in its attempt to protect incapacitated, vulnerable people, can make it difficult for an individual to leave assets to a caregiver. This is because the Code contains a presumption that bequests made to certain individuals in caregiving positions are the result of fraud or undue influence. While the intentions of the California government are clearly to protect the incapacitated person from coercion and/or abuse, this regulation sometimes backfires, restricting the testator from bestowing a gift upon whatever person he or she chooses.

Reasons for Presumption

 It is clear that, if an individual makes changes to his or her estate plan while under a non-relative's care, designating the caregiver as a new beneficiary, there is room for suspicion. In order to address the issue of possible abuse by the caregivers of dependent adults, the California Probate Code makes the presumption that transfers made in such situations are fraudulent, with the caregiver having used "undue influence" to coerce the action. 

While the Probate Code offers protection against abuse, it can also stymie genuine attempts on the part of the testator to provide a generous gift to someone to whom the testator is deeply grateful. Though it is tragic to contemplate the caregiver of a defenseless person being manipulative or abusive, it is also sad to think of that same defenseless person not being able to act volitionally to reward someone they care about. This presumption of fraudulence may be viewed by some as a presumption of guilt, something our legal system forbids.

When it has to be proven that there is no fraud involved

According to Probate Code Section 21380, there are three situations in which "clear and convincing evidence" has to be provided that the bequest (donative transfer) was not the result of fraud or undue influence. These categories are:

  • When the beneficiary is the individual who drafted the instrument
  • When the beneficiary is in a fiduciary relationship with the testator
  • When the beneficiary is the caregiver of the testator, the latter being a dependent adult

The presumption of fraud extends to relatives, cohabitants and employees of any of the three individuals mentioned, and to anyone affiliated with the law firm that drafts the documents.

It should be noted that, if a donative transfer is made to an individual in any of these categories and that person is unable to prove the legitimate intent of the deceased, not only will the designated recipient not inherit, but that individual will be responsible for attorney's fees incurred during the contesting of the gift.

How to avoid presumption when the gift is legitimate

While it is clear that the Probate Code is designed to be protective of the most vulnerable among us, it is important to know how to guarantee that your last wishes are not second-guessed after you die. The way to ensure that presumption of fraud doesn't occur when a transfer of assets is legitimate and desired is to have such gifts reviewed by an independent attorney.

The attorney must counsel the person making the bequest in the absence of any heir or beneficiary. In this way the lawyer can presumably determine whether undue influence or fraud is present. The attorney can then issue a Certificate of Independent Review (CIR) which will ensure the bequest is legitimate

There is no substitute for a skilled, impartial, untrustworthy attorney

Although CIRs clearly can be helpful is protecting your estate from unscrupulous caregivers or financial advisors, they are not a perfect solution to avoiding fraud. First of all, it is essential that the attorney who issues the CIR be completely trustworthy. Second, it is wise to include trusted medical professionals in the process -- very few attorneys are trained to be capable of making a determination of mental competency.

The situation can be further complicated by the variety of nontraditional living and care arrangements in today's world. These days, "family" members are not necessarily biologically related, or related by adoption or marriage. It is, therefore, necessary that you work with a knowledgeable estate planning attorney when you want to leave assets to a life partner to whom you are not married or with whom you do not reside, or to a beloved friend or caregiver who has stood by and supported you. Without the diligent work of an adept attorney, you run the risk of having Probate Code presumption nullify your wishes.


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