Conflicts over Pre-Death Gifts and Beneficiary Designations

April 6, 2024

Pre-Death Gifts, Given Years in Advance, Empower Donors to Support Loved Ones Financially, Fostering Lasting Change in Their Lives. And Yet, Not All Gifts Before a Person’s Passing are Deemed Legally Valid.

Conflicts over Pre-Death Gifts and Beneficiary Designations in Lavallette, NJ An individual often makes a pre-death gift to close family members or friends before death, sometimes years in advance. There are many reasons for this, such as helping your family build wealth by starting a business, buying a house, or going to college. Giving your assets away before death affords you the opportunity to provide advice and watch your gift transform into real change in their lives. However, not all gifts are considered legally valid, as some may be deemed “suspicious” and undermined via estate litigation after someone’s passing.

Families go through squabbles and rough patches from time to time, but when it comes to financial issues, it can become a no-holds-barred, claws-out, back-stabbing free-for-all. When the instructions for a will or trust are left up to interpretation, the decisions will either be cleared up in probate or fought among the affected members in court, possibly breaking up relationships and, ultimately, the family. The friction created by these kinds of conflicts can last a lifetime.

Beneficiary Designation Essentials

A beneficiary designation is a specific asset or account given to someone after the owner has passed. Common assets are life insurance policies, real estate, retirement accounts, other bank accounts, stocks and bonds, family heirlooms, etc. Because the beneficiary is named and given specific assets, those gifts are not part of the entire estate or general assets that will be distributed according to the will or trust.

Legal Standards for Pre-Death Gifts and Beneficiary Designations

According to N.J.S.A. Section 17:16 1-5, the money in a joint account should belong to the co-owner of the account unless there is evidence that it was not the depositor’s intent when the account was opened. The giver must give a pre-death gift with “donative intent” or purposely to the recipient. It is not enough that someone with Power of Attorney and whose name is on financial accounts to ease managing those accounts may assume ownership of those funds after the depositor’s passing. Assets put in joint accounts for the sake of convenience and practicality are part of the depositor’s estate.

The decedent can name a beneficiary of their life insurance policy, entitling the beneficiary to the funds derived from the policy after the decedent’s passing. If the beneficiary is named “irrevocable,” the law provides that they cannot be replaced without having consented in writing to such change. If a contractual agreement has been made with the beneficiary, no changes can occur, even at the decedent’s request.

Key Conditions for Pre-Death Gifts To Be Legally Valid

Certain provisions must be met for a pre-death gift to be legally valid. First, the donor must be of sound mind and act with intent. Second, the giver must intend that the transaction be a gift. Capacity and intent are key to honoring the donor’s wishes. Third, the transaction must be transparent by ensuring the proper transfer of the gift. To differentiate between a verbal promise and an actual gift, the donor’s intent should be followed quickly by an immediate bestowal.  The recipient must accept or reject the gift upon receiving it. This provides clarity as to the transaction’s validity.

Common Legal Arguments in Pre-Death Gift Challenges

The most common argument is that the decedent had diminished mental or physical capacity and did not comprehend the consequences of the gift. A lack of capacity includes Alzheimer’s, dementia, or other cognitive issues.

Another reason to challenge a pre-death gift is little to no evidence that the property or asset was intentionally given to them. Without impartial witnesses or legal documents prepared by the decedent, the gift may have to be returned to the estate.

Undue influence is another common argument for challenging pre-death gifts. For example, if a family friend has taken over the decedent’s finances, health decisions, and estate management, it would be improper for them to receive a significant financial gift. Their influence could be interpreted as manipulating the decedent from making their own decisions and placing undue influence over them. This is also seen when a family member moves in to care for the decedent and pressures them or convinces them to make drastic changes to the estate plan in their favor.

Outright fraud is also possible in these cases. A beneficiary can produce fraudulent evidence of the donation of gifts or assets supposedly made to them by the decedent. Additionally, an agent with power of attorney who uses that power improperly and for their own benefit is committing fraud.

Substantiating Evidence of Pre-Death Gift Intent

Witness statements from those who were present when the gift was made can provide important accounts of the decedent’s mental state and final wishes. Family members, friends, or healthcare professionals can offer valuable testimony. Legal documents requiring the donor to decide about their assets provide evidence of mental ability and acting of their free will. Video recordings of the donor discussing their intent and explaining the gift and to whom it is given. This can also show the donor’s mental state while highlighting their intent.

Investigating the Integrity of Pre-Death Gifts Due to Undue Influence or Coercion

If there is suspicion of undue influence, the estate’s executor can conduct an investigation as to the validity of the decedent’s gift. This is important because the pre-death gift was taken from the assets to which the estate beneficiaries are legally entitled. The court will receive witness statements and pertaining legal documentation referencing the gift to justify its validity. An official inquiry is made, and the respondent who received the gift is deposed to determine how the gift came about, the property’s location, or if they have knowledge of its location.

Learning from the Controversy Surrounding One Woman’s Will

Critical Conditions for Pre-Death Gifts to Hold Legal Validity in Belmar, NJSusan Porto was an elderly woman who left her estate to her son and daughter, Ronald Porto and Cathy Timpone. Cathy was the executrix of the estate, and Ronald sued her, claiming undue influence on her part over their mother. Cathy took care of her mother for several years. Her mother’s health declined significantly after her father’s passing, and Cathy lived with her, prepared all of the meals, did the shopping, took Susan to her doctor’s appointments, etc.

Ronald’s complaint was twofold: He claimed that Cathy did not include $121,891 in savings bonds and $94,649 in several bank and brokerage accounts as part of the estate to be divided between them equally. The court found that the accounts were a gift and coincided with the approximate time her name was placed on them as joint owner. The bonds, however, were to be placed back in the estate. The evidence provided in favor of Cathy was a document from her attorney, rather than Susan’s. Also, the court found there was evidence of undue influence as Susan was completely dependent on Cathy, and their relationship went beyond that of a normal mother and daughter. Displeased with the result, Ronald appealed the decision. The trial court’s determination was then reviewed and affirmed by the Appellate Court.

Get Legal Counsel from our Estate Attorneys in Freehold and Toms River, NJ

Managing your grief due to the loss of a loved one is a devastating undertaking. It becomes even more so when that family member’s last wishes are unclear or under scrutiny. Probate law in New Jersey is complicated and requires the level of experience and understanding that we at Chamlin, Uliano, & Walsh can provide. Whether you want to contest pre-death gifts or substantiate the validity of a pre-death gift to which you were the recipient in Middletown, Rumson, Toms River, Long Branch, Neptune, Wall, Freehold, Jackson, Holmdel, and towns throughout Monmouth County, Ocean County, and Southern New Jersey, we can help. If you are the defendant in a case regarding a gift you have been given or are the beneficiary of an estate facing legal controversy, our estate litigation team is prepared to assist you. It is essential to obtain excellent representation during these challenging times.

If you would like to know more about how our law firm can help you today, call (732) 440-3950 or fill out a contact form so that we can schedule a consultation.