Can I get my house back from my daughter?

Five years ago I was persuaded to gift my house to my only child, my daughter, to save her future IHT duties, on the understanding I would live in the property until I die. Our relationship has soured recently over her decision to leave her husband. Not only did she come to my house supposedly temporarily with her children, but she is now asking me to move into a rented flat, claiming she can force the issue because she is on the title deeds. What are my rights and options here?

Katherine Pymont, a senior associate in the contentious trusts and probate team at law firm Kingsley Napley, says cases like this sadly occur all too often. You say your daughter “persuaded” you to give your house to her. A transaction of this significance should be entered into independently and free from influence. If it can be demonstrated that this was not the case and you were subject to undue influence, the transfer would be declared void.

If you were to bring a legal challenge against your daughter to argue undue influence for this lifetime gift there needs to be a relationship of trust and confidence, and a transaction of such a size or nature that it calls for an explanation. A relationship between parent and child is assumed to be one of trust and confidence so you would satisfy this criteria. The transfer of your primary residence is likely to fulfil the requirement of a transaction that needs an explanation.

The burden of proof then shifts to the person seeking to uphold the transaction — your daughter — to disprove undue influence. She would need to produce evidence to counter the premise that she has preferred her own interests and not behaved fairly. She needs to be able to show that you made the decision of your own free will and put to bed any suggestion that you might not have made the property transfer had it not been for her influence.

If, for example, you received legal advice before making the transfer this could go some way in demonstrating both your understanding and independence in making the gift. That said, there have been cases when the court has found undue influence irrespective of the fact that the individual making the transfer was given legal advice, because it was found to be insufficient in the circumstances of that case.

A lifetime gift can also be set aside on the grounds of actual undue influence, which applies where there are overt acts of wrongdoing and the individual subject to the influence has been coerced or improperly pressured into doing something (for example the individual subjecting the influence may have made unlawful threats). In these cases, generally the burden of proving the allegation falls to the person claiming to have been wronged.

Claims for undue influence can be difficult to establish, not least because there is often a lack of evidence available. Nonetheless in the circumstances you describe, or where a lifetime gift has been made by a loved one to an unexpected beneficiary seemingly without good cause, or to a close family member to the detriment of other close family members, claims do succeed either at trial or with a mediated settlement.

Can I make cash gifts under a power of attorney arrangement?

My father has suffered from Alzheimer’s for a while, and his condition is getting worse. My mother and I are caring for him as best we can, and since my father’s diagnosis my mother and I have taken over his financial affairs under powers of attorney. I have discovered that his income far exceeds his expenditure — he receives a good pension and doesn’t have many outgoings. He may be able to benefit from an inheritance tax break where gifts can be made from unused income, which makes gifts exempt from IHT. Can I make these gifts for my father under the lasting power of attorney? I want to do so before his expenditure goes up, as we will soon have to start paying for multiple carers.

William Hancock, a member of the trusts, tax and estate planning team at law firm Collyer Bristow, says this inheritance tax break is known as the “normal expenditure out of income exemption”. The exemption applies if it can be shown that: the gift was made as part of the individual’s normal expenditure; taking one year with another it was made out of income and, after allowing for all other gifts forming part of normal expenditure, there is enough left to maintain his usual standard of living.

 You say you have lasting power of attorney over your father’s estate. Attorneys may make gifts within certain limitations subject to any restrictions the donor of the power has imposed. They can make gifts to the donor’s relatives and connections (including themselves) on those occasions when presents are customarily given within families or among friends, for example on birthdays. The value of the gift must be reasonable, having regard to all the circumstances and the size of the estate. Gifts cannot be made at other times, even if the donor would have wanted to make one.

However, an attorney can apply for authorisation from the Court of Protection to make gifts to reduce the assets of their donor’s estate for inheritance tax. The principle the court applies to the determination in these cases is the same that attorneys must apply. The gift must be in the donor’s best interests. The determination has to be reached in accordance with a checklist of factors. Best interests is a broad concept, not restricted to self-interest. Making use of a tax break can be as much in the interest of someone who is incapacitated as it is for someone who is not.

You say your father has a good income and I expect he has significant capital given the concern about inheritance tax. I also expect you have worked out that he will always have enough to meet the cost implications of multiple carers and residential care, should it come to that.

It is important that there is no prospect of your local authority being called upon to meet the cost of his care and support. It would not be in your father’s best interests to be deprived of assets that would otherwise be relevant in assessing his liability to contribute to care costs under the Care Act 2014. It is worth noting that an attorney can be challenged for making an inappropriate decision.

The Office of the Public Guardian has published a guidance note about this: “Giving gifts: a guide for deputies and attorneys”.

I recommend that you and your mother do not stop at lifetime giving. Review your wills and seek advice in the light of your father’s circumstances. You may also need to look into applying to the Court of Protection to make (or change) a will for your father.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

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