Seniors
Beware of Care For Life Agreements
- INTRODUCTION
- LEGAL DISCUSSION
- CONCLUSION
1. INTRODUCTION
I was recently retained by a senior who advanced over $400,000.00
to his only son and his wife. He did so on the understanding they
would purchase a home in which they all would live and the couple
would care for the senior for the rest of his life. The house was
purchased in the couple’s name. The senior lived downstairs
in the home until four years later when his son met an untimely
death. Title to the house was then transferred to the widow as surviving
joint tenant whereupon she immediately evicted her father-in-law.
The end result is the senior is now penniless and the widow has
pocketed the monies and departed. In only four short years, my client
went from having control of his life and finances to being a destitute
and broken person.
This devastating fact pattern is unfortunately happening all too
frequently. Unquestionably many lawyers and estate practitioners
will be consulted with respect to these types of failed agreements
in the coming years. As our population continues to age, more of
these informal kinds of family arrangements will certainly be made.
The typical scenario will involve a senior transferring property
in exchange for a promise of lifetime care. Most often the property
will be the family home which is transferred outright or into joint
tenancy with the caregiver. Such arrangements typically will be
made between a parent and one of their adult children or with another
relative or trusted friend. Caregiver kids range form those that
have never left home to the black sheep who returns after a long
absence to take care of elderly parent and winds up with the house.
Often these arrangements are entered with the best of intentions,
however the parties are naïve as to the careful thought and
discussion required. Such agreements are usually oral and accordingly
vague. They are likely done without any legal advice and the formalization
of such agreements is usually almost non-existent.
From the senior's perspective, the care agreement is perceived
to be a simple solution to allow him or her to stay in the home
until death. Many seniors may fear finishing their days, isolated,
in a nursing home or other institution. From their perspective transferring
the property to the caregiver, in return for continued care, may
seem an ideal solution. They often look upon their prospective caregiver
through "rose coloured glasses" and naively look forward
to a harmonious life surrounded by loving family or friends who
are grateful for the substantial financial benefit bestowed upon
them.
There is often an incentive for both sides to enter such an arrangement.
Many seniors of modest means purchased homes years ago. Those homes
have now greatly appreciated in value. Potential caregivers are
often relative newcomers to the real estate market and in the absence
of some financial assistance likely could not afford to buy such
a home.
Thus the demographics of our aging population, the high cost of
real estate and the increasingly uncertain economic conditions,
will combine to ensure the future proliferation of such arrangements.
Just as certainly, there will be a boom in related litigation when
such arrangements fail.
These informal agreements unfortunately leave disastrous legal
problems for the parties when they fail. The results may be especially
serious for the senior. The outcome is often the outright loss of
the home leaving the senior extremely vulnerable. On the other hand,
after many years service, the caregiver may become embroiled in
litigation with rival siblings who suspect undue influence on the
parent.
There are many legal pitfalls to informal care for life agreements.
Invariably there is little consideration by the parties of the innumerable
hypothetical questions that should be asked before concluding such
an arrangement. A myriad of potential problems may thwart the success
of such arrangements. They include control issues, unforeseen longevity
or early death, incompatibility, depression, hospitalization, divorce
or financial ruin of the caregiver.
A review of case law indicates that most care for life arrangements
fail because of the breakdown of the relationship between the parties.
The individual expectations are rarely discussed in advance, let
alone reduced to writing. Such breakdowns may result in the senior
being evicted from his or her former home. In effect they may lose
their home and their financial security without receiving the emotional
security of the promised long term care. Needless to say, such a
loss will render a senior financially, psychologically and emotionally
insecure.
A carefully drafted care agreement prepared by a lawyer will usually
provide better protection to both seniors and caregivers. It is
however, a simple fact that many people will continue to make informal
arrangements on their own. There are a number of motives for avoiding
the use of lawyers, ranging from false sense of economy to a preference
to follow "a wish and a prayer" that things will work
out. Indeed some seniors are even reluctant to mention the care
agreement when providing legal instructions to transfer the property
to a child or friend.
From a practice point of view, a lawyer or notary should always
make detailed enquiries to determine the reasons a substantial asset
is being transferred for little or no consideration. If the underlying
facts indicate that a “care for life arrangement” exists,
then written advice is essential urging the client to protect himself
or herself properly documenting the agreement in writing. A detailed
written agreement may also help minimize future family conflict.
It can assist in explaining the arrangement to other family members
who might otherwise challenge the land transfer after the senior’s
death. At the very least, where the home or other real property
is to be transferred to the caregiver, the legal adviser should
urge the senior to register a life interest against the title.
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2. LEGAL DISCUSSION
Almost invariably the informality of care for life arrangements
will create difficulties for courts charged with interpreting the
actual terms of the agreement. A review of current case law indicates
the challenge to courts faced with litigation involving such arrangements.
It seems the courts are pulled between handling such matters as
contract cases or treating such transfers as gifts. In the case
of contracts they must apply the legal principles of contract law.
In the case of gifts they may apply equitable principles such as
undue influence, unconscionable transactions, or resulting trusts.
The problem for those wishing to review the law is compounded by
difficulty in finding the appropriate index titles. For eg. case
law in this area may be reported under several different headings
such as “undue influence”. It is likely not referenced
to litigation involving “care for life” agreements.
While such agreements may appear to be contracts, the courts often
presume that family members are relying on mutual trust and affection
and do not intend to create legal relations in their arrangements.
Thus, the most recent cases tend to treat such informal care agreements
as gifts, rather than contracts.
While there are usually only fleeting discussions as to the terms
of the care arrangement, the transfer of the property from the senior
to the caregiver, will certainly create legal relations between
them. Subsequent litigation usually involves the question of who
owns what interest in the subject property.
If the courts conclude the care agreement amounted to a contract
they are then expected to interpret the contract and determine any
damages payable for breach of that contract. The law relating to
contract will be involved, including:
(a) The intention of the parties to legally contract. Was there
a meeting of the minds and the necessary intent to make a binding
contract?
(b) Consideration. If there is a contract, then the promise to
care will generally be found as the consideration for the transfer
of the property;
(c) Terms of the Contract. An oral agreement to provide care for
life will invariably raise many issues of the express and implied
terms based on the reasonable expectations
(d) Uncertainty. In the decision of Folia v Trelinski, 1996 New
Westminster Supreme Court Registry No. 19961104, a promise to care
for a parent for life was found to be enforceable. It was held not
to be uncertain.
In that case, a mother transferred her home to her daughter and
son-in-law. In exchange they promised to care for her and to allow
her continue to live in the home the transaction set aside. The
relationship broke down very quickly.
The mother left the house and ultimately sued to have the transaction
set aside. The caregivers asked the mother to vacate the home during
the ongoing litigation.
The Courts enforced the agreement and stated that the mother had
not been permanently evicted, and was only evicted for the duration
of the litigation. Therefore, the act of asking the mother to leave
the home, did not repudiate the contract. The mother was only allowed
damages for the time period out of the home, as under the care agreement,
the children were to provide care. In his reasons for judgment,
the judge stated living together for the parties, particularly after
the litigation, will be difficult, but not impossible.
Surely neither party was satisfied with that outcome
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e) Breach of Contract
If an important term of the contract is not performed, the aggrieved
party can sue for damages or, if the term of the contract is sufficiently
important, then to treat the contract at an end.
Rescission of the contract is another remedy, where the Courts may
order compensation so as to put the parties back to the position
that they were in before entering the agreement.
The problem from the senior=s perspective, is that contract law
can often be applied by the Courts in a somewhat harsh manner, just
as it was in the Folia case aforesaid. Contract law is far more
rigid in its application and remedies than legal remedies that flow
from the Courts of Equity. As seen in the Folia v Trelinski case,
the Courts gave a contract law remedy of damages only. The Court=s
view that it is the parties that make their own bargain, and unless
it is unconscionable, then the Courts may well enforce what may
be a poor bargain between the senior and the care giver.
As previously stated, most courts tend to view the transfer by
the senior as a gift. In Peter v Beblow 1993 1 S.C.R., the Court
defined a gift as Athe intentional giving to another without expectation
of remuneration
Probably the most common allegation made in this type of litigation
is that of undue influence. This was the situation in Hicks v Hicks,
(1997) B.C.J. No. 296, in which I was counsel . My client was a
son of the senior and he successfully had a transfer of land set
aside after his mother=s life, in favour of his
The amount of influence must amount to coercion. It is often difficult
to prove, as there are rarely any witnesses to the influence that
was exerted. The Court will investigate any suspicious circumstances
Another equitable remedy available to the Courts is to find that
there is a resulting trust, which is an implied trust that is created
when a person transfers legal title to another , (usually for little
or no consideration), but intends to retain the beneficial interest.
The Courts of equity presume a bargain, and in such a situation,
the Courts will often presume that the property is held in trust
by the recipient for the transferor or his or her estate. This presumption
can be rebutted by evidence showing that the transfer was intended
to be a gift.
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3. CONCLUSION
As stated above, it is my view that these types of arrangements
will continue to proliferate in the future, and will undoubtedly
lead to an increase in litigation in this area. The B.C Law Institute
( formerly the Law reform Commission) is currently undertaking a
project to investigate these agreements and determine what if anything
should be done about them. For example, the State of Alabama has
a statute that states A any conveyance of realty wherein a material
part of the consideration is the agreement of the grantee ( the
caregiver) to support the grantor( the senior) during life is void
at the option of the grantor (senior).
It is important for seniors in particular to know that disastrous
legal problems can occur, often to their detriment, when they enter
into these types of care for life agreements with family or friends,
and the arrangement does not work out. Seniors need to be educated
about these pitfalls and encouraged to reduce the contract to writing,
preferably with legal assistance. Practitioners, need to be educated
to ask the right questions of the seniors when transfers of homes
are occurring to family or friends for little or no consideration.
If the practitioner fails to take adequate steps to protect the
rights of the seniors in those situations, then the professional
may be met in the future with an allegation of professional negligence.
Thanks and acknowledgment to Professor Margaret Hall, of the University
of British Columbia, for her extensive work involving the Law Institute's
project on Legal issues affecting seniors and providing me with
her consultation paper and background materials, which I made use
of in the preparation of this paper.
The ultimate in elder abuse can even occur as a result of an incentive
on the part of an abusive caregiver to hasten the death of the senior.
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