A person dies, and it emerges that their house or bank account is not a part of their estate, because it was already transferred to someone. Or, someone was named as a beneficiary on a bank account or a life insurance policy. The one it was transferred to claims that the decedent gave them the asset. The other relatives don’t buy the story, and say that the decedent was tricked into transferring the property. Who is right?
There are three reasons why people transfer property to someone else – as a gift, as a “straw-man” to shield from liabilities, and because of being tricked.
Gift – people do transfer their assets to a favorite relative to exclude all others.
“Straw-Man” – People can transfer property to others in an attempt to avoid creditors or divorcing spouses, to avoid taxes, or to qualify for Medicaid. When a property is transferred for various avoidance reasons, the person who transfers the property orally tells the one getting the property that they are just a “straw-man,” keeping the property in title but really owning it for the benefit of the person who transferred it. In such cases, the person receiving the property promises the person giving the property to be a proper “straw-man,” to let the person who owned the property benefit from it during their lifetime and to distribute it to the owner’s heirs after the owner’s death.
Fraud and Duress – People also transfer property without wanting to do so. Some people are so sick that they can be easily convinced to do anything. Some are so dependent on others that they are easily persuaded. Some are just slipped papers and told to sign them without knowing what they are signing. Some are misinformed about family or financial circumstances, made believe certain things that makes them transfer the property to someone they trust.
When a pre-death property transfer is discovered, the person whom the property is transferred to claims that it was a gift, and the people who are left out claim that the recipient is merely a “straw-man”, or that fraud or duress took place.
It is up to the one wishing to undo the transfer to prove why the transfer should be undone. However, if it can be proved that the recipient of the asset was in a position of trust with the one who transferred the asset, the burden of proof can shift towards the recipient.
If you are involved in pre-death transfer of real estate or bank accounts and wish to speak with an attorney, you can call me at (212) 233-1233.