(Note: The pdf for the issue in which this article appears is available for download: Bifocal, Vol. 36, Issue 1.)
In 1987, Maine lawyers advocating for financially exploited elders undertook a legislative initiative. At that time, there was little awareness of the problem, and traditional approaches, such as building bridges with prosecutors, had not been successful.
The Improvident Transfer of Title Act (ITTA), 33 M.R.S.A. 1021 et seq., was the brainchild of attorney Neville Woodruff, at that time the director of Maine’s Legal Services for the Elderly (LSE). LSE was seeing an increasing number of older people who had divested themselves of their assets. Most often the recipients of these assets were family members or others with whom the elderly person had a close, trusting relationship.
Older people are often generous with their children, making gifts willingly, free from inappropriate influence. Reasons for doing so may include the following: to assist a family member with a particular need (such as funding a grandchild’s college savings plan or providing a child with a down payment on a house); to transfer responsibility for maintenance and expense on a piece of real estate such as a cottage; to give a family member acreage on which to build a home; to transfer a farm or a family business to a younger relative who works in the business; or as compensation for a person’s caregiving services.
However, the clients LSE was seeing (and still sees) came to the organization in great distress, having given up assets before they were ready, leaving themselves in precarious financial circumstances. Some were left destitute and had even been evicted from their homes after transferring title to family members.
Social and Economic Forces
One of the driving factors behind such transfers was, and continues to be, the high cost of long-term care. Almost all the LSE clients involved in these problematic transfers had a relative, friend, or neighbor who had spent everything on nursing home care. Stories circulated about families having to sell a nursing home resident’s house to pay the state of Maine’s estate recovery claim. Thus, some older people became increasingly susceptible to suggestions that they impoverish themselves in order to qualify for government assistance; and some family members eager to receive an inheritance or to keep the family homestead put increasing pressure on elders to do so.
Where transfers for less than fair market value were made without the advice of an attorney knowledgeable about Medicaid planning, elders were frequently in for a rude surprise. They had not been aware that where such gifts were made within five years before applying for Medicaid long-term care coverage, the state would penalize them by declining coverage for a period of months proportional to the value of the assets transferred. These elders were caught between a rock and a hard place: in need of long-term care, with neither the funds to pay for it nor coverage available through government programs.
Attorneys at LSE found such cases almost impossible to litigate. Elders faced a very high burden of proof going forward with civil suits based on common law causes of action such as undue influence.
These forces sparked the idea of shifting the burden of proof from the transferor to the transferee by creating a presumption of undue influence under a limited set of circumstances:
- Transferor was “elderly” (age 60 or older);
- Transferor was “dependent” on others;
- Transferor was in a “confidential or fiduciary relationship” with the transferee;
- Transferor did not have “independent counsel”:
- Transfer was made for less than full consideration; and
- Transfer of assets was “major” (ten percent or more of the elder’s estate).
(For the statutory definitions of these terms, see 33 M.R.S.A. Section 1021 and 1022.)
The proposal also included these legal remedies: rescission or reformation of a deed or other instrument, the imposition of a constructive trust on property, and injunctive relief. Moreover, it provided that the presumption could be used as a defense against a transferee’s action to enforce a contract for the transfer or guaranty of an asset.
Initial Opposition to the Bill
Sponsors were found for the bill and it was introduced in the 1988 legislative session. The bill faced opposition from several quarters: (1) various sectors of the bar, concerned that the Act would interfere with the orderly transfer of title and create ambiguity and litigation in ordinary transactions; (2) those who claimed it was a “lawyers’ bill,” designed to create business and drive up fees; and (3) even some advocates for elders, claiming it was paternalistic and ageist.
The critical elder advocates correctly pointed out that some elders who had decision-making capacity would be covered by the Act. A standard hypothetical used to demonstrate the issue was the following: Following a ski injury, a 60-year old competent, prosperous professional gives money to a child who is providing assistance while the parent recovers. Indeed this 60-year old would meet all the criteria of an elderly, dependent person in a confidential or fiduciary relationship, but would be clearly in control of his or her own destiny and would not need special protection. Legal Services for the Elderly’s rejoinder was that such elders, operating on a level playing field, would simply not avail themselves of the law, and thus would be happily unaffected by its ageism. The presumption would instead be there for use by elders who did need its protection.
Another objection to the bill was that the proposed law would aid manipulative elders who voluntarily transferred assets without having been unduly influenced, and who then sought to rescind the transfer purely based on a change of heart. These critics argued that this was unfair to the transferee. The proponents of the Act responded that the prevailing social problem (significant numbers of elders unduly influenced to give away substantial assets) outweighed these rarer incidences of “buyer’s remorse.” Moreover, any transferee who wanted to ensure that the gift would not be subject to rescission could make sure that the elder had consulted with independent counsel.
In spite of these objections, the bill was favorably received in the Legislature, and it passed in 1988.
For a period of time, the bill continued to be unpopular with some sectors of the bar. This was ameliorated to some extent by elder law attorneys collaborating with real property lawyers to successfully propose a number of appropriate amendments related to transfers of real estate: (1) a provision which states that nothing in the Act affects the right, title, and interest of good faith purchasers, mortgagees, holders of security interests, or other third parties who obtain an interest in the transferred property for value after its transfer from the elderly dependent person; and (2) provisions affecting title practices, stating that title examiners were not required to inquire as to the age of the transferor and whether he or she had independent representation.
Current Support of the Act
Most elder advocates, after seeing the legislation in action, became ardent supporters of it. Property lawyers learned to live with it and some even grew to appreciate it. Attorneys are now generally aware through continuing legal education and practical experience that the best practice in any intra-family real estate transaction involving a transferor age 60 or older is to ensure that the transferor has independent counsel. Moreover, most attorneys in private practice, including those whose practices are purely transactional, have seen egregious instances of financial exploitation and have come to appreciate the possibility of getting redress for elders. And, from a client-relationship standpoint, the legislation has allowed attorneys to avoid the awkward and possibly unethical situation of being asked by families to represent all parties to the transaction. Even if family members argue that family representation would keep the process simple and less expensive, the attorney can simply respond that the law requires separate counsel for each party.
Conclusion: What has the Law Accomplished?
Twenty-six years after the passage of the Act, plaintiffs’ lawyers say that it continues to be an uphill battle to litigate elder exploitation cases. There are several reasons why these cases are challenging, including:
- Litigation is, of course, expensive. Financial exploitation victims lack resources to pay private lawyers and agencies such as Legal Services for the Elderly have limited resources.
- Elderly, unwell clients frequently cannot take the pressures of litigation. Some drop their cases because they are reluctant to alienate family members, or because they are embarrassed about having been taken advantage of.
- Frequently these clients make poor witnesses, due to cognitive issues.
Finally, because litigation can drag on, clients often die before obtaining redress.
However, in spite of these difficulties, the presumption and burden-shift under the ITTA may offer a negotiating advantage and lead to settlement.
Moreover, the Act may have a deterrent effect. Knowledgeable attorneys now refer elders to outside counsel before assisting with a gift to family or others with whom the elder has a close relationship. Some elders may, having received this advice, nevertheless forge ahead with an unwise transaction—but others may hesitate. And unscrupulous family and friends, as more eyes focus on the transaction, may back off and cease pressuring the elder for fear of being sued. (Worth noting, however, is the counter-argument that an elder’s visit to a separate attorney who provides minimal advice may effectively give an inappropriate transaction the “Good Housekeeping Seal of Approval,” thereby making the case harder to litigate.)
Maine’s ITTA represents a creative statutory approach, seemingly unique in the U.S., to attempting to level the playing field for older people in property transactions. While representing vulnerable elders continues to be challenging, the law has, at the very least, created awareness within the legal profession of the need for caution in facilitating these transactions. ■
Related Reading from the Bifocal Archives...
Readers may also be interested in another Maine-focused article on elder financial exploitation: No Higher Calling — Representing Victims of Financial Exploitation (Bifocal, Volume: 34 Issue: 5) by Denis Culley and Jaye Martin.
Elder abuse cases often highlight the reality that the same frailties and vulnerabilities that make older clients easy victims also make them imperfect witnesses and poor advocates for their cause. Despite the difficulties and resource demands that financial exploitation cases involving the elderly present, there are no cases where a legal aid provider such as ours, Legal Services for the Elderly (LSE) in Maine, believes we are more clearly discharging our duties as advocates for our vulnerable elderly clients. Dogged pursuit of, and repeated success in, these civil cases is just one among the many actions that must be taken to rid our society of elder abuse.