Incapacity; Undoing the Transactions of the Elderly

Endicott v. Saul, just decided by Div. I of the Court of Appeals, involves a concern of many children with elderly parents: When do you intervene to insist on a guardian and what can you do to unwind ill-advised transactions? The facts in this case arose just a couple of years after the death of an 80 year old woman’s husband and involved property in aptly named community called Mutiny Bay on Whidbey Island. This case in some respects represents the worst case scenario for those considering intervening. The parent and two couples who were close friends were on one side in the lawsuit and two children were on the other side, asking for a guardian and seeking to have the court set aside a real estate sale. The elderly parent did not want a guardian and joined with her friends in saying that the questioned transaction was legitimate and should not be set aside.

The transaction at issue was the sale of property worth $324,000 to a friend for $150,000, plus expenses of short plat. The purchase and sale agreement acknowledged that the price was below market and stated that the transaction was subject to the approval of the seller’s attorney, which was obtained after a very short meeting with the parent. The court’s recitation of the surrounding facts reads like a daytime television serial.

The court first looked at the matter of a guardianship. In order for the court to appoint a guardian of a person it must determine that “the individual has a significant risk of personal harm based upon a demonstrated inability to adequately provide for nutrition, health, housing, or physical safety.” A guardian of financial affairs is called a “guardian of the estate” and that requires proof of the person’s inability “to adequately manage property or financial affairs.” The court held that there was sufficient evidence to warrant guardianship despite expert evidence to the contrary, saying that incapacity was a legal question, not a medical one.

Looking at the elderly person’s reliance on others for financial assistance and instances of erratic or confused behavior, the court also sustained a protective order under the Abuse of Vulnerable Adults Act.

The court labored over the question of the real estate transaction. It ruled that the elderly person had a confidential relationship with the people involved with the transaction and because of that they had a fiduciary duty to her. This shifted the burden of proof to the buyer to prove that there was no undue influence, a standard they did not meet.

This case illustrates a few things of which people should be aware in dealing with elderly or easily influenced people. First, in dealing with them you purchase something at a price below market value at your peril, particularly if you or anyone acting on your behalf is close to the person. The transaction is not immunized form attack by provisions in the contract or by a brief visit to a lawyer. There must be substantive assurance that the transaction is not corrupted by incapacity or undue influence. If you are watching out for such a person, act quickly if you discern exploitation of their condition. It is best to do something before there is a problem but possible to unravel things that were done inappropriately.


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