Resolving contested estates in the Court of Protection

I have noticed an increase in my caseload in the Court of Protection involving the financial affairs of those who have lost capacity. This is not surprising. We are at the beginning of one of the biggest generational wealth transfers in history, with the Baby Boomers now easing into, or already in, their later years – a life change that often corresponds with a loss of capacity to make a will or manage financial affairs. The Baby Boomers are hugely wealthy. According to the asset management firm Brooks Macdonald, over the next decade more than £300 billion will be transferred to circa 300,000 beneficiaries. They are also often remarried, which often results in family tensions. This combination of substantial wealth, fragmented families, and people becoming increasingly reliant on an inheritance to fund their lifestyles, has led to the Court of Protection having a growing role in resolving disputes about the estates of those who have lost the capacity to make decisions about these themselves, particularly as such applications in the Court of Protection carry fewer risks than a claim post-death. 

How the Court of Protection will resolve contested estates

Typically, the Court of Protection – which has jurisdiction over those who do not have capacity to make decisions themselves – will resolve disputes about a person's estate in two scenarios: to approve a statutory will or certain lifetime gifts. It is worth noting that the tests of whether someone has capacity to make a will or a gift are different and it can be the case that someone has capacity for the latter but not the former. The person who lacks capacity in relation to the decision in question is known as "P". 

Statutory wills

A statutory will is a will that the Court of Protection can authorise on behalf of P, except to the extent that the will disposes of immovable property outside of England & Wales; or P is domiciled outside of England & Wales and any question of their testamentary capacity would, according to the law of their domicile, fall to be determined in accordance with the law of a place outside of England & Wales. The Court may make a will on behalf of a person domiciled outside of England & Wales in relation to their immovable property inside England & Wales.

To authorise a statutory will, the Court must be satisfied there are grounds for departing from P's existing testamentary arrangements and that making the statutory will is in their best interests. Situations where the Court will authorise a statutory will include: where there has been a major change in P's relationship with beneficiaries under their existing testamentary arrangements; an existing will or intestacy fails to make provision for a person or organisation for whom P might be expected to provide; and there are concerns over the validity of an existing will. These all provide opportunities to resolve a dispute about how P's estate should ultimately be divided. 

'Best interests' is defined in section 4 of the Mental Capacity Act 2005, which includes a range of factors that must be taken into account, including P's past and present wishes and feelings and the beliefs and values that would be likely to influence his or her decision if he or she had capacity. 

These factors are often subject to significant differences in opinion by those who have to be informed of the application, and who often seek to be joined as a consequence, including those who would receive less under the statutory will if authorised by the Court. As a result, statutory will applications are often very hostile and expensive.

Lifetime gifts

An attorney appointed under a Lasting Power of Attorney for Financial Affairs, and very likely a Deputy appointed by the Court, will have the authority to make a gift in limited circumstances. Thus, the gift must either be:

• given on a customary occasion for making gifts, including births, birthdays, weddings, civil partnerships, and other occasions on which presents are customarily given within families or among friends and associates (for example, Christmas); or
• given to someone related or connected to the person or (if not a person) to a charity the person supported or might have supported

Furthermore, the gift must be of reasonable value, taking into account the circumstances in each case and, in particular, the size of the person’s estate.

Therefore, an attorney (or Deputy) has limited authority to make gifts of P's assets. If the attorney wants to make a gift (which includes for the purpose of the relevant legislation a loan) that falls outside the scope of the above, they will need to make an application to the Court of Protection. Before approving the gift, the Court will need to be satisfied that the gift in question is in P's best interests (as defined in section 4 of the Mental Capacity Act 2005). 

Applications for the approval of gifts are sometimes advised as a means of circumventing provision for another person under P's current testamentary provisions. In my experience, however, statutory wills tend to be the more common way of resolving a contested estate during a person's lifetime.

The advantages of making an application in the Court of Protection

Resolving disputed estates in the Court of Protection has (depending on the underlying facts) two key advantages over waiting until P has died and bringing a claim to challenge the validity of a Will or lifetime gift in the County Court or Chancery Division (the jurisdiction of the Court of Protection falling away on P's death).

The first relates to evidential thresholds. In a post-death claim, the claimant would have to satisfy the Court on the balance of probabilities that the will or lifetime gift was invalid (or valid if seeking declaratory relief). This can be difficult to do, particularly given the presumptions of validity that can apply in this context. In contrast, in an application for the approval of a statutory will or lifetime gift, there are no such evidential burdens – instead the Court will need to consider the best interests factors set out in section 4 of the Mental Capacity Act and, if relevant, satisfy the Court there are grounds to depart from P's existing testamentary arrangements. And where a statutory will is being made where there are concerns over the validity of an existing will, the Court will not conduct an examination into the validity of this.

The second advantage relates to costs. The general rule in the Court of Protection in respect of costs in relation to P's property and affairs is that these shall be paid by P or charged to his or her estate. While these costs will almost certainly be assessed, it means that any party to an application regarding a statutory will or lifetime gift should be able to recover a significant portion of their legal costs. Alternatively, in a post-death claim, the general rule is that the person who was unsuccessful shall pay the winner's costs. Combined with the evidential thresholds that will apply in a post death claim, the risks of bringing such a claim can be off-putting. Although, in either case, the Court will retain discretion on the liability of costs and may depart from the general rule.

All of this means that solicitors with a Court of Protection practice are likely to see this area of work grow, as that Court's jurisdiction often provides a less risky avenue for resolving contested estates.