Update | Estate planning: multiple wills in different jurisdictions

Scarfe and another v Matthews and others [2012] All ER (D) 25 (Sep) is an interesting case not only because it involves the estate of the late Bernard Matthews (of 'bootiful' turkey fame), but also as it deals with the construction of wills and the equitable doctrine of election.

The late Bernard Matthews died in November 2010, survived by his estranged wife, their three children (who were called the 'adopted children'), his son George from a different relationship and his partner Odile with whom he had lived for about 20 years. Matthews left two French wills and an English will and codicil. By the French wills, he left his French villa and his moveable property in France to Odile. By his English will, he also left Odile a tax-free legacy of £1m. He left the residue of his estate (worth approximately ‚¬40m) on trust for George.

In a letter left by Matthews, he explained that he had not made testamentary dispositions in favour of his other three children as he felt that he had made sufficient provision for them during his lifetime. In that letter, he also indicated his strong wish that Odile be allowed to receive the French villa outright and live there, despite the fact that as a matter of French law, his four children were entitled to receive 75 per cent of the villa on his death. George adhered to this wish but the ?three other children enforced their rights ?to inherit 56.25 per cent of the French ?villa, leaving Odile with an interest in ?43.75 per cent.

In France, it is the recipients of assets rather than the executors or estate who bear inheritance tax. While the gift of the villa to Odile was specified to be free of tax and there was provision in clauses 4 and 5 of Matthews' English will for all taxes as a result of his death to be met from his residuary estate, it was not clear whether this applied to the devolution of 56.25 per cent of the villa to the three children by French forced heirship. The executors of Matthews' estate (the claimants) asked the court to decide whether in construing clauses 4 and 5 of Matthews' English will the French inheritance tax payable on the share of the villa passing to the three elder children should be met from Matthews' residuary estate or not.

Nicholas Strauss QC held that it was clear from the terms of Matthews' wills that he had wanted to ensure as far as possible that Odile would inherit the villa free of tax. Matthews was fully aware of the risks of his children exercising their rights under French law and it was inconceivable that he could have intended that if they did so, contrary to his wishes, they should also receive funds from his residuary estate to meet their French inheritance tax liability. Therefore they were not entitled to have the French inheritance tax payable on their 56.25 per cent of the villa paid or reimbursed from Matthews' estate.

Although the three children received nothing under Matthews' will, the equitable doctrine of election was considered in the alternative, whereby the three children could be obliged to reimburse Odile for any benefit they obtained under Matthews' will. The judge concluded that, if the construction point had been wrongly decided, this was a case in which equity should intervene as the three children could not 'in good conscience' keep the benefit of the payment of the French inheritance tax from Matthews' estate.

This is an interesting example of how The construction of an English will can be relevant even to the recipients of an asset passing outside the terms of that will and outside the jurisdiction

Will revocation

Another cross-border estate case which concerned the construction of wills has recently been heard in the Court of Appeal. Perdoni v Curati [2012] EWCA Civ 1381 was first heard in late 2011 and concerned the estate of the late Pierluigi Curati, who was born in Italy in 1926 and moved to England in 1955 to marry his wife Emilia. Pierluigi and Emilia lived in England for ?the remainder of their respective lives, where they had their matrimonial home, later selling their restaurant business to leave a sizeable estate in England. During that time they had also built up a significant portfolio of properties in Italy. Emilia died in 2007 followed by Pierluigi in 2008. They left no children.

Pierluigi left two wills: an English will made in 1980 disposing only of his English estate and an Italian holographic will made in 1994. By the 1980 will, Pierluigi left his English estate to Emilia and if she predeceased, to her niece and nephew, the claimants at first instance and respondents in the Court of Appeal. By the 1994 will, Pierluigi indicated that Emilia was his erede universale or sole heir, but made no provision for what would happen if Emilia predeceased him.

If the 1994 will revoked the 1980 will, then on Pierluigi's death his entire estate would pass on intestacy (whether under English or Italian law) to his sister Carmen, the appellant. However, if the 1994 will did not entirely revoke the 1980 will, then on Pierluigi's death his English estate would pass to the claimants.

It was agreed that the effect of the 1994 will (as to whether it revoked the 1980 will or not) should be considered by reference to the law of Pierluigi's domicile in 1994. It was held at first instance that by 1994 Pierluigi had acquired an English domicile of choice. As such, the effect of the 1994 will was a matter of construction under English law. The 1994 will contained no express words of revocation and no words indicating that Pierluigi had intended it to be his last will. Therefore the 1994 will did not wholly revoke the 1980 will and Pierluigi's English estate passed to the claimants.

The grounds of the defendant's appeal to the court were that it had been Pierluigi's manifest intention that Italian law should govern the construction of the 1994 will and that, in the alternative, if English law governed the construction of the 1994 will, then as a matter of English law the 1994 will impliedly revoked the 1980 will. The finding that Pierluigi had an English domicile of choice in 1994 was not appealed.

In upholding the first instance decision, the judges found that there was no evidence of Pierluigi having a manifest intention that Italian law should apply. The words erede universale had no special meaning under Italian law and the fact that Pierluigi had made an Italian will in the Italian language was not sufficient to show he intended Italian law to govern its construction. In 1994, Pierluigi had a settled intention to remain in England. Turning to the second limb of the appeal, there is a presumption against the implied revocation of an earlier will. Revocation is only implied if there is a logical inconsistency between the successive wills and that was not the case with the 1980 and 1994 wills.

This case highlights the potential pitfalls of will drafting, particularly where two wills made in different jurisdictions may operate simultaneously. Practitioners are reminded of the importance of ascertaining a client's domicile when taking instructions for their will and of using clear wording as to revocation of earlier wills (if that is intended). In any case involving the construction of wills and the intention of ?the testator, the benefits of the will draftsperson having kept detailed attendance notes are evident.

Judicial encouragement of trustees

The case of RK v RK [2011] EWHC 3910 (Fam) is a divorce case which has attracted comment within the private client sphere due to the exercise of 'judicial encouragement' of trustees. The divorcing husband was an employee of a farming business held within family trusts of which he was also a discretionary beneficiary. The matrimonial assets had been derived mainly from the farming business which belonged to the husband's family and family trusts. Although the trustees had offered to make some provision for the wife as a beneficiary of one of the trusts, she sought additional provision from the husband. However, the husband would only be able to meet this provision if the trustees exercised their discretion to make additional trust resources available to him.

In his judgment, Moylan J set out his assessment of the wife's financial needs. However, rather than making an order to that effect, he sent the approved transcript of his judgment to the trustees and awaited their response before deciding the form the order should take. After considering the judgment, the trustees indicated that they would exercise their discretion to make provision for the wife in accordance ?with Moylan J's assessment of her ?financial needs.

The development of the doctrine of judicial encouragement is of concern to some trusts practitioners and trustees as it highlights the potential vulnerability of trusts on a divorce of a beneficiary. However, it is necessary to remember that the trustees in this case had already demonstrated that they were willing to offer some financial provision to the divorcing wife and had been party to numerous offers of settlement whereby she would receive trust assets. The principal trustee also gave evidence at the hearing. The residence of the principal trustee and the situs of the main trust assets was England and this is relevant generally when considering the court's ability to influence or encourage such trustees.

Finally, private client practitioners welcomed the new protocol negotiated between STEP, the Law Society and the British Bankers Association which was agreed last month by leading high street banks in England and Wales. Barclays, HSBC, Lloyds, Halifax, Royal Bank of Scotland and NatWest have all signed up to the new protocol which sets out how banks must deal with solicitors or other STEP members who are administering the estate of a deceased customer of the bank.
The protocol describes the information that the banks will require from the practitioner, how they should respond to requests for information and the procedures to follow on the closures of the deceased's accounts. It covers the deceased's current and savings accounts, credit cards and unsecured loans, but may not apply to business accounts or investments, pensions or insurance policies. It is hoped that the protocol will simplify some of the procedural aspects of probate administration, which in turn will be welcomed by grieving families.