Wills and probate: state of play
Will Michelmore sums up three recent cases that look at portions of estates, the legal test for gifts and the question of capacity
Will Michelmore sums up three recent cases that look at portions of estates, the legal test for gifts and the question of capacity
A real doubt about capacity
Testamentary capacity was revisited in the Chancery Court in Turner v Phythian & Anor [2013] EWHC 499 (Ch) examining the validity of the late Iris Wilson’s will. The testatrix’s niece, Lynda Turner, brought the case alleging that her aunt lacked mental capacity and did not know or approve the contents of the will.
Wilson was part of a large family. She married but had no children of her own. Her husband died in 2007 and her twin brother died in 2010, shortly before Iris made her will. Mrs Phythian (the first defendant) had been briefly engaged to Iris’s twin brother in the 1950s. She and her husband had maintained occasional contact with Wilson. Both the Phythians and Turner had provided Wilson with practical support during her elderly years.
Two months before she died, Wilson made a will, prepared by Mr Phythian, in which the Phythians were the exclusive beneficiaries. Wilson did not take any independent legal advice.
The judgment for the claimant applied section 2 of the Mental Capacity Act 2005 and the test for capacity in Banks v Goodfellow. It questioned whether Wilson understood the nature and effect of her act, the extent of the property of which she was disposing and comprehended and appreciated the claims to which she ought to give effect. She must also not have been subject to any disorder of the mind.
Fragile state
In applying the test about the burden of proof in relation to testamentary capacity in Key v Key, the court was satisfied that the will appeared duly executed and rational on its face, therefore the evidential burden shifted to the claimant to raise '¨“a real doubt about capacity”.
Wilson suffered from a “fragile mental state” all her life. She had periods in a psychiatric hospital and had lifelong depression. Contemporaneous emails between relatives, GPs and social care providers testified to her poor mental health and reclusive tendencies.
A medical report confirmed that she was suffering a “severe grief reaction” to her brother’s death. This was sufficient to raise “a real doubt as to capacity” and the evidential burden shifted back to the defendants, which they could not satisfy. The judgment took into account Wilson’s advanced age and physical frailty, and in doing so, found that she lacked the necessary testamentary capacity.
Mr Phythian’s involvement in drawing up the will making himself and his wife the exclusive beneficiaries is '¨“a circumstance that ought to excite the suspicion of the court” (Barry v Butlin). The court was under a duty to “be vigilant and jealous in examining the evidence in support of the instrument”. There was no evidence from anyone other than Mr Phythian that the will was read to Wilson, there was no discussion of the will in the presence of the witnesses and she received no independent advice.
Vague instructions
Wilson remained on good terms with her family and had previously indicated which items of her estate she had wished them to receive. The court found that Wilson’s instructions to Mr Phythian were vague and dismissive. Given that Barry v Butlin must lead the court to '¨a presumption of suspicion, there was little evidence to rebut that presumption and it was concluded that Wilson could not have known or approved of the contents of her will.
It’s an unsurprising outcome. But the case emphasises the importance of being vigilant when assessing capacity. Often clients who appear controlled may be concealing a depressive mental state.
Attempts should be made to take as full a picture as possible of the client’s current circumstances and medical condition. And caution should be taken with elderly clients as their physical frailty and age may be used to reinforce a finding of a lack of capacity.
The meaning of etcetera
In Day v Harris & Anor [2013] EWCA Civ 191, the Court of Appeal was required to consider two questions arising from the estate of Sir Malcolm Arnold (the composer of the score to'¨1957 film The Bridge on the River Kwai and numerous other choral and orchestral works). The appellants were two of Sir Malcolm’s three children, Robert Arnold and Katherine Arnold. The respondent was Anthony Day, who had cared for Sir Malcolm for 22 years until his death.
Carer's rights
The first appeal was whether Day should repay to Sir Malcolm’s estate five gifts (totalling £36,000), which were made between June 2002 and May 2006. The gifts came from a bank account in the joint names of Sir Malcolm and himself. Sir Malcolm was the beneficial owner '¨of the money.
Sir Malcolm had executed an enduring power of attorney (EPA) that appointed Day as his sole attorney. The EPA had no restrictions and was registered with the court on 8 February 2002. From 1994, Sir Malcolm had made gifts of £3,000 to Day each year. These annual gifts were increased from 1999, when accountants advised that Sir Malcolm could make normal gifts out of income and these gifts would also be immune from inheritance tax.
Robert and Katherine Arnold asserted that section 7(1)© of the Enduring Power of Attorney Act 1985 invalidated the five gifts made by Day. They argued that once an EPA is registered, the donor cannot authorise something to be done that is not authorised under the EPA – and that would include making gifts of the kind '¨in question.
The Court of Appeal upheld the judgment of the High Court, namely deciding that Day could only use the bank account to benefit himself with the full, free and informed consent of Sir Malcolm, which they agreed he had.
The judgment reminds attorneys acting under an EPA that not all aspects of an attorney’s ability to act may be imparted by the EPA. In this case, before the EPA’s registration, it was the pattern of gifts and the fact that Sir Malcolm gave his free and informed consent to these gifts that made them effective after the EPA’s registration. The gifts made post-registration were deemed to form part of the pattern of giving, which had been initiated by Sir '¨Malcolm in 1994.
'¨Manuscripts included
In July 1976, Sir Malcolm sent several boxes of books, paintings, sculptures and composition manuscripts to Katherine Arnold’s house unannounced. That month, he also sent a postcard to Robert Arnold, which simply read: “All the books, pictures, sculptures, etc are for you and Katherine to share and keep, or sell if you like! Dad.” The case for a gift relies principally on the postcard.
Day submitted that the word “etc” should be read as indicating only things of the same kind as those included on the postcard, and therefore not the manuscripts. The lower court agreed, and held that the manuscripts delivered to Katherine Arnold were deposited with her for safekeeping.
However, the Court of Appeal allowed the appeal on the basis that the only reasonable reading of the word “etc” in the postcard is that it referred to everything else in the boxes. The court also refused to accept a claim that Robert and Katherine Arnold were estopped from asserting their ownership over the manuscripts.
While it’s a fact-specific decision, the case reminds us to ensure certainty when making a gift – as to subject matter, the donor’s intention and the identity of the recipient.
Presumption against double portions
The Kloosman v Aylen & Ors [2013] EWHC 435 (Ch) case concerned the will of Richard Frost (Frost), who died in March 2008. Frost had lived for many years in a house he bought in Lewisham, London. He '¨had two daughters, Linda and Susan. '¨He also had a son, Andrew, from whom he was estranged.
As he got older, Frost’s daughters helped looked after him. Susan lived nearby. So she shopped for him, supplemented his state pension and '¨took him to hospital appointments.
In early 2007, Frost was diagnosed with bowel cancer and it was decided he should move to Essex to live with his other daughter, Linda. In anticipation of the move, Linda and her husband made a number of adaptations to their house to accommodate Frost.
The cancer diagnosis prompted Frost to make a will in which he left one-third of his estate to Linda, one-third to Susan, one-sixth to Andrew, and one-twelfth each to Andrew’s two children.
Cash gifts
After making the will, Frost’s Lewisham home was sold. The sale was far in excess of what he had imagined and he decided to make gifts to both daughters of £100,000 each. The remaining proceeds were £137,078 net.
Evidence was presented to the court that, at the time, Frost had said he would also give a much smaller gift to Andrew – if his son visited him to reconcile their relationship. That did not happen.
Frost envisaged retaining the bulk of the remaining sale proceeds in case he had to go into a care home.
On Boxing Day 2007, Frost became seriously ill and was admitted to hospital. He returned to live with Linda and her husband for a short time – to accommodate this, Linda made further internal alterations to accommodate the equipment needed for her father’s care. During this time, Linda, a palliative care nurse, stopped work to care for Frost. He died in early 2008.
The question for the court was whether the £100,000 gifts by Frost to his daughters should be treated as being a gift of their “portion” under his will.
The presumption against double portions assumes that a parent only intends to fulfil their moral obligation to their child once. Where this presumption applies, the doctrine of ademption means that the lifetime gift is taken into account when calculating the recipient’s share of the estate under the will.
Support recompense
While it was true that the £100,000 gifts to Frost’s daughters roughly amounted to one-third of Frost’s estate, the court found that these figures were not chosen by him because they were roughly one-third of the sale proceeds of the house. It was because they were large, rounded amounts.
The court took the view that the gifts were a way to compensate his daughters for the money they had already spent on him and may need to spend on him in the future.
On this basis, the judge found that the gifts were not intended as “portions” of Frost’s estate and that the shares set out in his will should stand, without taking the lifetime gifts into account.
Given the facts, the result is not surprising. But it is a useful reminder that, ideally, lifetime gifts that might be considered to be a “portion” of a client’s estate should be carefully recorded so '¨that this issue does not arise on the '¨client’s death.
Will Michelmore is head of the private client group at Michelmores