Of sound mind?
A charitable legacy can be a poisoned chalice if there are expensive disputes about testamentary capacity. Lloyd Junor explains how this arises and offers some solutions
KEY POINTS
- Charities have lost out from successful challenges to charitable bequests
- There are four key tests of mental capacity
- Dementia, delusions and bereavement can be evidence of lack of capacity
The recent budget has reduced the rate of inheritance tax to 36 per cent on estates where at least ten per cent of that estate has been left to charity, in an attempt to stimulate more charitable legacies.1 With legacies estimated to be worth up to £2bn to the charity sector, it is an important source of income. However there has been increased coverage in the media in recent years of cases involving charities and legacies left to them in wills, particularly where the testamentary capacity of the testator (the person making the will) is in question.
The case of Re Ritchie, Ritchie v Joslin [2009] illustrates quite starkly the impact of such cases on charities. Mrs Mary Ritchie had died leaving the bulk of her estate of £2.5m (save £5,000 to her local church) to the National Osteoporosis Society (‘the NOS’) and nothing to her four children.2 The children argued that Mrs Ritchie lacked the requisite testamentary capacity to make her will, based on the fact she suffered a delusion of the mind which affected her decision to leave her estate as she did. Mrs Ritchie recorded with her solicitor that she held the belief that her children had never helped her, that one of her sons had been violent towards her and that some of her children were stealing from her.
Two issues were relevant to the question of capacity:
1) Whether the statements about her children were true; and
2) If they were not true, whether she believed them or not.
The judge found that the allegations made by Mrs Ritchie, between the death of her husband in 1992 and the execution of her will in 1998, about her children were not true. He also found that the medical evidence suggested that Mrs Ritchie was suffering from paranoia and believed the allegations to be true. There was no rational reason why Mrs Ritchie would have disinherited her children and it followed that the delusions caused Mrs Ritchie to disinherit her children. The will was therefore invalid for lack of capacity. The will was set aside and NOS lost their legacy – the estate passing to the four children under intestacy rules.
Given the relevance of claims challenging the validity of wills on grounds of capacity it is worth setting out the test for testamentary capacity in more detail.
Testamentary capacity
The starting position for any claim is the presumption that an individual has:
1) The competence to make their will; and
2) A continuance of that capacity.
The effect is to require the person disputing validity to prove the individual’s lack of capacity – the burden is on them to do so. If, however, there is any ‘real doubt’ as to capacity, then there can be no presumption of capacity in the first place. This means, the person attempting to prove that the testator was of sound mind when they made their will has to establish this – the burden therefore reverses. The doubt as to capacity must be ‘real’ and supported by evidence demonstrating a real possibility or probability that the testator lacked capacity – in effect the burden shifts with the evidence. It has been said that the testator should come to a ‘rational, fair and just’ testament.
The test that each party will have to refer to when testing the evidence was set out in the case of Banks v Goodfellow – a case decided in 1870, but which is still good law today. It established four key tests for determining testamentary capacity which are set out in Figure 1.
The testator must have capacity at the time the will is executed. An exception is the rule in Parker v Felgate – that a will may be valid if the testator had capacity when he gave instructions, but not necessarily at the time of execution. For example a will can be valid if the testator has lost capacity at time of execution if:
- the testator had capacity at the time instructions were given;
- the will is prepared in accordance with those instructions; and
- at the time the will is executed, the testator remembered having given instructions and believes the will was prepared in accordance with those instructions but the testator does not need to know in full the details of the will.
The four tests of capacity
The four criteria must be separately satisfied. The following are the requirements in more detail:
1. The nature of the act and its affects
This test is very transaction-specific. The testator need not have capacity generally, but must have the capacity to execute the particular will under consideration. The approach of the court to the issue of capacity will therefore depend in part upon the complexity of the terms of the particular will. The greater the complexity the greater the level of capacity required.
The client seeking to make the will must understand:
- that they will die;
- that the will only comes into effect on their death and not before; and
- that they can revoke or change the will at any time before death, so long as they remain mentally capable of doing so.
The client must also understand:
- who gets provision from the estate;
- the difference between a conditional and outright gift to a beneficiary under the will;
- that heirs may inherit a great deal more, or less, as the case may be (market values and the testator’s expenditure in his final years can affect the size of the estate);
- that the beneficiaries may not survive the testator. The testator may therefore wish to consider substitional gifts in such an event;
- the executors role, who they are, and why they should be appointed; and
- whether a previous will has been made and why the new will is different and to be preferred. Sometimes the court will require that a will be explained to a testator to help them understand it, the absence of which means the will is invalid.
2. The extent of the property
This requirement is interpreted in a broad brush way. There is no need for a testator to be able to compile a mental inventory of all of their assets, but to have a general idea of the assets disposed of by the will.
The client must, broadly, have capacity to understand:
- the extent of their solely-owned property. There is no need for actual understanding of the extent of the assets, only capacity to understand;
- the fact that, regardless of the terms of the will, certain types of jointly-owned property might pass automatically on death to the other joint owner; and
- that there may be pension, insurance or other benefits payable on his death which may not be affected by the terms of the will.
3. The claims to which the client ought to give effect
It is, of course, not necessary that the testator should make provision in their will for persons who have claims upon their generosity , but they must be able to recall them so that they can decide whether or not to benefit them in the will. The testator should therefore be able to comprehend and appreciate these claims and give reasons for preferring certain beneficiaries, and possibly excluding others, for example, by:
- comparing their respective levels of affluence or lack of means;
- assessing any special needs, due to age, infirmity, or disability, which may justify financial support;
- comparing the degree of their care and attentiveness and overall affection and concern for them as an individual; and
- Solicitors should give an explanation of the nature and effect of the will, and to remind their clients of the extent of their assets.
However, in the final analysis, the client himself must be able to appreciate and comprehend the claims to which he ought to give effect without any assistance or prompting.
4. Was the testator’s mind affected by any disorder or delusion which was active in bringing about a disposal which the testator would not otherwise have made?
This test is ultimately a question of expert opinion, but the solicitor should exercise his own judgement. For example, as to whether the testator exhibits signs of lack of capacity (by appearing confused for instance) and doubts may be raised if the testator is very ill. If so the solicitor should follow the golden rule.
Typical triggers of incapacity
Dementia and Alzheimer’s
Dementia and Alzheimer’s are the two most common grounds upon which to challenge a will.
This is hardly surprising – dementia and Alzheimer’s is fast becoming more prevalent in an ageing population. Claims are often characterised by the beneficiary’s relative alleging the testator suffered dementia in the last few years of their life and before the will was made.
There is no recognised test for dementia, but medical professionals often use a mini-mental state examination (MMSE), with a maximum score of 30, to assess capacity for treatment. These can often be a useful starting point in establishing capacity – a score of anything less than 26/30 indicates dementia. It should be noted however that the severity of dementia is highly relevant – early onset dementia does not usually indicate lack of capacity. A score of 20 to 26 is in the mild range of dementia and it is possible for an individual to have testamentary capacity despite suffering from mild to moderate dementia.
Delusions
Delusions can be a cause of incapacity which can be difficult to rebut. There must be a causal connection between the delusion itself and the disposition effected by the will to establish that individual’s incapacity.
A good (although quite extreme) example of a will being set aside because the testator held delusional beliefs is Kostic v Chaplin in which the testator, a Serbian businessman, left his £8m estate to the Conservative Party Association. He had suffered from a delusional disorder, believing that “dark forces” were conducting a “sinister and highly organised international conspiracy” against him in which various family members were implicated. Part of his delusions involved him believing that only the Conservative Party, through the agency of Margaret Thatcher, could save the country from such dark forces.3
Bereavement
Bereavement may produce symptoms equivalent to severe depression. In Key v Key the testator made a will exactly one week after his wife’s death. It provided for the bulk of his estate to be divided between his two daughters. This was in stark contrast to his previous will, which had left the bulk of his estate to his two sons.
The sons successfully challenged on grounds of lack of capacity and the court accepted evidence that the effect of death can cause the testator to lose the necessary decision-making capacity to make a will. The court observed that the greater understanding of the mind now available from modern psychiatric medicine, in particular in relation to affective disorder, allowed for this development of the test in Banks v Goodfellow.
Tread carefully
There is no doubt that challenges to wills on grounds of lack of capacity will increase. The above illustrates the requirements and some common issues that arise in these cases.The watchword is tread carefully. If an early resolution or settlement can be reached take the opportunity – this saves cost, time, and avoids running the risks mentioned above.
1. www.charitiesdirect.com/caritas-magazine/budget-boost-for-charity-giving-reform-948.html
2. www.charitiesdirect.com/caritas-magazine/substantial-legacy-lost-417.html
3. www.charitiesdirect.com/caritas-magazine/to-the-death-134.html
Author: Lloyd Junor
Lloyd Junor is an associate solicitor at Thomas Eggar LLP.
He specialises in dispute resolution and litigation for charities relating to trustees' duties, legacies and claims for and against charities.
He was formerly in private client litigation at Bircham Dyson Bell.
Crispin Ellison, 06/06/2011
I think it is the best synopsis of the law in this area that I have seen. I am occasionally asked to mentor Institute of Legacy Management students and to provide through Legacy Link bespoke one-to-one training for individuals coming into charity legacy administration. I shall be firmly recommending students to Lloyd Junor's excellent article.