Weekly Round Up – 14 May 2021

Weekly Round Up – 14 May 2021

A quick round of the latest news in the world of Wills, Lasting Powers of Attorney and Probate.

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Charitable legacies on the rise to avoid inheritance tax

A recent figure from Co-Op Will writers indicated that there has been a 61% increase in charitable legacies.

In the context of coronavirus-related deaths, more people sought to avoid the impact of the death duty by leaving more gifts to charities in their Will.

Inheritance tax is charged at a flat rate of 40% on the value of estate which is above £325,000. However, the tax rate is reduced to 36% if at least 10% of the estate passes to charity. Moreover, any gift to charity is totally exempt from inheritance tax.

With rising asset values, higher death rates and fixed tax-free allowance (as it was announced in the March budget that the inheritance tax threshold will be frozen from 2022 until 2026), thousands more people in Britain will be expected to pay inheritance tax.

Aside from inheritance tax, the lockdowns have given people time to reflect on what matters most and what they can do to help. Legacy income is vital for charities, especially in the context of many having been forced into closures and losing out on retail sales.

As such, A.D.E Wills are seeking to help out by raising awareness of local charitable initiatives and causes and encourage such empowering giving.

We offer a free Will for anyone who leaves a legacy of any value to Oxford United in the Community and team up with a charity each month to raise money for their cause.

You can get involved now and receive tax savings by leaving a charitable legacy in your Will and making a difference.

Testamentary capacity tests

A recent judgment in the case of Clitheroe v Bond [2020] upheld an historic, yet still relevant, piece of case law.

Jean Clitheroe died in 2017, having written her last Will in 2013. In the 2013 Will, her daughter, Susan, was excluded on the basis that Jean believed that Susan would spend it all, and because they were no longer close. Jean also blamed Susan for her relationship breakdown with her ex-husband and believed Susan had stolen from her.

Jean’s earlier Will in 2010 included Susan to the extent that she would inherit several chattels only. In both Wills, Jean’s son, John, was to inherit the residuary estate. Jean also had another daughter, Debs, who died in 2009.

The validity of the 2013 Will was contested on Jean’s lack of capacity. It was argued that Jean was unable to cope with the grief of Debs’ death, causing her to suffer from insane delusions, affecting her capacity for both the 2010 and 2013 Wills.

Susan had been abused by her father, Jean’s aforementioned ex-husband, which caused Jean to divorce him on discovery of this with substantial evidence at the time. The Court held that Jean’s belief that Susan had caused her divorce beyond this fact was irrational to the point of being delusional.

The legal points of the case brought into question the impact and relative importance of the Banks v Goodfellow [1870] and the Mental Capacity Act 2005 (‘MCA’) tests for capacity and their presumptions.

Under Banks v Goodfellow, a testator must understand the nature of making a Will and its effect, the extent of their estate, and must not be affected by a delusion or disorder of the mind. The starting point is that the person who wishes to prove capacity has the burden to prove such capacity. Where the Will is duly executed and appears rational on its face, the capacity is presumed. The evidential burden shifts to the people challenging the Will to raise a real doubt as to capacity. If this is achieved, the burden reverts back to those proving capacity to establish such capacity.

Conversely, under the MCA, the starting position is that the testator is presumed to have capacity unless established otherwise. The case highlighted the conflict between the two tests in proving capacity. Under Banks v Goodfellow, the burden would start on John to prove Jean’s capacity, whilst under the MCA, Susan would have had to disprove Jean’s presumed capacity. In cases such as these, it could be the determinant factor in the outcome.

Whilst the Court held that Banks v Goodfellow remains good law, there is still much left to be debated in likely cases in the future. The MCA Code of Practice notes that the MCA definition of capacity is “in line with the existing common law tests and does not replace them”, but allowing judges in such cases to adopt the new definition “if they think it is appropriate”. Further issues can be created by this ambiguity of precedence.

Statutory Wills are made on behalf of those who lack the requisite testamentary capacity. With the MCA providing a more stringent test, it could be argued that an individual may have capacity under one test but not the other, leading to a statutory Will not being capable of production for them.

However, for now at least, Banks v Goodfellow seems to be the approach to follow when considering testamentary capacity.

In Walker v Badmin [2015], the Court stated it was the “correct and only test” and that the MCA wording suggests it was intended for application in regards to living, incapable persons, and not deceased testators.

Parliament was unlikely to intend to reverse the policy behind Banks v Goodfellow, that the threshold should be kept low to allow older people to make a Will in their declining years.

Don’t delay in registering your LPA

The Office of the Public Guardian (‘OPG’) is the government body which operates within the Mental Capacity Act 2005 and is responsible for protecting the interests of those who lack the mental capacity for making decisions about their financial affairs.

Lasting powers of attorney (‘LPAs’) fall within the OPG’s jurisdiction. To become legally valid, your LPA must be registered with the OPG. Once you send your completed LPA to the OPG, it usually takes around 12 weeks (or 3 months) for it to be registered, provided there are no mistakes in the application.

In each case, there has to be a minimum of 6 weeks to allow the people chosen to be notified to raise any objections they may have to the LPA’s registration. This gives them ample time to do so, which is a safeguarding measure.

However, the OPG has recently publicised that there are currently significant backlogs due to the impact of the coronavirus lockdowns. With staff working from home and the need to comply with social distancing measures, the OPG has stated that the usual time period for registration has increased to 15 weeks.

The OPG introduced new online tools last year to alleviate the impact of the backlogs; however, as lockdowns eased across England and Wales, the OPG was overwhelmed with a large influx of applications.

The OPG has encouraged people to “register their LPAs in advance of needing it”. They reiterate that LPAs do not “come into effect until you lose mental capacity, or until you give permission to your attorney to make decisions on your behalf (only for financial LPAs)”.

The OPG has also extended their working times and the Ministry of Justice plans to discuss modernising LPAs this summer to create a more accessible system of making LPAs, whilst at the same time, always ensuring the protection from fraud and abuse.

Weekly Round Ups

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