The intestacy rules provide that certain categories of relatives should benefit from your estate in a certain order of priority. Therefore, if you had not made a Will but wanted to leave everything to your spouse, then the rules of intestacy would dictate that only a set amount or percentage of your estate would go to your spouse, and not everything as you may have intended. With the intestacy rules, other relatives may be entitled to a portion and inheritance tax may need to be paid on that portion. For more information on the intestacy rules, please see heading below.
Our advice would be to seek legal and financial advice regarding making a Will sooner rather than later to ensure that your plans are executed as per your wish when the time comes and that the wishes in your will are not contested. The reason for this is because once you have lost capacity, you cannot make a Will and neither can your deputy or Attorney on your behalf.
Lack of capacity to make a will
When someone has lost mental capacity before they had the opportunity to make a Will, there are two options:
1. To do nothing. If you do not have a valid Will in place, then the rules of intestacy will apply; or
2. Apply to Court of Protection to make a Statutory Will.
The rules in relation to Intestacy can be complex and our advice would depend on your family set up. If you have a spouse, children, grandchildren and an estate that you estimate would be over £250,000, then usually the position would be that your partner would keep all the assets (including property) up to the value of £250,000, as well as all your personal possessions. The remainder of the estate would be shared in this way:
- Your spouse will have an absolute interest in half of the remainder of our Estate; and
- The other half will be shared equally between your surviving children. If any child has already passed away, then their share will be equally split amongst their children.
As you can see from this brief example, you do not have an input as to who receives what in your estate which can be upsetting and also cause argument in the remaining family. Another aspect to be aware of is that grandchildren are not automatically provided for under the rules of intestacy and only receive their parents’ share if the parents have passed away.
Our recommendation would be not to leave your estate to be shared out under these rules because there is a chance that they may not provide for all the family members that you intended to look after.
Making a statutory will
Before making a Court of Protection application for a statutory Will, it must be established whether the vulnerable person has testamentary capacity to specifically make a Will. The test for testamentary capacity was established in the case of Banks v Goodfellows (1870). This states that the person considering making a Will must consider and understand:
- The nature and effect of making a Will;
- The extent of his or her estate;
- The claims of those who might expect to benefit from the testator’s estate; and
- The testator must not have a mental illness that influences the testator to make certain legacies in his Will that he would not have otherwise included.
Another consideration, to be taken into account section 3 of the Mental Capacity Act 2005 which explains that a person is unable to make a decision for himself if he is unable to understand information relevant to the decision, retain that information in order to make a decision and effectively communicate the decision.
If you have reached a stage where you do not have testamentary capacity, then an application for a statutory Will needs to be submitted to the Court of Protection. This can be done by your attorney, a relative etc., (please see below). The Court of Protection is most likely to allow a statutory Will to be made if a vulnerable person has never made a Will before or if there is a significant change in their circumstances.
A statutory Will can also be made if:
- the estate value has decreased or increased;
- tax planning purposes;
- a beneficiary under the current will has passed away;
- a beneficiary under the current will has received substantial gifts which call for an adjustment to the current Will.
The Court’s permission is usually required to make a statutory will. However, there are certain categories of people who do not need permission:
- the vulnerable person;
- the donor or donee of a Lasting Power of Attorney;
- an attorney under a registered Enduring Power of Attorney;
- a deputy appointed by the Court of Protection;
- persons who may become entitled to the vulnerable person’s estate under the rules of intestacy or under a current Will; and
- a person for whom the vulnerable person might be expected to provide for if they had capacity.
A concerned friend or other relative would need to apply to the Court of Protection for permission.
When the Court is making their decision as to whether to allow the statutory will to be made, they will consider if it in the vulnerable person’s best interests. Under section 4(6) of the Mental Capacity Act 2005, the court must consider:
- the vulnerable person’s past and present wishes and feelings;
- any written note from when the person had capacity;
- the beliefs and values that would be likely to influence the persons decision if they had capacity;
- the other factors that the person would be likely to consider if they were able to do so.
The Court of Protection will also try to take into account, where possible:
- Anyone named by the person as someone to consult when required;
- Anyone involved in caring for the person’s welfare; and
- Any deputy appointed for the person by the Court of Protection.
Making substantial gifts
An attorney has limited power to make gifts on behalf of the vulnerable person. They may make gifts:
- On customary occasions to persons (including themselves) who are related to or connected with the vulnerable person; or
- To any charity to whom the vulnerable person made or might have been expected to make gifts provided that the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the vulnerable person’s estate.
A Court of Protection Deputyship Order will usually contain a similar expressed authority to make gifts. Any other gifts will require the permission of the court.
Where a vulnerable person has a substantial estate which will bear inheritance tax at the time of their death, the attorney or deputy may consider making an application to the Court of Protection for permission to gift assets away during the vulnerable person’s lifetime. This will reduce the value of the vulnerable person’s estate for inheritance tax purposes. The vulnerable person must survive a period of 7 years following the date of the gift in order for the value of it to fall outside of their estate.
Generally, the Court of Protection will make an order where it can be demonstrated that the vulnerable person has adequate capital and income to maintain their standard of living for the rest of their lifetime after the gift has been made. Usually the recipient of the gift will be someone named in the vulnerable person’s Will (or in the absence of a will, someone who will benefit under the intestacy rules). The Court of Protection will require notice of the application to be given to the vulnerable person’s close relatives and anyone likely to be affected by the outcome of the application.
The general rule on costs, persuant to rule 156 of the Court of Protection Rules 2007, is that where the proceedings concern a vulnerable person’s property and affairs, the costs of the proceedings shall be paid by the vulnerable person or charged to their estate