UNIT 1: TAKING INSTRUCTIONS AND DRAFTING A BASIC WILL Page 1 of 29
Table of Contents Unit 1: Taking Instructions and Drafting a Basic Will Learning Objectives 3 1. Why make a Will? 4 2. Taking Instructions 5 3. Drafting the Will 14 4. Executing the Will 26 Page 2 of 29
Wills and Probate Distance Learning Package Unit 1 Taking Instructions and Drafting a Basic Will Learning Outcomes Assessment criteria To achieve this unit a learner must demonstrate the ability to: 1. Explore reasons for making a will P1: Explain advantages of making a will P2: Identify potential problems caused by intestacy 2. Investigate information required to draft a will P3: Describe the range of instructions required from the client P4: Explain the importance of checking capacity of client 3. Explore professional rules relating to drafting of a will P5: Summarise significance of identity checks P6: Identify professional rules governing conduct of solicitors P7: Describe professional rules relating to client care provisions 4. Draft a will to meet client requirements P8: Produce a will covering elements that must be included P9: Explain the role of the executor P10: Explain what must be done to ensure this will is validly executed Page 3 of 29
1. Why make a Will? There are many reasons why a person should make a will. You may be aware of many of these and by the time you have completed this course it will no doubt be clear that in more and more situations it is extremely dangerous not to make a will. 1.1 Benefits of making a will When advising a client about the preparation of a will, it is important that you make clear the undoubted benefits. However, many of the clients who voluntarily book an appointment to see you are usually the converted; it is the client sitting in reception to see an adviser about his personal injury claim that you should be aiming to convince. Making a will is important because it ensures that: 1. The client s wishes are generally (subject to any claim under the Inheritance (Provision for Family and Dependants) Act 1975) respected on his or her death. 2. The stringent application of the intestacy rules contained in Part IV of the Administration of Estates Act 1925 (as amended) are avoided. 3. It ensures that where second families are involved there is fair consideration of all the parties involved. 4. A Testator can leave specific bequests to individuals or charities. 5. Any executors appointed are willing and able to act and they can begin the administration of the estate immediately after death. An administrator appointed on an intestacy only has authority to act when Letters of Administration are issued. 6. If there are children of the family, the Testator can appoint guardians to look after them in the event of both parents death and in some circumstances with a surviving parent. 7. The Testator s wishes (if any) as to burial or cremation can be immediately consulted and taken into account in the funeral arrangements. 8. Any additional powers the Testator wishes to give to the personal representatives can be clearly set out making the administration of the estate easier for them. It can also release them from the strict obligations imposed on the personal representatives through statutes. 9. If carefully drafted, the inheritance liability will be mitigated if the estate falls with the inheritance tax brackets. The above briefly outlines the advantages of making a will and whilst you may emphasise all these points to your client on your first meeting they are unlikely to absorb all these advantages immediately. Page 4 of 29
Every probate department should, therefore, have a pamphlet for the client to take home and to consider in their own time. It can also act as a marketing tool, as they may also pass on the flier to interested friends or relatives. One example of such a pamphlet can be found at www.step.org under their publications (leaflets) section of the resources area of their website. Task 1 See also: http://news.bbc.co.uk/1/hi/business/4032019.stm for a BBC article from 2007 on the dangers of not making a will 2. Taking Instructions In order for a will to be valid, English law requires that the Testator (the person making the will) should have both capacity and intention to make a will and that the will itself must comply with all the legal formalities. 2.1 Who is my client? Whenever you take instructions, on any matter, you always need to ask Who is my client?. In a wills and probate matter, the question is imperative. 2.1.1 Checking client identity The Money Laundering Regulations 2007 (MLR) (see http://www.opsi.gov.uk/si/si2007/pdf/uksi_20072157_en.pdf) state that in certain circumstances lawyers must check the identity of his/her client. Although the MLR do not apply to will drafting, they do apply when you administer a will and it is good practice to identify your client. Some firms may have a policy of checking the identity of all clients regardless of the type of work they do for them, other firms may only check clients identity where it is essential. If your firm does not have a policy then the identity can be checked by asking for documentation which shows the client s name and address, for example, a passport or photographic driving licence and a utility bill or bank statement. For guidance on Money Laundering for solicitors you can look at the Law Society s website: http://www.lawsociety.org.uk Page 5 of 29
2.1.2 Capacity To make a will the client must have the relevant mental capacity i.e. understand what he/she is doing. The mental capacity requirements for making a will were laid down in 1870 in the case of Banks v Goodfellow(1870) LR 5: the Testator must have understood three things: i) the nature of the act (making the will) and its effect ii) the extent of their property iii) the claims to which they ought to give effect. This requirement of capacity is generally required at the time the will is signed BUT there is the ruling in the case of Parker v Felgate 1883 8 P.D. 171, which has been argued successfully in the recent case of Clancy v Clancy EWHC. The Parker v Felgate rule states that it will be sufficient to show that: the requisite capacity existed at the date of giving instructions for the preparation of the will; the will was prepared in accordance with those instructions; and at the time of execution the testator understood that he was signing a will for which instructions had previously been given (though it was not necessary for the testator at that time to be able to either remember what those instructions were, or to understand the will if read over to him). Read the following short description [if you can find the full case description then read it] of Clancy v Clancy [2003] EWHC 1885 (Ch) - do you agree with the decision? In Clancy v Clancy [2003] EWHC 1885, the deceased gave her solicitor instructions for a new will to be drafted. It was sent to her and she was admitted to hospital. Her solicitor came to the hospital, she signed the will and died two days later. The will was challenged on grounds of diminished capacity. The court held it was her true last will. She had capacity when she gave instructions to her solicitor to draft a will, and when she called the solicitor to the hospital it was clear she had read the draft and was happy with it. She therefore executed a will that she believed gave effect to her earlier instructions; notwithstanding there was evidence that she had reduced capacity at the time of execution due to heavy sedation. Page 6 of 29
The will was a simple one and the court was satisfied that she was signing a document she recognised as the draft will she had previously seen. Therefore, it might be possible to defend a challenge of diminished capacity in the circumstances set out above, even if the deceased did not have full capacity when signing the will. Whilst this case redefines the earlier judgment, it seems difficult to accept that a will can be valid at the time of execution, the testator s mental capacity is such that she does not understand the words in front of her nor the extent of her estate. What if the will was not drawn as she had wanted and that was why she had not responded to the solicitor s first letter sending out a draft or maybe she called the solicitor to make further changes to the will.or maybe, like many of us, she just didn t get round to making an appointment to sign the will and events overtook her? In all cases, however, it is imperative that you ensure your client has mental capacity when you take instructions. This is particularly important when dealing with elderly clients whilst statistics show that one in twenty over 70 year olds suffer from dementia, this figure rises to one in five over 85 year olds. If you have concerns about the client s capacity then: Always be honest with the client; tell them you have to make sure that they know and understand what you asking them to do; Always see the client in some situations it may be prudent to see them twice (perhaps once when they are only given little warning of your proposed visit); Be wary if someone asks you to visit to take instructions from another person, particularly, if that person is elderly and they have always used other solicitors always ask why they are not using their usual solicitor; Be especially vigilant if they are only staying with the person who contacted you, for a short time, or where a third party insists on being present. There are numerous decided cases involving capacity - take, for example, the case of Lily Louisa Morris deceased (2001) WTLR, here Mrs Morris s carer, with the assistance of friends, managed to arrange for the whole of Mrs Morris s estate to be left to her whereas previously it had all been left to charity. In this case, the solicitor who drew up the will never saw Mrs Morris personally. Page 7 of 29
There is no requirement that you have to see a client face to face, but if you have concerns about the client s capacity or the instructions that you receive do not add up then you may want to see the client in person. For a further example try to read the following case in full: Richards v Allen [2001] WTLR 1031 a summary is set out below: Richards v Allan The testatrix, who was 84, was admitted to hospital suffering from uncontrolled diabetes and dehydration. Her medical notes indicated that she was very confused. Her physical and mental condition remained poor even after her discharge. Shortly after leaving hospital, and at the suggestion of the defendant ( A ), she gave instructions for a will appointing A to be her sole executrix and beneficiary. A s brother-in-law, a solicitor, prepared the will on the basis of instructions relayed by A (not, of course, best practice). A arranged for the testatrix to sign the will at a time when the testatrix s sister (who shared the house) was absent. The testatrix was visited by her doctor in the morning and by a friend in the evening. Both said that they found her confused. A contended that the will had been validly executed between the two visits and indeed the two witnesses said that they had observed nothing strange in the testatrix s behaviour. The will was found invalid on the basis of lack of capacity and lack of knowledge and approval. The court referred to the presumption that mental states continue. The testatrix s confusion was a serious and continuing problem resulting from the diabetes and her medication. It was not credible that the will had been executed in a lucid interval between two periods of confusion. Also look at the Appeal Court s judgment of Sharp v Adam [2006] EWCA Civ 449 (28 April 2006), which also looks at the issue of capacity, this can be found on the BAILII website - www.bailii.org - use the search facility to find the case. If you have concerns about the client s mental capacity consider obtaining a doctor s report. There is available a book called Assessment of Mental Capacity for Doctors and Lawyers published by the Law Society (Available from Marston Book Services 01235 465656) which outlines the position on capacity and gives advice on how to write appropriate letters to the doctors. Page 8 of 29
If you have serious doubts about the mental capacity of the client you should not act. The client s lack of capacity terminates the retainer or prevents the client entering into a retainer. See paragraph 10 to the guidance to Rule 2. You may wish to suggest, therefore, to close members of the family the need to consider a Deputy Order. This was introduced by the Mental Capacity Act 2005 (which came into force on 1 st October 2007). This Act replaced the form of Enduring Power of Attorney with the Lasting Power of Attorney and replaced the Receivership order with an order for the appointment of a Deputy. This is where a close member of the family or a close friend is appointed by the Court of Protection to look after the affairs of the person who is mentally incapable. The actions of the person appointed (the Deputy) are closely monitored by and the Deputies have to annually submit accounts to be checked by them. However, if a Deputy order is in place the Deputy can apply to the courts to prepare and execute a Statutory Will. The procedure may be lengthy but it still needs to be considered. Remember that the onus on proving there is mental capacity is with the propounder of the will the person who wants to have the will declared valid. If you have drawn up the will make sure that your file contains full details of how and when instructions were taken and if you need to note any concerns show how these were dealt with. Note, there are two presumptions concerning capacity which can both be rebutted. i) Rational will. Capacity is presumed where a will which has been properly executed and all the formalities have been dealt with appears to be rational; and ii) Mental illness continues. Where the testator generally lacked capacity, it is presumed that he continues to have the mental illness. This can be rebutted if it can be shown that he has recovered or that he made the will in a lucid interval. Consider the following cases that discuss these points: Channon v Perkins [2005] All ER (D) 30 Otuka v Alozie [2005] All ER (D) 265 Page 9 of 29
2.1.3 Undue influence The same principles which apply to judging mental capacity can also be applied, as vigorously, when removing doubts about undue influence. The same features are quite often present. The testator does not use his usual solicitor, the appointment for a new will is often made by a third party (who will often accompany the testator), and the will is a complete revision of earlier wills made. Make sure, in any of these circumstances, that instructions are always taken privately; ensure that the testator is aware of the size of his/her estate and the proportion of any gifts in relation to that estate. Always make full file notes if there is any aspect that concerns you, or advise the client to return at a later date when they have a chance to consider their instructions. In the case of an elderly client you could offer to see the client in their home where you may be able to assess the situation more carefully. Cases such as Lily Louisa Morris deceased (see above) can happen even when the testator is lucid, if it is they are pressurised in some way into making a gift or taking a course of action they would not otherwise take. An interesting case on the subject to read, even though it does not concern will drafting, is that of Daniel v Drew (2005) EWCA (Civ) 507 - this can be found on www.bailii.org.uk. For most clients, however, mental capacity and undue influence are not issues, but they must always be considered as a pre requisite before taking any instructions. 2.1.4 Gifts to solicitors You should note at this stage that if it is proposed that a legacy is to be left to the solicitor or those in close contact with him the legal adviser MUST follow the Law Society s ruling. This rule applies to gifts to a client s solicitor, the solicitor s partner, or a member of staff or to the families of any of them. The gift is to be of a significant amount (either in itself or having regard to the size of the client s estate) and the reasonable expectations of the prospective beneficiaries. If this is the case the solicitor must advise the client to take independent legal advice as to the gift and if the client refuses he must refuse to act. For further guidance and clarification you should go, again, to the Solicitors Regulation Authority s website (www.sra.org.uk) and read Rule 3 and notes 56-63 of the guidance to the rule. Page 10 of 29
2.1.5 The Instructions When taking instructions for a will it is always useful to have a checklist with you to ensure you cover all the points that you wish to raise with the client - in particular - aspects on Inheritance Tax or specific legacies. It needs to be clear from the file that you have addressed all those issues. Below you will find a checklist covering the major points that should be discussed with the client when taking instructions. Task 2 Consider the checklist and from it devise your own questionnaire that can be used for all clients and which can, when completed, be placed on the file as a record of your instructions. Such a questionnaire is also invaluable if, for whatever reason, you are unable to draft the will a colleague will be able to take over the task without reverting back to the client for further instructions. 2.1.6 The Client Retainer (Your contract with the client) Once you have taken instructions from a client, a retainer letter should be sent to the client setting out the extent of the obligations and duties you owe to your client in respect of the work you have agreed to do. This is the contract between you and the client. This is applicable in all areas of work undertaken by legal advisers but is especially important in wills as it defines the specific task that the solicitor has agreed to deliver. This is potentially important in defining the extent of liability since, without a clearly defined retainer, the Courts are more likely to side in favour of the clients if there is a dispute over what the legal adviser agreed to do for the client. It is clear from case law that the retainer is one of the key elements in determining a legal advisers liability in a potential negligence claim. Note: the retainer is not the same as the client care information, which you are required to provide by virtue of Rule 2 of the Code, which will be looked at in detail in Unit 2. The retainer should not therefore be just another paragraph incorporated into these pieces of correspondence. Good practice dictates that the firm s terms and conditions, the Client Care Information should be contained in one letter or booklet, with a separate letter being sent containing information relevant to each individual client and setting out the terms of the retainer Page 11 of 29
2.1.6.1 What should a retainer include? The client should be supplied with all the appropriate information before he accepts the terms of the retainer. If the retainer is challenged, the Courts will need to see that the client had appropriate and relevant information prior to making their decision. Appropriate information? Can the client understand the decision they are making based on what you have told them in the letter. For example, have you set out the timescale of the matter, have you explained whether your fee includes witnessing the document or will there be a separate charge, will you store the will for the client and, if so, will there be a charge for this? Cases which have come before the courts challenging the retainer have usually sided in favour of the client. The case of Hurlingham Estates Ltd v Wilde & Partners (1997) STC 627, whilst involving a solicitor failing to give tax advice in a commercial context, would apply equally to any private clients receiving advice from a legal adviser about wills. In this case, the solicitor argued that it had been expressly agreed during a meeting with the client that the client would obtain his tax advice from his accountant. However, there was no file note reflecting this, nor was there a clear retainer between the solicitor and his client setting out these terms. The judge, Mr Justice Longman, was critical of the deficiencies in the information given to the client stating at one stage the purpose of the retainer as being: The letter is required not only to evidence what has been agreed but to ensure after receipt of the letter the client can consider (and discuss with others) the position and its implications away from and free from any constraints imposed by the presence of a solicitor The points emphasised in the above case were followed by Mrs Justice Arden in Gladys Muriel Estill & Others v Cowling Swift and Kitchen(1) Matthew Caswell(2)(2000) Ch. In this case, the judge went on to hold that even though the solicitor had sought counsel s advice on the matter this did not mean that the solicitor was excused from giving full advice to the client on the tax implications of the proposal and should also have checked that the advice from counsel contained reference to that issue. Page 12 of 29
She went on to hold: To undertake some lesser service, for example, that of simply asking questions approved by the client and forwarding Counsel s advice to the client would have required an express agreement to that effect For a Probate adviser, both these cases seem to suggest the following: i. A legal adviser who drafts a retainer agrees to act with the reasonable care of a reasonably competent legal adviser this means that failure to act on basic tax issues could be dangerous. ii. If you are seeking to limit your liability you should iii. have an express agreement. Reliance on experts is insufficient in most cases you should be able to identify appropriate information and explain it. iv. Always try to have the terms of the Retainer acknowledged by the client. It could be appropriate, as with the client care letter to send out a duplicate for signing and return by the client. Task 3 You have been instructed by a client in the preparation of a will. During the course of the interview the client informs you that he has a property in Spain and asks what is the position about this property on death. You have no knowledge about foreign assets, nor do any of your colleagues. Draft a suitable paragraph for including in your retainer letter limiting the advice in this area. Checklist on taking instructions for a will: 1. Receive instructions from the client check all money laundering requirements are in order check client is over 18 check client has capacity and intention to make will 2. When taking instructions make a full file note of all the information given and complete the questionnaire. Note the areas you are not giving advice on and indicate the client s agreement. Note timescale agreed. Page 13 of 29
3. Confirm instructions in writing and provide the information required under Rule 2 of the Solicitors Code of Conduct 2007. At the same time set out the firm s general terms and conditions. 4. Send a separate letter setting out the written terms of the retainer as agreed. The letter may need to refer to separate information you are sending or to the advice given during the meeting or to any advice given subsequently. The retainer letter should state clearly the work that is included and any areas that are specifically excluded. Ensure that the letter has enough information to enable the client to make an informed decision. 5. Check all copy documentation is returned acknowledged and with agreement to the Rule 2 information and the terms of the Retainer. 6. Draft will. 3. Drafting the Will 3.1 Precedents and will writing techniques Will precedents are invaluable tools for will writing; however they MUST NEVER be relied upon as you will rarely find a precedent which fits your client s instructions. Always be careful in case you are using out of date precedents; tax changes may necessitate radical revision of a precedent and if the out of date version is used a negligence claim is almost inevitable. For example, following the case of IRC v Lloyds Private Banking in 1998 it became essential for will draftsmen to alter their precedents to ensure that no beneficiary had to be allowed to stay in the property after the testator s death otherwise the Revenue saw this as a continuing interest in possession and all tax advantages of disposing of a share in the property would be lost. Older precedents did not cover this point. See IRC v Lloyds Private Banking [1998] STC 559 Most wills are written without punctuation - this was generally to prevent fraud. A comma can alter the meaning of a sentence, but if it was accepted practice not to have commas then if one is later inserted, this should arouse suspicion. Page 14 of 29
Task 4 Try to draw up a clause in a will that would have two different meanings if a comma was inserted. 3.2 Structure The structure of a basic will is generally consistent, as follows: Words of commencement Revocation clause Executors appointment Guardian appointment Specific gifts General legacies Residuary gifts Extension of Executors and Trustees powers Attestation clause and Date We will now look at each of these parts individually: i. Commencement The commencement clause identifies the person making the will and should clearly state the testator s FULL name and address. If the testator owns assets which he knows are not in his usual name, maybe because of a change of name, then refer to both names here. When a Grant of Probate is applied for, both names will be added to the Grant and this will ease the administration. Clause: THIS is the last will and testament of me Jake Martin (otherwise known as Jake Shufflebottom) of 23 Steep Rise, Downport, West Uplands. ii. Revocation A later will always revokes earlier wills that are inconsistent with it. To avoid any confusion, however, a revocation clause should be included so all previous wills are revoked in their entirety. Clause: I revoke all former wills made by me. Page 15 of 29
iii. Appointment of Executors As stated at the start of the unit, one of the reasons for making a will is to ensure that the testator knows who will be looking after his estate after his death. He needs to be assured that they are all willing and able to act. The executors will also, generally, act as trustees of any trusts that may be created under the will so the testator has to be made aware that this could be a lengthy responsibility that the trustee may take on. Any number of trustees can be appointed, but no more than four can take out a Grant for a specific property. (This links in with property law where only four people can hold the legal title to a piece of land.) Usually two people are appointed; then if one of them dies before the testator or during the administration or for some reason cannot or does not want to act the second appointee can continue. As will be discussed in Unit 3, even if a person is appointed he or she can have power reserved which means that they do not have to act initially if they do not want to but they can become involved at a later date if they wish. The choice of executors is generally: a. friends or relatives b. professional advisors c. trust corporation a. Friends or Relatives? Many consider the appointment of a friend/relative to be the preferable option. There are many factors in favour of appointing them; they may do the work for free, have knowledge of the testator s affairs and take a personal interest in the proceedings. On the other hand, being an executor is not an easy role it brings with it many responsibilities that some people may find hard to cope with, especially if they are not commercially experienced or have other commitments. Some testators take the positive decision not to appoint a close relative, as this person may also be having to cope with the bereavement. Such appointments can also lead to conflicts of interest, particularly if the executor is a specific legatee (a named beneficiary i.e. someone who has been given a gift under the will) who it may be felt has put his own interest above those who are to receive the residuary (or balance) of the estate. Page 16 of 29
b. Professional Advisers Professional advisers i.e. accountants, solicitors, have the advantage of often being neutral towards the estate and at the same time will have experience and knowledge not only on estate administration but also on associated areas such as tax. However, the professional advisers will charge for their work and often have no personal interest in the estate itself. If a firm of solicitors is to be appointed it is important to note the following: i. Generally a firm is appointed to act rather than one particular person. This avoids problems if the individual dies, retires or leaves the firm. ii. When drafting the appointment clause be sure to state that the partners at the date of death are appointed rather than XYZ firm of solicitors as this latter wording will cause problems with the probate registry. iii. It is usual to state that two and only two partners are to take out the Grant, but this is not essential, as we have already seen, since any additional partners who do not take out the Grant can have power reserved. iv. In all cases where professional advisers are appointed a charging clause should be added as strictly, particularly if there is a trust involved the solicitors are unable to make a profit from their position, unless previously agreed. c. Trust Corporations (banks) A testator can appoint a bank or other trust corporation to act in the administration of the estate. Such institutions, however, will usually insist on their own appointment clauses including fixed charging rates, which allow little room for negotiation and which have been known on occasions to have been excessive in relation to the amount of work undertaken. Further the trust corporations have been known, where the estate is not very large, to give up their appointment as executors, in other words, renounce probate, (see Unit 2), leaving the unsuspecting family to become involved. Page 17 of 29
d. So who should be appointed? A legal adviser can only point out the options to the client and should never force the appointment of the firm on them. One of the most preferred options is the appointment of a professional adviser with a close member of the family or a friend. This ensures a personal involvement as well as some of the more onerous responsibilities being placed on the experienced practitioner. iv. Guardians Task 5 In all situations where the testator has parental responsibility for a child or children, the testator should be advised about the appointment of guardians. As with the appointment of executors, before the guardian is appointed the testator should check with the individuals that they are willing to act. The law relating to the appointment of guardians is set out in the Children Act 1989 and you should be aware of these provisions when advising a testator on the proposed terms. Go to the Children Act 1989 at http://www.legislation.gov.uk/ and consider the provisions contained in ss5 and 6 of the Act. Note, particularly the position in relation to divorced parents. Consider also when under the Act a surviving parent can have the guardianship appointment terminated. 3.3 Specific Gifts and General Legacies These two types of legacies (gifts under a will) are usually considered together, although whilst they have some common elements, they should also be examined separately. When taking instructions for these legacies, always advise the client to think about: the nature of the legacy the size of the legacy in relation to the size of the whole estate the beneficiary. 3.3.1 Specific gift This is a gift of a particular item owned by the deceased at the date of death e.g. my motorcar. Page 18 of 29
Always take care in clearly identifying a specific item so that there is no room for doubt later as to what the testator wanted to give away. So, for example, the testator leaves his motorcar as a specific gift and he has more than one car then specify the object by reference to the registration number. This is more difficult when the item is something like a piece of jewellery, then a fully detailed description would have to be given and try to include a distinguishing feature. The testator should always be told that if the object to which the gift refers is lost, sold or destroyed or changed in substance at the date of death the beneficiary to whom it is left gets nothing. This is called ademption. However, the Testator could give a substitutional gift in case the original object is no longer available e.g. I GIVE to X my Ford motor car registration number G368ERN or such other motor car I may own at the date of my death. Note that ademption can also occur when there is also a change in the nature of the property. This is particularly relevant when T is gifting, for example, specific shares in a company. If the company were, during the testator s lifetime to be taken over by another company, then it is likely that this would be seen as a change in substance or nature and the gift would fail. Task 6 a. Consider any company takeovers where ademption may have occurred and affected the ordinary person who may hold a few shares which they may have left in their will; and b. Draft a clause for a will which may overcome this problem. Some testators may wish to leave a token gift to a friend or relative or group of friends or relatives that the beneficiary or beneficiaries themselves choose. Whilst this may happen quite often in practice it is not without its dangers. When taking instructions the testator should always be asked to consider various points: a. There should be a specific list of who will be able to choose any gifts and, if appropriate, it should state in what order. b. If there is a limit on the value of the gift this should be stated. c. There should be a time limit in which the beneficiaries have to select their gift. Page 19 of 29
d. There should be a method of resolving any disputes that may occur between beneficiaries. e. What happens if one of the beneficiaries dies before the testator. f. What happens to any items not selected? 3.3.2 General Legacies Whilst general legacies may include general gifts, for example, I give 200 shares in the company ABC, they are most often associated with gifts of money (also known as pecuniary legacies). Gifts of this nature, to some types of beneficiaries, can also create problems in certain circumstances. This is particularly so when the gift is to minors or charities. Minors: Unless there is a specific provision in the will a minor cannot give a valid receipt for money left to them. Until the Children Act 1989, a parent could also not give a valid receipt without a specific provision. Task 7 Look, again, at s5 of the Children Act 1989 and consider how this changed the law. It now means that if the Testator does not want the parent to receive the money on behalf on the minor then the legacy should be placed in trust until the minor reaches the age of 18. Charities: You should always take extreme care when dealing with any gift to a charity. Always check with the client the correct name and details of the charity where the legacy is to be left. There may be several charities with very similar sounding names and objects but which is the one that the client wishes to benefit? Once this is established it is always prudent to include the charity s registration number in your description, this not only confirms the correct charity but is also evidence of its charitable status. If, for whatever reason, the charity is not in existence at the testator s death, the gift may be diverted to another charity under the Cy pres doctrine. If you are not familiar how this works see: http://dictionary.law.com for an introduction to the subject. You should note that ademption does not apply to general legacies. If the testator has left to the beneficiary 200 shares in ABC Ltd and there are not 200 shares in ABC Ltd the personal representatives either have to buy the shares or, as is more usual, give the beneficiary a sum equivalent to that value. Page 20 of 29
Many specific and general gifts also include the words free of tax in the precedents. This is not strictly necessary. Why not? Task 8 Go to the Inheritance Act 1984 s211 for the reason. However, most wills include this as it shows that the testator knows the position and does not want it altered. 3.3.3 Residuary Gift A residuary gift is all the property left in the testator s estate that is not disposed of by a specific or general gift. This is the part of the will that usually requires the most careful drafting. For example, to incorporate, if required, substitute beneficiaries if the original beneficiary dies before the testator - or to decide if a survivorship clause should be included. [In this Unit we will only be considering the very basic residuary clauses and will not be covering in depth the various trusts that can be established in the residue.] In all residuary clauses it is usual for the will to deal with unsecured debts (i.e. not secured debts such as mortgages), which are usually paid out of the residuary estate first together with the administrative costs. So most basic wills contain the statement: I GIVE all my estate both real and personal after payment of my debts funeral expenses and legacies to DF of. Another common way is instead to give all the property to the personal representatives as trustees and then to set out the objects of the trust (i.e. the people or organisations to benefit). I GIVE all my real and personal property whatsoever and wheresoever not already disposed by this will to my Trustees UPON TRUST.. This is usually the preferred method when the residuary estate is to be divided into two or more beneficiaries, or if there are minors who are to benefit under the clause. So, who may the residuary estate be left to? Page 21 of 29
a. An individual This is straightforward drafting but what if the individual dies before the testator, should there be a substitutional gift? This will be discussed shortly. b. Gift to more than one person or institution. The gift to more than one person or institution does not have to be the same. So, for example, the estate can be divided into 12 parts 6 can be given to A 4 to B and 2 to C. Task 9 Draft the appropriate clause reflecting this by continuing the following: My Trustees shall hold my Residuary Estate UPON TRUST and divide the same into twelve equal parts However, in most cases it is essential that a substitutional clause is included, either giving a particular share or shares to another person e.g. the children of the first beneficiary or allowing that share of monies that has failed to be divided up between the surviving residuary beneficiaries. If there is no substitutional clause there is a possibility that a partial intestacy could arise, which as we shall see in Unit 2 could have adverse consequences. c. Class Gifts Quite often, gifts to more than one person are made to a class of beneficiaries e.g. all the testator s children. If this is the case, a technical point should be considered called the class closing rules. These can be explained in any Trust text books but effectively the rules determine at what point a particular class of beneficiaries stops and then only the people within that class at the time will benefit under the will. If a class gift is to be included the class itself must be clearly defined. For example, if a testator wishes to leave his estate to his nieces and nephews that will not include his wife s nieces and nephews unless they are specifically included. Page 22 of 29
Again, as with named beneficiaries, the client has to be advised to consider what would happen if one of the class members were to die before the testator. Would their share go to the surviving class members or if the deceased beneficiary has children do those children take per stirpes the share their parent would have taken? Task 10 3.4 General Points on Residuary gifts Many clients are perplexed by the term per stirpes. Devise an explanation of the term that any client would be able to follow. For all residuary gifts the following general points should be considered. 1. The inclusion of a survivorship clause. If a residuary beneficiary dies shortly after a testator, he or she may take an immediate interest in an unconditional gift. As a result the gift the testator left may go to someone totally unknown under the original beneficiary s estate. Equally important if the estate was to have gone to the spouse then, as a result, the spouse s estate may have been considerably increased by the gift causing it to fall within the Inheritance Tax brackets. A survivorship clause will make sure that the gift only goes to the named beneficiary if they survive the testator by a specified period of time. For Inheritance Tax purposes that period of time should never exceed 6 months, and for administrative purposes too the period of time should not be excessive since the estate cannot be distributed until the principal beneficiary dies or until the end of the specified period, whichever is the sooner. In most wills the survivorship clause is 28 days. Note however that you will need to consider in each case whether a survivorship clause will be required. We will see in Unit 6 the detail about the inheritance tax provisions and the recent introduction of the transferable nil rate band. It may not be desirable to include a survivorship clause in the event of a person leaving their estate to their spouse. Go to http://www.gotelee.co.uk/about-us/news/removal-of-the-28- days-survivorship-clause-can-save-you-tax for a useful summary of the point by Gotelee s solicitors. Page 23 of 29
2. The inclusion of substitutional gifts. The need for substitutional gifts has already been discussed and their importance in ensuring that the testator s wishes are followed and a partial intestacy avoided. In addition to careful drafting, there are two statutory provisions, which could, in certain circumstances, be effective. They are: i. Administration of Justice Act 1982 as amended by s3 of the Law Reform (Succession) Act 1995 and ii. s33 Wills Act 1837. Task 11 Read the statutory provisions referred to above and identify the limited circumstances in which they operate. A prudent draftsperson will always consider a specific substitutional gift. The problem that may arise is that some testators wish all contingencies to be covered. This often makes the residuary clause long, complicated and open to misinterpretation. If possible, a Testator should be encouraged to consider making a new will as and when a large number of potential beneficiaries pre decease him. 3.5 Administrative Provisions As stated earlier, the administration of an estate is not always routine. If a trust is created and the will does not mention any powers given to trustees then there are various statutory provisions which govern how the trust and the original will are to be administered. Through the will, however, these powers can be excluded, altered or restricted and other powers can be added to make the administration of the estate simpler. Some of these provisions we have already considered e.g. a receipt clause from a minor at a certain age. There are, however, considerably more and whilst it is intended to look at these provisions in later Units you may wish to consider at this stage if there are any administrative provisions that may help the personal representatives. STEP has produced a comprehensive set of clauses that are comprehensive enough for most wills. Some will precedents simply refer to these clauses rather setting out the individual administrative powers. This has the advantage of considerably shortening the will. Page 24 of 29
For example, a clause could read: I DECLARE that the administrative provisions of the Society of Trust and Estate Practitioners (1st Edition) shall apply Section 11 of the Trust of Land and Appointment of Trustees Act 1996 (TOLATA) (Consultation with Beneficiaries) shall not apply. Task 12 Why do you think that s11 of TOLATA should not apply? 3.6 Miscellaneous Provisions A will may contain any number of miscellaneous provisions; however the most common are those that give directions about the funeral arrangements. These provisions usually appear at the end of the will but it is often the first item the personal representatives will want to check on the testator s death so that the wishes expressed can be taken into account. Note, however, there is no obligation on the part of the family or personal representatives to follow the testator s wishes. The client may ask advice about more creative funeral providers. For example, concerns are already being expressed about the environmental pollutants emitted during cremations and many people are now considering more green funerals as a preferred choice. If more information about these funerals is asked for it can be found on the following sites: The Natural Death Centre www.naturaldeath.org.uk Peace Funerals www.peacefunerals.co.uk 3.7 Date and Attestation Clause The attestation clause is usually the last clause in the will, but immediately prior to the attestation the date is often set out, although in many wills the date is at the beginning. It has no effect on the validity where the date is written but it should be clearly shown on the document. The date identifies the latest will and is therefore imperative if there has been a number of revised wills during the testator s life. Likewise, it is not a requirement for a valid will to have an attestation clause, but the attestation clause is the clearest evidence that the formalities of section 9 of the Wills Act 1837 as amended by s17 of the Administration of Justice Act 1982 have been complied with. The requirements of s9 reflect how seriously the courts have taken the signing of the will to ensure the minimum risk of fraud. If a proper attestation clause is included in the will there is a presumption that the Page 25 of 29
will has been properly executed. If it is not included the Probate Office will invariably ask for an affidavit of due execution. This can lead to a delay in the administration and potentially increased costs, particularly if either of the witnesses cannot be easily traced. Task 13 Read the requirements of s9 of the Wills Act 1837 (as amended) to ensure you are fully aware of the requirements. There are many different forms of attestation e.g. SIGNED by the said EF in our joint presence and then by us in hers An attestation clause approved by the courts in Selby v Bigge 1950 1AER 1009 reads as follows: Signed by the Testator in our presence and attested by us in the presence of him and of each other In the case of the testator being unable to read or write the procedure is governed by the Non Contentious Probate Rules 1954 rule 11. Task 14 4. Executing the Will Read this rule and draft a clause that reflects the requirements if the testator cannot read or write. When the will is drafted make sure that the testator is sent a copy for his approval with an accompanying explanation of the contents. The testator should be allowed to make amendments in his own time. Try to ensure he sends you back the will amended, rather than tell you the amendments over the telephone, when they can be misinterpreted. If they are major changes then the testator should be sent a further copy of the revised draft. Once the draft is approved an engrossment should be prepared ready for signature. This should be securely bound to ensure there can be no tampering with the final document. The will is then ready for signing. Page 26 of 29
The testator s signature is his usual signature incorporating, if appropriate, any initials. However, any mark made by the Testator and intended to be his signature will be sufficient. In the case of In the Goods of Chalcraft [1948} P 222, the dying testatrix only managed E.Chal before she died. This was held to be sufficient. The signature is usually at the end, but it can in rare situations be at the beginning if the courts rule that the signature and all the subsequent written dispositions formed part of the same document. (Wood v Smith (1993) Ch 90). 4.1 Witnesses To complete the attestation the testator must sign the will in the presence of at least two witnesses present at the same time. The witnesses do not need to know the contents of the will nor do they need to know they are witnessing a will. They must see the testator writing the signature, but they do not have to see the signature. Alternatively, the testator can sign the will and then acknowledge the signature by words or conduct in the presence of the two witnesses present at the same time, but this time they must be able to see the signature. If the will is more than one page long the testator and the witnesses should be advised to initial each of the pages at the bottom. There are no rules about the capacity of the witnesses; they can be minors, provided they are old enough to understand what they are doing. They must however be morally/physically present i.e. not drunk! Always take care when arranging for a will to be signed that none of the witnesses is a beneficiary or a spouse of a beneficiary. If they are, then the gift to them will be invalid but the will itself will remain valid. The witnesses do not need to sign or acknowledge the will in the presence of each other, but the testator is required to be there when the witness signs. In practice, always try to ensure that all three people remain present throughout the signing procedure to avoid any potential problems over procedure. On a further practical point, it should be noted that most hospital trusts have now prohibited their staff from witnessing wills. It is always important therefore to take witnesses with you if you have to have a will signed at a hospital or nursing home. Page 27 of 29