Fights over wills are growing as the population ages

There is never a good time for bad news, but this was a really bad time.

When Jonathan’s father-in-law, George, was diagnosed with terminal cancer at the age of 92, his mother-in-law Mary was sliding into dementia. Their four children were worried about how Mary would cope after George died, given that she was clearly losing mental capacity. Jonathan arranged for a power of attorney for Mary, to be split between him and his wife’s siblings, so that they could make decisions about her care.

Jonathan tells the FT that this decision avoided a family catastrophe. His wife’s sister was caring for their mother and had already tried to access her funds to pay for a house extension. He sat the siblings down and told them they had to agree not to use their power of attorney but to allow him to make decisions with Mary’s best interests at heart. That meant he could ensure that, aside from her care fees, no more of his mother-in-law’s money was spent while she was alive.

“If I’m honest,” he says, “if we hadn’t had the [power of attorney] in place, the money would have gone: one of the siblings would have taken the lot.”

Cases where a will is disputed on the grounds that the person who made it had lost mental capacity are on the rise, say lawyers and advisers to the rich. Part is purely demographic: there are more people and they are living longer. There were 55mn people with dementia globally in 2020, which is set to rise to 78mn by 2030, according to the World Health Organization.

Part is because there is now significant wealth: by 2030, roughly $18tn of assets will have been passed down by the baby boomer generation to their children and grandchildren, according to a recent estimate by asset manager Vanguard, in what has been labelled the “great wealth transfer”. And part is societal, as blended families increase, opening up more opportunities for disharmony. “There’s definitely an increase in legal challenges,” says Jeremy Franks, head of wealth planning and advisory at HSBC Private Bank.

Jonathan, a lawyer attuned to such situations, saw the trouble coming. Many other families do not.

Capacity is not something that a person loses one day and never regains. It relates to specific decisions, and a person may be able to make decisions at certain times, or about certain things but not others. In order to be deemed to have capacity, a person has to be able to weigh up the pros and cons of a decision, make it themselves and explain why they made it.

“Someone could decide to sell a house much more easily than deciding who should get what in a trust fund,” says Jonathan Arr, a lawyer at Macfarlanes. “I have seen cases where, if you go to see someone in the morning at the right time, they have relatively excellent ability to take decisions — but then they get tired or ill and that causes much greater loss of capacity.”

When it comes to making a will, capacity means understanding who their beneficiaries are, what their estate is worth and why they have decided to bequeath money to certain people and not others. Beneficiaries are not always pleased with the result, but as long as those steps have been followed, there may not be much they can do.

Proving loss of capacity is not easy. “If someone makes a bad decision, that’s not a lack of capacity,” says Dr Justin Sauer, a consultant psychiatrist who regularly advises families and is called into court to give testimony on loss of capacity issues. If a person in their eighties decides to change their will to give all their money to the donkey sanctuary rather than their children, is that a loss of capacity or just a bizarre choice?

Complex family structures, combined with the great wealth transfer and the likelihood people will make more than one will in their lifetime, as well as UK-specific tax changes, mean that loss of capacity is occupying more and more of lawyers’ and advisers’ time.

Disputes can go all the way to court, including after people die, and psychiatrists are called in to try to decide if a person had capacity based on paper records. Some cases hit the headlines. A judge ruled in 2019 that US billionaire media mogul Sumner Redstone did have capacity to make changes to his trusts a few years earlier, after his former companion claimed he did not.

In a sadly ironic case in the UK, former judge Lord Sydney Templeman’s will was challenged after, having married again, he changed it to the detriment of his biological heirs. The judge had in fact introduced the so-called “golden rule” in the 1970s, stating that any solicitor drawing up a will for an elderly person should ensure their capacity to do so was certified — but he failed to do this himself. Despite that, a judge ruled that he had had capacity when he made the will.

One unexpected reason for the rise in capacity-related disputes, Arr believes, is that it is easier to allege loss of capacity than to challenge a person’s decision. That is not just a legal reality, but often an emotional one: it can be hard for heirs to accept that they were cut out of the will or given less than their siblings. “There is also a tendency now to use it as an aggressive tactic in litigation,” he says. “People sometimes perceive it as being an easier way of mounting a challenge.”

Alleging loss of capacity can cut both ways. Before Florence’s grandmother died, she had been making cash gifts whenever anyone came to see her; family members knew that a visit meant funds. “She’d go to the supermarket and take out £200 to give to the kids almost to blackmail them to visit them. It was very sad,” Florence says.

There was a general feeling among the family that her grandmother was not entirely on top of her gift-giving and, after she died, Florence had to go through bank statements to figure out who had received what. It turned out that her father had received £20,000 more than her aunt. “That caused an almighty stink,” she says. Yet because the aunt had also been accepting the gifts, she couldn’t challenge the unequal outcome on the grounds of loss of capacity.

Ian Dyall, head of estate planning at wealth manager Evelyn Partners, says that most of the contentious cases he sees are in blended families. In a second marriage, the husband may want his wife to be comfortable after his death and leave her the house until she dies, which creates conflict with his children from the first marriage, who want the capital to be released. “We do see it in natural families as well, where the children are a bit more money-hungry,” he adds.

It is that “middle space”, where clients are starting to lose capacity, which causes most tensions, says Kamila Samin, an adviser at Lincoln Private Investment Office, a wealth manager. If they are unwilling to recognise that they are losing capacity, and thus refuse to sign a power of attorney, it may become too late, as a person needs to have capacity at the time of assigning a power of attorney.

How, then, can families avoid the loss of capacity, a sad situation, sparking something much worse?

People should think about capacity when they review their wills, advisers say, ideally every five years or when there is a significant change in circumstances. A clear audit trail between wills explaining any changes will make it easier to prove a pattern in long-term thinking, rather than a sudden change that boots a beneficiary out for no apparent reason. The normal advice is that anyone making a will should discuss their intentions with their beneficiaries while still alive, in order to avoid painful shocks.

Proving capacity is particularly important where the decision around a will may come as a surprise to the beneficiaries, advisers say. If one child is given less for whatever reason, the wealthy person needs to prove they had a good reason for that and that they thought it through. Otherwise, heirs could assert loss of capacity and fight the decision. Even an equal split could cause contention if one beneficiary felt their circumstances meant they should get more. Keeping a record of these intentions is helpful — for example a letter to be read out to beneficiaries by a solicitor at the reading of the will. Some people record a video explaining their thinking to be shown after their death, says Franks at HSBC.

Increasingly, if people make changes to their will, they should have their capacity to do so certified, in accordance with the “golden rule”, says Sauer. He will look at a copy of the old will and get an idea of the value and complexity of the estate. He then checks the person understands that too, as well as who the beneficiaries are. In order to assess whether there is undue influence, he separates family members and questions them individually. If he does feel someone is cognitively impaired, he does a memory assessment.

Power of attorney is not a panacea. Choosing the right person to be attorney is difficult: picking one child might inflame the others, so some ask a lawyer, adviser or business partner. Then there’s potential abuse. “You’d be surprised how many attorneys suddenly pop up and say, ‘Oh, Mum would want me to have a new car,’” says Stephen Richards, a partner at law firm Withers.

Dyall at Evelyn Partners says he is seeing a rise in court cases alleging that children with power of attorney are not executing their role properly. Such cases aren’t always about outright stealing, he notes. It could be that the child wishes their parent had done some inheritance tax planning so transfers money into a trust — but if the parent does not have capacity, that gift cannot be legally made. Court approval can be sought, but that takes time, so “the temptation to just get ahead and do it leads people astray”.

There is no escaping the fact that questions about capacity, legacy and family are fraught and emotional. Even talking about death and wills is something people are only recently understanding they should do, says Richards. The aversion to discussing loss of capacity can be a lot stronger: while death is inevitable, loss of capacity is something most people hope to avoid. “When someone loses capacity,” he says, “they still need to be looked after, so it’s almost like you’re grieving the loss but they’re still there.”

Names have been changed

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