Wills and Property – The First Two Limbs of Banks v Goodfellow
I am going to cover the first two limbs of the Banks v Goodfellow test for testamentary
capacity:
1. Capacity to understand the nature and effect of the act of making a Will.
2. Capacity to understand the extent of the property of which you are disposing.
The First Limb – Capacity to understand the nature and effect of the act
(of making a Will)
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What does it mean?
Various judges have tried to encapsulate what this means in the context of a
particular case, as set out below:
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Minns v Foster [2002] All ER (D) 225 – “he understood that he was making a
Will, and that he understood both the terms of his 1998 Will, and the specific
amendments that he wished to make to it”.
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Sharp v Adam [2005] EWHC 1806 – “knew that he was giving instructions for,
and executing, a Will, and understood the details of its provisions and their
effect”.
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Abbott v Richardson [2006] EWHC 1291 – “the nature of the act of making a
Will, and that she fully understood the nature and effect of the provisions of
the Will which she signed”.
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Carr v Thomas [2008] EWHC 2859 (Ch) – “Christopher Ward knew and
understood that he was making a Will and what a Will was”.
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Markou v Goodwin [2013] EWHC 4570 (Ch) – “clear from the instructions that
she knew she was making a Will and what it did”.
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Hawes v Burgess [2013] EWCA Civ 94 – “the deceased knew she was making a
new Will”.
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Simon v Byford [2014] EWCA Civ 280 – “Mrs Simon was capable of
understanding (and did understand) the nature of a Will and the effect of this
Will, which was a very simple one. He considered that it was sufficient that
she understood that David’s share would go to his family trust, without
further details. She was capable, if she had wanted to know who the
beneficiaries under the trust would be, of asking, but she did not do so”.
So, to summarise, there are two aspects:
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Firstly, the testator needs to have capacity to understand what a Will is. He
needs to be clear that it disposes of his property on his death, rather than
being an immediate lifetime gift.
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Secondly, he needs to have capacity to understand what the particular Will
he is making does in terms of who will benefit and how
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This limb therefore tests the testator’s understanding of the Will making process. It
requires a very basic level of understanding. I view it as a gateway: if the testator
cannot understand what a Will is and what his Will does, then there is little point in
considering the other Banks v Goodfellow criteria, as his incapacity is likely to be
obvious.
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Probably because of this, there are very few (if any) cases in which this limb is a
decisive factor. If the testator himself gives instructions for a Will (either to a third
party or by writing out his Will himself) then he is likely to show enough
understanding to fulfil this limb.
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In this scenario it is Jim who raises the need to update his Will now that his wife has
died. It is also Jim (rather than Ben) who says that he wants Ben to have everything.
You will need to decide whether you think this demonstrates sufficient capacity on
Jim’s part.
The Second Limb – Capacity to understand the extent of your property (of
which you are disposing)
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This is a much more hotly litigated area in terms of Will challenges. The law has
developed a lot over the past ten to fifteen years.
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There has been a considerable amount of confusion over the difference between the
capacity to understand the extent of your property and actual understanding. The
difference was addressed by the Court of Appeal in Hoff v Atherton [2004] EWCA Civ
1554.
In that case, the testatrix, Mrs Krol, had previously made a series of Wills leaving her
estate to the children of old friends in the event that her husband predeceased her.
He died in 1985. After her husband’s death, she became good friends with her
neighbour, Mrs Atherton. They saw each other every day and went on holidays
together.
In 1987, Mrs Krol made a new Will again leaving her residuary estate to the children
of old friends. She added a legacy of £3,000 to Mrs Atherton in 1989.
Mrs Atherton began to help Mrs Krol with her finances as their friendship developed.
In recognition of their friendship and so Mrs Atherton could better assist with her
finances, Mrs Krol put her current account into joint names with Mrs Atherton in
1993. She also assigned the benefit of an insurance policy worth £22,000 to her in
1994.
Also in 1994 Mrs Krol gave instructions to her solicitor for a new Will leaving
pecuniary legacies of £100,000 to the former residuary beneficiaries and residue to
Mrs Atherton. The residue was worth over £500,000 after IHT. It was accepted by all
parties that Mrs Krol was suffering from mild to moderate dementia at the time.
The solicitor did not speak to or visit Mrs Krol to take instructions for the 1994 Will.
Instead, the instructions took the form of a typed letter signed by Mrs Krol:
“I want to change my Will. I want to leave £50,000 to Francis, £25,000 to
Maxine, £25,000 to Gloria, £5,000 to you and £2,000 to Asthma Research.
Everything else is to go to Mary [Atherton] because she has looked after me
ever since Stan [Krol] died. If Mary dies first then it is to go to her two
children, Andrew and Rosemary, in equal shares. I want to appoint the same
executors as before.
Would you please prepare a new Will for me to sign.”
After receiving the letter, the solicitor wrote to Mrs Krol acknowledging receipt of
the letter. He wrote to Mrs Atherton to ask for details of Mrs Krol’s assets. Mrs
Atherton provided him with those details. She suggested that Mrs Krol should ask a
local solicitor, Mr Hatt, to witness the Will. The drafting solicitor sent a Will to Mrs
Krol for execution with a letter which confirmed that the residuary gift was likely to
be worth considerably more than £500,000.
Mr Hatt visited Mrs Krol with his daughter to witness the Will. Mrs Atherton was also
present. He read through the Will and specifically checked with Mrs Krol that she
understood that all of her residuary estate would pass to Mrs Atherton and was happy
with that. She confirmed that she was and also said how good Mrs Atherton had been
to her. He was satisfied that she understood the Will and she then executed it.
Mrs Krol died in 2001. After her death, the residuary beneficiaries under the earlier
Wills challenged it on the grounds of lack of testamentary capacity and want of
knowledge and approval. They argued that, because of Mrs Krol’s dementia, the
judge should have required evidence that Mrs Krol actually knew the extent of her
property. As no-one had discussed it with her, there was no such evidence and they
said that the Will should therefore be overturned.
The Court held that, in general, it is not necessary for a testator to demonstrate
actual understanding of his property, he must just have the capacity to understand.
By way of illustration of the difference, I could give instructions for a Will having won
the lottery but not having checked my ticket. The fact that I did not know about the
win (and therefore did not know the true extent of my property) would not rob me of
capacity, as I am able to understand how this affects the extent of my property.
The Court was satisfied in Mrs Krol’s case that she had the capacity to understand the
extent of her property and therefore upheld the Will. I will come on to the reasons
for the decision shortly.
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Of course, where the testator has discussed his property as part of the Will making
process, it is easier to determine whether he had capacity as there is evidence of his
understanding (or lack of it).
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Where there is no discussion, the Court will draw inferences as to whether he had
capacity from the other evidence (Hoff v Atherton [2004] EWCA Civ 1554). This
effectively means that the Court has to make an educated guess as to whether the
testator had capacity. In Hoff v Atherton, the Court held that the following were
evidence of Mrs Krol’s capacity:
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Mrs Krol’s accountant gave evidence that she was capable of discussing her
finances (in the context of her tax return).
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Mrs Atherton, who was helping Mrs Krol with her financial affairs, gave
evidence that Mrs Krol was capable of understanding them. Although the
judge treated her evidence with caution, he accepted this part of it.
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Several witnesses, including Mrs Krol’s hairdresser, gave evidence that she
was capable of having a coherent conversation at the time she gave
instructions for the Will. She was also capable of remembering her regular
hairdressing appointments.
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The witnesses to the Will (and particularly Mr Hatt) formed the view that she
understood the Will and knew what she was doing.
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Her solicitor had written to her and explained that the residue would be over
£500,000.
All of the above supported the inference that Mrs Krol was capable of
understanding that the estate would exceed the pecuniary legacies and that the
residuary gift would therefore form the bulk of her estate. That was sufficient to
fulfil this limb.
My view is that there were two key factors:
1) the fact that an independent solicitor supervised the execution of the Will
and did a thorough job of checking that Mrs Krol understood the Will and was
happy with it; and
2) the letter from the drafting solicitor explaining that the residue was worth
over £500,000.
Without them, I am not convinced that the Court would have reached the same
decision, whether or not Mrs Krol had remembered her hairdressing
appointments.
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This brings me neatly on to how good the testator’s capacity to understand the
“extent” of his property has to be. Does he simply have to be capable of
understanding roughly how much he has or does he require the ability to understand
it in more detail? Judging by the case law the Court takes a fairly broad brush
approach. The testator does not have to be capable of understanding exactly how
much he is worth, just to have a rough idea of the basic make-up and value of his
property as you will see from the extracts listed on the summary:
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“[The deceased’s] active consideration of the precise amount which it would
be appropriate for him to leave to his chosen charities seems to me to
betoken a man fully conscious of the general nature and extent of his
property, even if not necessarily aware of its precise value at any particular
moment” (Minns v Foster [2002] All ER (D) 225).
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“Nor do I think Miss Loxston’s ignorance of the value of her shares affected
her testamentary capacity” (Abbott v Richardson [2006] EWHC 1291 (Ch).
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“The principal property comprised in Christopher Ward’s estate was his
house. He was mistaken about the extent of the mortgage and did not know
its value. He was also unaware of the death benefit under the Post Office
Scheme. He was, however, in my view sufficiently aware of the nature of
the property to be disposed (Carr v Thomas [2008] EWHC 2859 (Ch)).
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“It is not, of itself, a requirement of testamentary capacity that a testator
has to know the value of his or her home. It is highly likely that she knew
that it was her most valuable asset by a long way, and that is good enough on
the question of capacity. When Banks v Goodfellow talks of knowing the
extent of one’s property, it does not mean that one has to know its value
with a high degree of precision” (Schrader v Schrader [2013] EWHC 466).
The Court does not therefore generally expect much. A testator can be ignorant or
mistaken about his property. As long as he is capable of having some idea of the
value of his estate, that seems to be sufficient, particularly when he is making a
simple Will which just leaves residue to one or two people, without any pecuniary
legacies.
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If, however, he is making a more complex Will, with pecuniary and/or specific
legacies, the required degree of understanding is likely to be higher (Sharp v. Adam
[2005] EWHC 1806 and Abbott v Richardson [2006] EWHC 1291). This is because the
extent of the estate is likely to be more relevant to the dispositions in the Will.
For example, imagine a case where a testator gives his home to one beneficiary and
a legacy of £1 to another. He tells his solicitor that his home is worth £1 and that he
wants to leave the pecuniary legacy of an equivalent amount to the other beneficiary
so they are both treated equally. Unless the testator lived in Stoke, he is likely to be
mistaken about the value of his property. In this case, the mistake about his assets
would have had a material effect on his Will and therefore call into question his
capacity to understand the extent of his estate.
However, if the same testator wanted to give all of his estate to one person, the fact
that he thought his house was worth £1 is likely to be less concerning. It would
probably be sufficient for him to be capable of understanding that he owned a house
without having any idea of its value.
The testator’s financial circumstances are also likely to impact on the required
degree of understanding. Take the example of a testator who leaves pecuniary
legacies of £500,000. If his estate is worth £2,000,000, then there is more than
enough in the estate to pay the legacies and there is unlikely to be a question mark
over his capacity, unless there is anything in his instructions which suggests he
thought that the legacies would be worth more than residue. But what if his estate
is worth £300,000? The fact that he was trying to give away more than he owned
could suggest a lack of capacity to understand the extent of his estate.
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Sometimes, a testator will only have capacity to understand the extent of his
property if it is explained to him. If it is not explained to him, then he will be held
not to have had capacity. This follows the case of Re Beaney [1978] 1 WLR 770. That
case concerned a gift of the testatrix’ house, which was her main asset, to one of her
three children. The effect of the gift was to make the testatrix’ Will, which left
everything equally to her three children, redundant. The Court held that the degree
of understanding for the gift was the same as for a Will, in view of the size of the
gift. It therefore considered the limbs of the Banks v Goodfellow test.
The Court held that the testatrix, who was suffering from advanced senile dementia
at the time she made the gift, would only have been capable of understanding the
extent of her property if someone had explained to her what she owned and what
effect the gift would have had on her assets. As there was no explanation, the gift
was invalid. This decision was approved in Hoff v Atherton [2004] EWCA Civ 1554.
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Finally, if the testator’s inability to understand the extent of his property has no
bearing on the dispositions in his Will, then it will not affect his testamentary
capacity, as per the case of Sharp v. Adam [2005] EWHC 1806.
This was an interesting case in which the testator, Mr Adam, was suffering from
advanced multiple sclerosis and could only communicate by eye movements and by
nodding and shaking his head. The multiple sclerosis had also caused cognitive
impairment. This made it rather difficult to take instructions for his Will.
Mr Adam owned a stud. He also owned an interest in a property and some shares.
His estate was worth around £600,000. He had a history of leaving his residuary
estate equally between his daughters. In his last Will, however, he left his residuary
estate equally between his stud manager and assistant stud manager and cut out his
daughters completely.
The Court held that Mr Adam was unaware of his assets apart from the stud because
of his lack of capacity. It also held that although he had a general idea that the stud
was doing well, he did not have any idea of its value. The stud manager ran the stud
and had not discussed its finances with Mr Adam for many years because of his lack of
capacity. The implication was that Mr Adam was unable to understand the extent of
his property even with an explanation. Despite this, the Court was prepared to
conclude that, if this was the only problem with his capacity, the Will would be valid,
as he would have made the same Will regardless of whether or not he was able to
understand the extent of his property. His inability to understand was irrelevant as it
had no effect on his decision.
This is an interesting decision. It seems to introduce a new gloss on this limb which is
not explicitly present in Banks v Goodfellow, in the form of a relevance test. That is
"does the testator have capacity to understand the extent of the property of which
he is disposing and does his incapacity affect the provisions of his Will". This suggests
that it is insufficient to simply prove that the testator lacked capacity to understand
his estate in order to overturn a Will. You also need to show that this affected the
provisions of the Will.
To summarise, this is a tricky area which even judges struggle to grapple with. It can
be difficult to separate actual understanding from capacity to understand. If there is
no evidence of actual understanding, then it may involve guesswork on the part of
the judge as to whether a testator had capacity.
The level of capacity involved will also vary from case to case depending on the
testator's particular financial circumstances and the complexity of his Will. It is
therefore important to look at the Will in context when considering whether the
testator is likely to have fulfilled this limb. Finally, the judge also has to consider
whether or not any incapacity affected the Will.
Turning to our case study and to Jim, he clearly has some issues in valuing his estate
if he believes it to be worth only £1,000. The questions for you are:
a) whether his mistake about the value of his estate indicates a lack of capacity or
simply a lack of actual understanding of his assets;
b) what level of capacity he requires to make this Will; and
c) whether any lack of capacity will affect the dispositions in the Will.
Charlotte Watts
Partner
T: 01722 427 728
E: [email protected]
The contents of these notes are intended as a guide for readers. They can be no substitute for specific advice.
Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent
changes in the law.