Capacity Challenge – Deathbed Gifts

Following the recent judgment in the case of Davey and another v Bailey and Another [2021] EWHC 445 (Ch), the Court showed how strictly it follows the requirements needed for a valid deathbed gift (a great overview of this case can be found here).

The case related to a husband and wife who died within a few months of each other. Each left a Will and appointed the other as sole executor and sole beneficiary. Following the wife’s death, the husband failed to execute a new Will prior to his death, meaning that his estate, including that which he inherited from his wife, passed under the law of intestacy to his next of kin, the Defendants. The Claimants (the wife’s sister and family) challenged that claiming that the couple had made gifts to them, whilst alive, of a substantial part of their sizeable estates, in contemplation of their respective deaths.

On the evidence, the intention of each of the couple had not been to make gifts to take effect on the death of one or other of them but to express wishes which the husband would incorporate into a new Will after the death of his wife. Accordingly, the strict requirements for a valid deathbed gift had not been met in all of the gifts claimed.

The Court noted that the Claimants were deserving of sympathy but unfortunately, the circumstances did not satisfy the requirements of a valid deathbed gift.

The strict principles that need to be followed are as follows:

1. The donor had to contemplate their impending death;
2. The donor had to make a gift that would take effect only when their contemplated death occurred; and
3. The donor had to ‘deliver dominion’ (possession) over the subject matter of the gift to the donee.

Strict proof of all three conditions will be required. If the donees fail in any one of them the “gift” will revert to the personal representatives to be distributed in accordance with the Will or intestacy.

Mental capacity when making deathbed gifts

Another important aspect to consider with deathbed gifts is the mental capacity of the person making the gift. The donor must have the requisite mental capacity to make a valid lifetime gift.

The burden of proof to establish, on the balance of probabilities, that the deceased did not have the capacity to make the gift lies with the party asserting incapacity. If, however, that party adduces evidence to raise sufficient doubt from which incapacity can be inferred, the evidential burden shifts at that point to the opposing party.

The common law test for establishing mental capacity to make a lifetime gift is set out in the case of Re Beaney [1978] 1 WLR 770 and is described as an ability to understand, rather than actual understanding:

The degree of understanding required in order to make a lifetime gift varies according to the importance of the transaction. In Re Beaney, the Court was asked to consider a widow’s gift of her house to the eldest of her three daughters. The gift was made shortly after the widow was admitted to hospital with dementia and she died intestate a year later. The Court set aside the gift having taken into account the medical evidence, and the facts that the effect of the gift was to disentitle the other daughters to any share in the estate (on the basis that the house was the only valuable asset) and that this was not explained to the widow.

The Court found:

It appears that the requisite capacity for the transfer of a family home is, therefore, likely to be as high as that required for a Will. The conclusion we are led to, based on the above, is that if the home is the donor’s principal asset, an understanding is also required of both the effect of the gift on their estate and also, if relevant, that it would deprive another of any entitlement or legal right to stay there.