Analysis
CJF was a thirteen year old boy who suffered very serious neurological damage at birth. He was initially cared for by his mother, KJF, but she had also suffered complications as a result of CJF’s birth, so he ended up being cared for by a foster parent, LR under a Special Guardianship order. LR passed away in 2013, and the Special Guardianship order was transferred to LR’s daughter, EH, and her husband, AH. CJF’s father, BJF, had denied his paternity, was not named on his birth certificate, and had played no role in CJF’s life.
Before she died, LR brought a claim against the NHS Trust responsible for CJF’s care at birth. This was settled in February 2013, with the Trust agreeing to pay a lump sum of £823,943 and periodic payments which amounted to £88,250 per annum in 2018.
In September 2013 a property known as 1AY was purchased and adapted for CJF’s needs using the funds that he had received from the clinical negligence claim. CJF lived in this Property with EH, AH and their two daughters.
At the time of this application CJF was expected to live for a matter of days – in fact, he died the week after the application. Had he died intestate, then his estate would have passed to his parents in equal shares. His estate would have been worth approximately £660,000. The major asset was 1AY, which was valued at £350,000, and the inheritance tax due would have been about £117,000.
LCN, CJF’s Deputy, proposed that his assets be settled on a disabled person’s trust pursuant to s89 of the Inheritance Tax Act 1984, under which 1AY would pass free of inheritance tax to EH and AH, and the residue would pass to KF. AH and EH agreed with this proposal, as did the Official Solicitor on behalf of CJF. LF accepted that 1AY should pass to AH and EH, but did not think that it should pass free of inheritance tax.
The principal question before the court was therefore whether the settlement should provide that the burden of inheritance tax should fall on the residue alone, or whether AH and EH should also bear part of it. In coming to its conclusion, the court relied upon authorities relating to the making of statutory wills.
The court also had to decide if it was appropriate to proceed in the absence of CJF’s father, who had not received notification of the application or hearing as he was unknown to LCN when they made the application, but who could potentially be contacted on social media by LF.
Held:
1) LCN’s proposal was approved – the property known as 1AY should pass to AH and EH free of inheritance tax, thus diminishing the residuary estate which would pass to KF. In coming to this conclusion, the court placed particular weight on the following factors:
a. The impact that caring for CJF had on EH’s and AH’s financial situation. EH was unable to work due to her caring responsibilities and AH took a lower paid job in order to be able to make more time for CJF and the rest of his family.
b. EH and AH refused care payments that they would have been entitled to, benefiting CJF’s estate to the sum of around £240,000.
c. CJF would have wanted EH’s and AH’s daughters to remain in their home and to be able to continue attending their local school.
d. KF, as a young single mother, looked after CJF in the early stages of his life and suffered long-term medical consequences as a result of the complications at his birth.
e. CJF is likely to have considered that his father, BJF, who played no part in his life, should not stand to gain from his estate.
f. The ‘magnetic factor’ was a concern that AH, EH and their daughters could remain securely in the home that they shared with CJF. That had been his home where he had been provided with care and love. EH and AH said that they would have been able to pay the £40,500 share of Inheritance Tax over 10 years, but it would have been a financial struggle for them to do so. It would not be in CJF’s best interests for there to be any risk to the security and stability of EH’s and AH’s home.
2) There were exceptional circumstances which justified proceeding without notifying BJF. In particular: CJF’s condition meant that a decision was required urgently; BJF had denied being CJF’s father and had played no role in his life; and not proceeding risked causing significant prejudice to AH and EH.
3) It was appropriate for the Court of Protection to exercise its powers under s16 of the Mental Capacity Act 2005, as CJF lacked capacity to manage his property and affairs at the time of the decision, and would have continued to lack such capacity if he had reached 18.
JUDGMENT DISTRICT JUDGE BECKLEY: [1] This is an application under s18(1)(h) of the Mental Capacity Act 2005 for the settlement of CJF’s property on trust. [2] The application was made on 20th November 2018 and the matter was heard urgently on 26th November 2018 for reasons set out later in this judgement. An order was …Continue reading "LCN v KF & ors [2019] WTLR 633"