Lifetime Agreements and Gifts

AuthorNasreen Pearce
Pages155-168

Chapter 11


Lifetime Agreements and Gifts

11.1 INTRODUCTION

Family relationships, obligations and dependence may lead a person to enter into an agreement with a family member or a third party on the basis that he/she will ensure that on his/her death the third party will receive an interest in the estate or a specific property. These agreements take different forms, but can be enforceable against the estate in a claim for a declaration of the third party’s rights over the property or damages. Such a claim may also be challenged wholly or in part by the estate and/or the beneficiaries.

Such an agreement may take different forms. The agreement may be that the testator/testatrix will make a will in which he/she will ensure that a specific property or fund is bequeathed to the other party or for his/her benefit. This agreement is commonly known as a contract to make a will which is enforceable against the estate. The validity of the agreement may be challenged by the personal representatives of the estate of the testator/testatrix. The property or fund may also be subject to an application under section 11 of the I(PFD)A 1975.

The testator/testatrix may by his/her conduct have encouraged the third party to believe that he/she would acquire an interest in the testator/testatrix’s estate, thereby inducing the third party to act to his/her detriment. This type of arrangement is usually made in a parent/child relationship where a parent may encourage a daughter or son to work in the family business in the belief that he/she will receive an interest in the parent’s estate. If the testator/testatrix then fails to make the provision, the party who was encouraged to act to his/her detriment may sue the estate on the ground of proprietary estoppel.

Two or more persons, usually a couple in a relationship, for example a husband and wife, opposite sex or same sex civil partners or two people living together, may enter into an agreement to execute joint or mutual wills disposing of property belonging to each of them to the other on his/her death and then proceed to make their joint will or mutual wills. These arrangements or agreements often lead to a

156 A Practitioner’s Guide to Probate Disputes

challenge on whether the wills made can validly be regarded as mutual wills and whether the survivor can validly dispose of the property acquired by him/her in breach of the agreement reached between them.

A person may also make a gift to another in contemplation of his/her death which is not intended to, nor does it, come into effect until the death of the donor. This type of arrangement is known as donatio mortis causa. Certain conditions must be fulfilled in order for there to be a valid donatio mortis causa and, therefore, this arrangement is open to challenge if a claim is made against the estate of the donor on his/her death.

These arrangements are discussed in detail in this chapter.

11.2 CONTRACTS TO LEAVE PROPERTY BY WILL

Under this arrangement the testator/testatrix in his/her lifetime enters into a contract by which he/she agrees to leave by his/her will a sum of money or other property to any person, or by which he/she agrees that a sum of money or other property will be paid or transferred to the named person out of his/her estate. Provided that the agreement clearly identifies the property which is to pass on the death of the testator/testatrix, the promisee is entitled to make a claim against the estate for a declaration of his/her right or for damages in lieu. Where appropriate, an injunction may be obtained to prevent the disposition of the property (see Synge v Synge [1894] 1 QB 466). In order to be enforceable, the agreement must be validly executed. There must be an intention to enter into a binding agreement with an offer being made by one party and accepted by the other. There must be some consideration given and accepted, and the subject of the contract, be it property or money, must be identified.

On the death of the testator/testatrix, if a claim is made the claimant must prove the existence of a valid contract between the claimant and the testator/testatrix. The validity of the contract, however, may be challenged. For example, if the agreement was for a transfer of property it must comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and must be in writing. Prior to 27 September 1989, when this Act came into force, agreements relating to land had to comply with section 40 of the Law of Property Act 1925, which required a contract for the sale of land to be made in writing or evidenced by a note or memorandum signed by the deceased or a person authorised by him/her to sign on his/her behalf.

Irani v Irani and Others [2006] EWHC 1811 (Ch) (a case where the agreement came within section 40 of the Law of Property Act 1925 above) provides a good example of a contract to make a will, a challenge made on its validity and the

evidence which the court will take into account when determining whether a valid contract was concluded. In that case, an agreement was reached between a husband and wife during negotiations in an application made by the wife for financial remedy following the dissolution of their marriage. During negotiations, the husband through his solicitors made an offer in the following terms (at [9]):

In order to compromise this matter, may we put forward the following suggestion:-Our client undertakes not to sell, mortgage or otherwise deal with or dispose of the property and to execute a will leaving the property in equal shares to the children of the family Xerxis, Mahnaz and Rushna together with a further quarter share to Florine Da Costa.

The offer was accepted by the wife through her solicitors and as part of the agreement she agreed to discontinue her application, but neither she nor her solicitors took any further action in the proceedings. On 6 August 1984, pursuant to the agreement reached, the husband signed an un-witnessed document in which he purported to leave the property to the four children in the following terms (at [13]):

To Whom It May Concern


I Kaikhushroo Boman Irani in accordance with my divorce settlement dated
23.7.84 do here by leave my property at 62 Macfarlane Road Shepherds Bush London W12 7JZ in equal shares to Xerxis Irani, Mahanaz [sic] Irani, Rushna Irani and Florine Da Costa.

K B Irani

Clearly, this was not a valid will, but he intended to execute, and believed that he had executed, a valid will. He did not make any other will. He died intestate in September 1996. Under the intestacy rules the deceased’s illegitimate son, Edward, his former wife and the three legitimate children were entitled to a share in the estate. The former wife and children claimed that a valid contract was made between her and the deceased. Edward challenged this by issuing a claim for declarations that he was entitled to an equal one-quarter share in the deceased’s estate (which was admitted) and that the property formed part of the deceased’s estate (which was in dispute). Mrs Irani thereupon made a third party claim in the proceedings (to which her three children, Florine and Edward were defendants) in which she claimed that she had orally accepted unconditionally the terms proposed in the letter dated 19 July 1994, and that this thereby constituted a contract between her and the deceased. The terms of the contract were that, in consideration of Mrs Irani not proceeding with her application for a lump sum payment order and a property adjustment order in respect of the property, the deceased would not sell, mortgage or otherwise deal with or dispose of the property and would execute a will leaving the property in equal shares to her three children and Florine. Edward contended that although the deceased made an offer it was not validly accepted by the wife and that it was unenforceable as it...

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