Understanding the Legal Rules on the Incidence of Debts: A Case Study of Petterson v Ross [2013] EWHC 2724 (Ch)

In a recent case, Petterson v Ross [2013] EWHC 2724 (Ch), the legal rules on the incidence of debts in wills were brought to light. This case serves as a reminder of how assets are applied to meet unsecured debts in the absence of specific provisions in a will.

The Administration of Estates Act 1925 sets out a statutory order in which assets are used to pay off debts. If there is insufficient residue to cover the liabilities, pecuniary legacies and specific gifts are reduced rateably, with each beneficiary bearing a proportion of the debts. It is important for personal representatives to follow the correct order when paying debts to simplify the administration process.

In Petterson v Ross, a mother left specific gifts of properties in her will, resulting in insufficient residue to cover the debts. One daughter was given two properties, with one being subject to a mortgage. The daughter was only responsible for the charge on the second property, while the first charge was treated with other liabilities of the estate.

The case also involved the principle of marshalling, where a disappointed beneficiary is entitled to be compensated from the assets that should have been taken first. In this case, the daughter was entitled to be repaid from estate funds for the amount wrongly deducted from the property repossessed by the building society.

Additionally, the case of Pearce v Beverley [2013] EWHC 2627 (Ch) highlighted claims of undue influence in relation to lifetime gifts and a disputed will. The court found that the donee failed to rebut the presumption of undue influence and the will was successfully challenged on the grounds of lack of testamentary capacity and knowledge and approval.

In another case, Re Devillebichot (deceased) Brennan v Prior [2013] EWHC 2867 (Ch), a disappointed daughter failed to overturn her father’s will, which left the majority of his estate to his siblings. Despite evidence of persuasion by family members, the court found that the testator had capacity and knew and approved the contents of the will.

These cases serve as important reminders of the legal rules surrounding debts in wills, undue influence, and testamentary capacity. It is crucial for individuals to carefully consider the implications of their wills and seek legal advice to ensure their wishes are carried out effectively.