Daughter cut out of will loses to animal Charities

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Supreme Court landmark decision:

The long awaited judgment in the saga of Ilott v Mitson & Ors[i] is a landmark decision by the Supreme Court. The result overturns the previous Court of Appeal judgment, which itself had caused shockwaves. It appeared to give almost no weight to the clearly expressed views of the late Mrs Jackson who did not want her only child, Mrs Illott to benefit from her £500,000 estate. Instead, she left everything to the animal charities. In a decision that will attract considerable attention, the Supreme Court has largely upheld the wishes of Mrs Jackson, and made serious criticisms as to the confused state of the present law, which led to such prolonged proceedings.

Background

In 2004, Mrs Melita Jackson died leaving a Will giving most of her £500,000 estate to Animal Charities. She had one daughter, Heather Illott. They had been estranged for 26 years. Heather had left home aged 17 to live with her boyfriend. Mrs Jackson disapproved. Mrs Jackson had left a detailed letter for her executors, explaining her decision to exclude Heather from her Will and that she had made it clear to Heather that she would receive anything under the will.

By the time of the latest hearing, Heather was in her 50’s and her husband had been made redundant. They were in receipt of benefits of around £13,000 a year, and their annual income totalled £4,665. The Court of Appeal said Mrs Jackson had been “…unreasonable, capricious and harsh.”

The Court of Appeal Decision

Mrs Illott was awarded £143,000 to buy the rented home she lived in. A further £20,000 was granted as ‘additional income’. This was a substantial increase beyond the £50,000 granted on an earlier hearing by a District Judge. She succeeded on her application for an award for maintenance under the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFD”). The Court of Appeal stated that it was applying the law as set out in the statute, including considering all relevant factors under s.3, such as:

  • Financial resources and needs of claimant;
  • Financial resources and needs of any other claimant;
  • Financial resources and needs of beneficiaries;
  • Obligations and responsibilities of deceased towards claimants and beneficiaries;
  • Size and nature of estate;
  • Disabilities of claimants and beneficiaries;
  • Any other matter

Supreme Court Judgment

The Supreme Court highlighted errors in the approach by the Court of Appeal. Their order was set aside and the District Judge’s order restored.

Lady Hale in her judgment reviews the history of the Act and preceding legislation. She comments on the unsatisfactory state of the law, giving as it does no guidance as to the weight of the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance. The approach under the Act invariably involves a value judgment, which may be problematic as there is a wide range of opinion among the public and the judiciary about the circumstances in which adult descendants ought or ought not to be able to make a claim on an estate which would otherwise go elsewhere.

For an applicant other than a spouse or partner, reasonable financial provision is limited to what it would be reasonable for her to receive for maintenance only. This is an objective standard, to be determined by the court. The limitation to maintenance provision represents a deliberate legislative choice and demonstrates the significance attached by English law to testamentary freedom. Maintenance cannot extend to any or everything which it would be desirable for the claimant to have, but is not limited to subsistence level. The level at which maintenance may be provided is clearly flexible and falls to be assessed on the facts of each case, as at the date of hearing.

Although maintenance is by definition the provision of income rather than capital, it may be provided by way of a lump sum. As to the first suggested error, the process suggested by the Court of Appeal is not warranted by the Act. The Act does not require the judge to fix some hypothetical standard of reasonable provision and then increase or discount it with reference to variable factors. All of the s.3 factors, so far as they are relevant, must be considered, and in light of them a single assessment of reasonable financial provision should be made.

The District Judge worked through each of the s.3 factors, and was entitled to take into account the nature of the relationship between Mrs Jackson and Mrs Ilott in reaching his conclusion. As to the second suggested error, the District Judge specifically addressed the impact on benefits twice. The Court of Appeal’s criticism that his award was of little or no value to Mrs Ilott was unjustified.

Reasonable financial provision can in principle include the provision of housing, but ordinarily by creating a life interest rather than a capital and inheritable sum, which possibility appeared not to have been considered by the Court of Appeal.

To the extent that the benefits means test was relevant, it was likely to apply also to the additional sum of £20,000 apparently awarded with a view to avoiding that test. The statement in the Court of Appeal that a claimant in receipt of benefits should be treated in the same way as a disabled claimant was problematic; what must have been meant was that receipt of means tested benefits is likely to be a relevant indication of a claimant’s financial position. Finally, the Court of Appeal’s order gave little weight to Mrs Jackson’s very clear wishes and the long period of estrangement. The Court of Appeal’s justification for this approach was that the charities had little expectation of benefit either.

Lady Hale said this approach should be treated with caution, given the importance of testamentary bequests for charities, and because the testator’s chosen beneficiaries, whether relatives, charities or otherwise, do not need to justify their claim either by need or by expectation.

COMMENT

Media comment had seized on the Court of Appeal decision, fearing that people’s wishes in their Will are not being followed. The Supreme Court judgment should now reassure those concerned that the courts were unduly interfering in the wishes of testators about who should inherit. The judgment provides more clarity for those involved who may object to a decision made by a relative to exclude them from the Will and also for those, executors and beneficiaries alike, involved in issues concerning “reasonable financial provision” when a challenge to a Will is being considered.

The Court has to decide whether the Will makes

“reasonable financial provision”

according to IPFD, for the adult child of the deceased. The trial judge is not exercising a discretion in reaching a decision, but making a value judgment based on an assessment of the statutory provisions which have to be taken in to account. It is solely the Act which sets out the factors for the exercise of the court’s decision.

  • Based on this judgment, people are still entitled to cut their children out of their Will if they wish. However, there will have to be good reason shown. How and why they are making other provision needs to be explained, and what their connection is to any particular charity to which they wish to leave their estate.

In view of the Supreme Court’s guidance on IPFD:

  • The upshot is likely to be that adult children who have been excluded may now be less encouraged than suggested by the Court of Appeal decision to dispute a Will by arguing that they have not been left reasonable financial provision.
  • The Court will still take in to account any accompanying letter of wishes. If anything, these may now be more important than before, and this case can be seen in the context of its own particular and quite unusual circumstances.

 


[i] https://www.supremecourt.uk/cases/docs/uksc-2015-0203-judgment.pdf

This piece has previously appeared at http://social.luptonfawcett.com/blog/daughter-cut-out-will-loses-animal-charities

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Inheritance Dispute: Early Neutral Evaluation

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Early Neutral Evaluation – Read my piece in the link below on:

Probate and Inheritance Disputes – Court Approves application for Early Neutral Evaluation.

http://www.luptonfawcett.com/blog/inheritance-disputeearly-neutral-evaluation/

 

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INHERITANCE DISPUTES: NO WILL? NEW INTESTACY RULES APPLY

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The Inheritance and Trustees’ Powers Act 2014

For anyone who dies without a Will after 1st October 2014, new rules apply. Up to two thirds of adults don’t have a Will, and thousands of people die “intestate” every year. The Inheritance and Trustees’ Powers Act 2014 (“ITPA 2014”) follows a six year investigation by the Law Commission.

Many people don’t get round to making a Will, are put off, or don’t know that key events in life like getting married or a civil partnership can revoke an existing Will. The intestacy rules then apply. These fix the distribution of a deceased’s estate once debts and liabilities, funeral expenses and costs of the administration of the estate have been paid

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KEY CHANGES

(References to “spouses” and “marriage” include same-sex spouses and civil partners respectively).

a/ If you are survived by a spouse and children

The spouse takes all the assets in joint names, all your personal possessions, the first £250,000 outright, and half the remainder. The other half of the remainder goes to the children equally at 18.

Previously, a surviving spouse would receive a statutory legacy of the first £250,000; any remaining amount would be split in two. Half went to the surviving spouse as a “life interest” reverting to the children on the surviving spouse’s death. The other half went to the surviving children immediately.

b/ If you are survived by a spouse but no children or grandchildren

The spouse takes the whole estate, even if your parents or brothers and sisters survive you. Extended family will no longer have an interest. Previously, the spouse had to share the remaining estate (after payment of a £450,000 legacy to the spouse) with the deceased’s parents (if living) or full siblings (and their descendants). Under ITPA 2014 the spouse receives the whole of the estate. Most would regard this as fairer to the spouse and usually what the deceased would have wished.

c/ If you don’t have a spouse but you do have children

The remaining rules are unchanged, so the children share the estate equally between them.

d/ If you don’t have a spouse and you don’t have children

Remaining family members inherit the whole estate (equally between them if there is more than one, e.g. you have two surviving parents) in the following order:

  1. parents
  2. brothers and sisters of the whole blood and the offspring of any predeceased
  3. brothers and sisters of the half blood and the offspring of any predeceased
  4. grandparents
  5. aunts and uncles of the whole blood and the offspring of any predeceased
  6. aunts and uncles of the half blood and the offspring of any predeceased and,
  7. finally, if there are none of the above then the estate goes to the Crown.

For someone whose parents were not married, if both names are on the birth certificate, then they are both parents for the purposes of inheritance.

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WINNERS & LOSERS

  • Children of wealthy families where a parent dies intestate will receive less under the new rules than before. Spouses are the main beneficiaries of an intestate’s estate under the new Act.
  • Where there are no children, other relatives of the intestate individual (like siblings, parents and cousins), will no longer automatically inherit part of their estate.

FAMILY PROVISION

Certain family members and dependents can apply to the court for a share (or larger share) of a deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFD 1975”) where they can prove there is no “reasonable financial provision”.

Although making a Family Provision claim can make a difference, this depends on litigation, which can be expensive. It is preferable to consider any potential claims when making a Will because decisions taken then can stop such disputes arising once it’s too late.

The 2014 Act does make a number of amendments to IPFD 1975 permitting close family and dependants of the deceased to make a claim for provision from the estate where they have not been provided for.

Classes of claimant will be extended to include any person who was treated by the deceased as a child of the family, not only in relation to a marriage or civil partnership, but in relation to any family in which the deceased had a “parental role”.

Changes also apply where someone is treated as being “maintained” by the deceased. Previously, a person would be treated as being maintained by the deceased if the deceased was, otherwise than for full valuable consideration, making a substantial contribution towards that person’s reasonable needs. Now, the words

“otherwise than for full valuable consideration”

are deleted. This prevents a claim failing where there was some give and take economically in the household.

WHAT IS NOT COVERED

  • The intestacy rules don’t recognise a deceased person’s step-children, only their natural, adopted or illegitimate children.
  • Whilst the rules give some protection to married couples and civil partners, both partners or co-habitees should have a Will to ensure that their wishes are carried out.
  • Entitlement under the Intestacy Rules only applies to couples who are married or in a civil partnership. Other couples who are co-habiting have no protection. Anyone who is co-habiting with a partner who wants to provide for them on death must make a Will. If not, your estate passes to your relatives or, failing that, to the Crown – unless your partner can make a claim for financial provision to be made on the ground that they were financially dependent on you.

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MAKING A WILL OVERRIDES THE INTESTACY RULES

  1. People should still always make a Will rather than rely on the Intestacy Rules. These are only a fall back where there is no valid Will, and are inevitably rough and ready, often very different to what the deceased may have wanted or assumed would happen.
  2. Making a Will not only ensures that your wishes are complied with, but it can also help to minimise the tax burden when you die. In addition, Administration in an Intestacy can be slower and more expensive.
  3. For unmarried and co-habitating couples, having a Will is equally, if not more important, as the rules for an unmarried surviving partner are unchanged; under the current and the revised intestacy rules, they are not automatically entitled to any of the estate.
  4. Often a Will saves surviving relatives an enormous amount of time, expense, uncertainty and possible disputes and litigation.

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Paul Sykes is a Contentious Trust and Probate Specialist registered with ACTAPS

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