How safe is your estate from a claim following the latest Supreme Court judgement?
Yesterday the Supreme Court delivered its judgement in the case generally known to lawyers as “ILLOTT v MITSON”. Two of the central issues the Supreme Court considered related to the freedom to leave your property or money to those you wish to inherit on your death and whether the reason(s) for seeking to exclude or restrict an inheritance, e.g. to a family member, were a significant factor for the court to take into account.
An earlier reported decision of the Court of Appeal in the case in 2015 gave rise to a number of newspaper headlines which led many to question why family members, who had little or nothing to do with a person for many years, were able to secure a share, or greater share, of an estate. This was often despite the deceased having made it clear why they were not leaving any, or only a limited, inheritance. In the view of many the apparent limit on testamentary freedom was not only surprising but plainly wrong.
In the judgment Lord Hughes (with the agreement of the other Law Lords) commented: “Unlike some other systems, English law recognises the freedom of individuals to dispose of their assets by will after death in whatever manner they wish.” He went on to say: “..the law knows of no rule of automatic succession or forced heirship”.
Readers who are familiar with succession rights on the continent will be aware that in most European countries it is not possible to exclude certain family members from inheriting a share of your estate. Many in England and Wales believe that the ability to determine who you include, exclude or restrict from inheriting under your estate is a fundamental right. They are surprised to learn that there are those who are entitled to bring a claim for a share or a greater share of your estate.
The Law of England and Wales entitles certain family members, and those maintained by the deceased, to claim against the estate if the deceased failed to make ‘reasonable financial provision’ for the claimant. The question for the court when presented with a claim is whether the deceased made reasonable financial provision for the claimant and, if the deceased did not, whether the claimant is entitled to a share or increased share of the estate.
In order to appreciate the background to the case it is important to know some of the basic facts. Following the death of her mother her only daughter brought a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”) seeking a share of her mother’s estate. The mother had made a will leaving all her estate to various charities. One of the factors in the case was that the mother and daughter had been estranged for many years. The daughter was living in rented accommodation with her family and the majority of her family income derived from state benefits.
At the initial trial held in 2007 the judge awarded the daughter £50,000.00 as he considered that the mother had failed to make ‘reasonable financial provision’ for the daughter. The daughter appealed seeking a larger share of the estate and the charities cross-appealed seeking an order that the claim should have been dismissed by the judge. Eventually, in 2015 the Court of Appeal very substantially increased the award to the daughter enabling her to acquire a house. The charities stood to lose out significantly.
When assessing the amount of financial provision a claimant should receive the court must take into account a wide range of factors. Those factors include the conduct of the claimant and the conduct of the person who has died.
The justices in the Supreme Court were critical of the Court of Appeal stating that it had failed to give sufficient weight to the mother’s very clear wish not to make any provision for her daughter and their long term estrangement. The Supreme Court judges made clear that the original trial judge was entitled to reach the conclusion that there was a case for giving the daughter something from the estate but that any financial provision “would be coloured by the nature of the relationship between mother and daughter”.
The fact that the relationship between mother and daughter was a very difficult one, for which both sides were responsible, played a significant part in the determination by the Supreme Court that the appeal court judges were wrong. As a result, the Supreme Court set aside the decision of the Court of Appeal. It determined that the daughter was entitled to a much less generous award than allowed by the appeal court and, significantly, the other beneficiaries should not have to lose out.
Where does this leave the reader who might be concerned about family members or others bringing claims against their estates after death?
It is settled law that you cannot exclude those entitled to pursue a claim under the Act from doing so. The decision of the Supreme Court clarifies some of the issues that previously troubled the court tasked with determining claims for an inheritance or increased inheritance and the lawyers advising on them. Courts in future will be required to look more deeply into the reasons for excluding or restricting an inheritance and take into account the wishes, causes and reasons for the wish to restrict or refuse to make an inheritance. It is therefore very important for someone wishing to exercise a wish to restrict an inheritance to have a properly constructed will and leave written evidence setting out the reasons for any decision. Whilst this may not prevent a claim by a disgruntled person, making these simple precautions may well result in those you wish to inherit being able to do so.