Testamentary Freedom v Duty to Provide for Dependants

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Should you have a right to dispose of your assets in any way you wish upon your death?  Put another way, should anyone have a right to challenge what is written in your will, providing it was made legally?

On first hearing these questions most people would say that they have every right to pass on their assets to whomever they like and nobody should be allowed to challenge that.  The assets are theirs and nobody should be able to interfere.

Balanced against this is a moral obligation to provide for your dependants.  Should you not pass on your assets to the people that are dependent upon you in life?  This moral obligation becomes a public concern if your dependents are, or will become, reliant upon state benefits for their maintenance on your death.

There has long been a debate about whether individuals should be allowed complete testamentary freedom or whether the state should legislate to enforce provision for dependents.  For instance, in Scotland and in mainland Europe parents are required by law to leave a percentage of their estate to their children, even if those children do not deserve such a gift.

The current legal position in England and Wales is that an individual has testamentary freedom subject to minimal legislative intervention in the form of the Inheritance (Provision for Family and Dependants) Act 1975 [hereafter referred to as The Act].

The Act provides that immediate family or partners living as husband and wife or as civil partners can apply to the court for an order for financial provision where the deceased’s will does not make, “…such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance.”

The Act does not define maintenance but it has been referred to in previous cases as providing conditions, “neither luxurious nor poverty stricken” and in the case of a spouse or partner the court should consider what settlement would have been likely if as a result of divorce proceedings rather than the deceased having died.

The court has a wide discretion and can order payment of periodic and lump sums and the transfer of property.  In doing so the court must consider such matters as:

  • the resources and needs of the applicant.
  • the resources and needs of any other applicant.
  • the resources and needs of any beneficiaries (those due to receive gifts under the will).
  • the obligations and responsibilities of the deceased towards any applicants and beneficiaries.
  • the size and nature of the estate.
  • any physical or mental disabilities of the applicants and beneficiaries.
  • any other matter it considers relevant.

As a result of the subjectivity of the legislation applicants have varying degrees of success when making an application under The Act.

Recently a case brought under The Act reached the highest court in England and Wales, the Supreme Court, for the first time.  Practitioners have been awaiting the judgment of Ilott v Mitson in the hope that it would bring some clarity to the law.

The basic facts of the case are that Mrs Ilott, the applicant, had been estranged from her mother for 26 years following her decision to leave home at the age of 17 to live with her boyfriend, whom she later married and had five children with.   Despite repeated attempts, reconciliation had not been achieved before her mother’s death in 2004.  Her mother left nothing of her £500,000 estate to Mrs Ilott but did leave letters of wishes with both of her last two wills saying why her daughter was not a beneficiary.  At the time of her mother’s death Mrs Ilott had four children at home with a total net income (including state benefits) of approximately £20,000 and had been living so for several years.

At trial the court made an order for the payment of a lump sum of £50,000 to be paid from the estate to Mrs Ilott.  Mrs Ilott appealed against this because such a sum was not enough for her to purchase the house she was living in as a sitting tenant (thereby reducing her outgoings) and therefore the sum would be deemed a capital amount which would result in her means tested benefits being reduced.

On appeal the High Court decided that Mrs Ilott’s mother’s will provided reasonable provision for her, i.e. no provision was reasonable in the circumstances.  Mrs Ilott appealed to the Court of Appeal.

Over two hearings the Court of Appeal decided that an order should be made and awarded £143,000 (enough to purchase the property) and a further £20,000 to supplement state benefits.  The defendants appealed to the Supreme Court.

The Supreme Court reversed the Court of Appeal’s ruling and reinstated the original trial court order for a lump sum payment of £50,000.

The whole process has therefore gone full circle and it could be argued that it was a waste of time and resources.  Certainly it probably exhausted most of the estate in legal costs.

What the process has highlighted is the subjectivity and uncertainty in the law in relation to the financial provision for dependents.  Given the same facts different courts ordered significantly different financial provision.  Lady Hale, one of the Judges at the Supreme Court hearing, has expressly stated her opinion on “…the unsatisfactory state of the present law, giving as it does no guidance as to the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance.”

The Supreme Court’s decision appears to support testamentary freedom but it remains the will writer’s obligation to advise all parents who are choosing to leave their children out of their wills that there remains a potential risk of a claim against the estate.

In addition, the judgment sends a clear message to the legislature for clarity of the law.  This may lead to new legislation introducing some form of forced inheritance for children, similar to that found in mainland Europe.

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If you would like further information or advice please contact Robert, Jane, Glenn or Amy on 01752 668246 or send an email by clicking here.

:
Robert Butler
:
Jane Gilding
:
Glenn Sambells
:
Amy Douch