Legal

GUEST COMMENT: Intentions Of Will Creators Mostly Intact, But Some Concerns After Ruling In London

Neil Long, Bond Dickinson, Partner, 11 August 2015

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Another law firm has provided a detailed analysis of the implications of a court ruling about the freedoms of will writers to leave money to whomever or whatever they want.

As noted recently by this publication, a prominent case surrounding the principle of testamentary freedom – or ensuring that the intentions of a will-writer are honoured in practice – has ignited concerns that wills will be more subject to challenge by disgruntled offspring and other interested parties. To see one such recent analysis of the issues, click here. And click here for the initial raft of reactions to the case. In this article, Neil Long, a partner at UK law firm Bond Dickinson, gives his own views on the Ilott vs Mitson case.

Last month, the Court of Appeal [in London] delivered its latest decision in the case of Ilott v Mitson [2015] EWCA Civ 79. It seems to have attracted the attention of the popular press, who are presenting it as an encroachment on the principle of testamentary freedom. That might make for a good headline, but nothing has fundamentally changed. In England & Wales, people are at liberty to leave their assets to whomever they like. This might cause hardship to dependants. The law recognises this.  Heather Ilott has been through the Courts to show how her needy circumstances trump her mother’s wishes – albeit in a limited way. So what is it about the case which is generating so much coverage?

The facts
Melita Jackson died aged 70, leaving an estate worth £486,000 ($752,950). Her will left the bulk of her estate to 3 charities – RSPB, RSPCA and the Blue Cross, but made no provision for her only child, Heather Ilott.

Heather was in her 40s by the time her mother died, and was completely estranged from her.  Heather had left home at the age of 17 following a row about her boyfriend, whom she went on to marry.  Mrs Jackson never forgave Heather, who lived independently of her mother from the day she left home. Mrs Jackson was not invited to Heather’s wedding, and a number of attempts at reconciliation ended in failure. Mrs Jackson cut Heather out of her will entirely. She left two side letters with her will explaining her decision, and asked her executors vigorously to defend any claim by Heather.

Heather has five children (the oldest is an adult and the youngest a teenager) and lives in fairly straightened circumstances; the family having little income over and above state benefits.  1

So Heather is someone who received no financial support from her mother during her lifetime, and had no expectation that she would inherit. Despite this, and no doubt on taking legal advice, she brought a claim for provision from the Estate under the Inheritance (Provision for Family and Dependents) Act 1975 (the 1975 Act).

The decisions
The starting point in English Law is that individuals are entitled to leave their estate to whomever they choose.  Testamentary freedom is curtailed by the 1975 Act, which allows spouses, children or other dependants of a Deceased to claim “reasonable financial provision” in circumstances where the court finds that what has been left for them under the will is insufficient.  The 1975 Act grants the court a wide discretion to decide what constitutes reasonable financial provision.  In reaching a decision, the court is guided by a list of factors, including the size of the estate, the conduct of the individuals involved and the various demands on the estate.

Awards to spouses are set at whatever the court says is reasonably in all the circumstances. For everyone else, the provision is limited to whatever sum is required for “maintenance”; a standard which is not defined in the 1975 Act. The court will try to do the best it can to work out a claimant’s maintenance needs by reference to the specific facts of the case.

The Ilott case has been flip-flopping through the courts since 2007. The first instance judge found that Heather’s straightened circumstances, the absence of other demands on the estate and Mrs Jackson’s unreasonable conduct towards Heather warranted an award of £50,000. This decision was reversed and then re-reversed on appeal, with a 2011 appeal upholding the original award of £50,000.

In the eyes of many practitioners, the 2011 judgment was the leading authority on claims by adult children and confirmed the established rule that the way in which the trial judge decides to exercise his/her discretion under the Act should not be interfered with lightly.

This latest decision casts doubt on that proposition, with the Court of Appeal judges finding that the original judge made many errors when carrying out his original quantification of the award, including:

-- seeking to make an award that replicated Heather’s existing state benefits;
-- failing to assess what Heather might reasonably require for her maintenance (other than by analogy with state benefits);
-- ignoring the fact that half of Mrs Jackson’s estate was derived from a life insurance payment following the death of Heather’s father;
-- failing to take account of Heather’s rent costs;
-- failing to get to understand and apply how any award would affect Heather’s state benefits.

By re-assessing the relevant facts and applying the provisions of the 1975 Act, the Court of Appeal found that Heather’s award should be increased to £143,000.

The implications
Before reaching definite conclusions, we should be mindful that the case could yet be appealed again – this time to the Supreme Court.  

In the meantime, what are the likely effects?
Whilst there is no change to the substantive law, the Ilott case may serve to encourage disappointed beneficiaries to bring claims. It may also be perceived as creating a more benign environment for successful claimants to challenge awards they don’t like.   

It may have a knock-on effect on charities and legacy giving. Charities have an obligation to maximise the value of assets in their hands, which can compel them to litigate these claims. But the pressure to do that has to be balanced against the reputational risk of being seen as greedy, which may deter people from leaving any part of their estate to charity. It’s a tricky balance for the charities to strike.

The oxygen of publicity of these types of claims will of itself encourage disappointed beneficiaries to explore the pursuit of claims. With an aging population, high property values and modern blended families, the atmosphere for resorting to law is ripe.

Focusing only on claims under the 1975 Act is a narrow view. Other lifetime arrangements might be scrutinised more as awareness grows:  

Lots of people make lasting powers of attorney, appointing a friend or family member to take over their finances if they lose the ability to do so themselves.  For the most part, these arrangements work well.  But there are a small number of attorneys who turn out to be bad apples, and the court can and does intervene to remove the rogue attorney and replace them with someone else.  This is no reason for concern and simply shows the system is working.  Most people are going to be comfortable knowing there is a process in place to root out the fraudsters, even if that means someone you don’t know could end up running your finances.

Lifetime promises to make gifts are an increasing feature of the legal landscape. The classic situation is the promises to leave land to someone on death, especially if it’s a ‘reward’ for working for no or little pay. These cases arise surprisingly often. The law recognises that these promises can be binding, but only if the right ingredients are present.  They are i) the promise “One day, all this will be yours”; ii) the would-be beneficiary has to show s/he has relied on the promise (making life choices which demonstrate their expectation; iii) the putative beneficiary suffers detriment as a result – the cases are often concerned with working for years for no or little pay; and iv) that the law can see it would be unfair for the hard-working individual to lose out on what they had been promised.  

Conclusions
As things stand, Mrs Jackson didn’t get it all her own way. Heather takes around 1/3rd of the estate. Mrs Jackson’s intended beneficiaries - the charities - take 2/3rds.  

But it’s worth remembering that if Mrs Jackson hadn’t made a will, Heather would have got everything. Presenting this case as the end of testamentary freedom is to overstate it.

The best way of minimising the risk of a claim is to talk the situation through thoroughly with your trusted advisers at an early stage. Lawyers who know what matters most to their clients will advise the client to address the situation head on.  

Some pointers:
Could the use of will trusts be appropriate?  Clear letters of wishes and a good choice of trustees may give testators the opportunity to exercise control without triggering litigation.

Would a ‘no-contest’ clause in the will deter a claimant?

Effective communication with the wider family and the charities would enable those defending a claim to be more cohesive in their strategy.

The Ilott decision may encourage disappointed beneficiaries to bring claims. But the principle of testamentary freedom is alive and kicking.

 

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