Widow’s Claim Against The Estate – The Application Of The Divorce Fiction Post Charman v Charman
A recent case considers the appropriate award in a big money, short marriage claim under the Inheritance (Provision for Family & Dependants) Act 1975.
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This was an application pursuant to S1(1)(a) of the Inheritance (Provision for Family and Dependants) Act 1975, “the Inheritance Act”. It was a second marriage of a couple in their 60s. The Deceased was a self-made business man, whose sons had followed him into his companies. The Claimant owned her own property, which she sold. The majority of those funds (£233,000) were applied to the couple’s properties; both the marital home and investment. The duration of the marriage was two and a half years, in which time the Deceased had been in declining health.
The Estate was valued at £6 million. The companies were valued at £5 million, and there were other assets amounting to £1 million. These included the Estate’s 50% interest in the marital home purchased by the couple (value £165,000) and a 100% interest in a holiday home, (also £330,000).
The Will provided the Claimant with limited rights of occupation in the 2 properties, together with a small income of £378 per month. Only at the end of the trial was there a concession that the Will failed to make reasonable financial provision for the surviving widow. The bulk of the Estate passed to his 2 children, who ran the companies.
Briggs J concluded that the total sum that the Claimant should receive was £500,000. This was made up as to 50% of the marital home, and at her election the holiday home or £330,000. The Judge also concluded that she owned 100% of a £130,000 property, claimed by the Estate. He concluded that the effect of the award was that the C secured only 8% of the net estate. However with regard to her own assets, the Claimant was left with total funds of £800,000.
The issues raised
(i) The divorce fiction – [Para 62] “the divorce cross-check is just that, a cross check no more no less”. Whilst there is no hierarchy in the S3 matters variable weight might be placed on particular considerations depending on the factual matrix of each case. In this instance considerable weight was given to the divorce analogy.
(ii) The relevance of the brevity of the marriage – This consideration fell to be considered both within the application of the divorce fiction and pursuant to S3(2).
This case provides a relatively pure instance of the interplay between:
(a) Substantial easily identifiable pre-acquired assets
(b) A short marriage, as Briggs J describes it; “a big money – short marriage case”
(iii) Non-matrimonial property and the divorce fiction – The guidance in White v White  1 AC 596 defines this property as assets generated from a source external to the marriage eg pre-acquired, inherited, or gifted. From the divorce jurisdiction, Briggs J examined the guidance of the CA in Charman v Charman (No 4) 1 FLR  1246, to the effect that whilst the sharing principle prima facie means equal sharing, the presence of non-matrimonial property provides a good reason for the departure from equality of distribution of assets. In respect of “big money cases” there is a developing body of case law as to the impact of such property.
In Jones v Jones  1 FLR 1723, the CA endorsed the approach of dividing the assets into those which are non-matrimonial or matrimonial assets, accepting that there cannot be forensic exactitude. In this case the companies were non-matrimonial property and only £250,000 growth was ascribed to their value post the marriage, in contrast to a presumption of passive economic growth. See [Para 52] of Brigg J’s judgment for his analysis of how the court determines the nature of an asset. In the majority of cases the marital home will have occupied a central place in the marriage, and so will be treated as marital property.
(iv) Application of the divorce cross-check by Briggs J – The Judge concluded that there was marital property in the sum of £1.6 million, therefore an award on the basis of a divorce would give rise to a maximum sharing entitlement of £800,000. The award from the Estate of £500,000 left the Claimant with £800,000. Thus the sharing principle of the marital property was engaged to this limited extent, with the companies untouched.
From White onwards it is clear that the sharing principle is only 1 of 3 central principles from the divorce analogy. As well as the sharing principle, a fundamental consideration will be that of needs, which in the majority of cases would be a clear circumscribing feature. In a divorce the court will need to consider the needs of both parties.
(v) Small asset cases & needs – In a small asset case needs will be the pre-eminent concern. The CA in Charman at [Para 73] state that: “It is clear that, when the result suggested by the needs principle is an award of property greater than the result suggested by the sharing principle, the former result should in principle prevail”. The fundamental difference is that the question of reasonable financial provision under the Inheritance Act requires the court to have regard to the needs of the survivor only . This problem illustrates the “mental gymnastics” required in applying the divorce fiction. The needs of the survivor (see S3(1)(a)) may well mean that the answer posed by the divorce fiction does not make reasonable financial provision for the surviving spouse, when the full statutory checklist at S3 is properly applied. For a recent example of a small estate see the case of Iqbal v Ahmed  1 FLR 31.
(vi) Income issues – The Claimant had an income stream of £11,000 pa. There was a finding that her income need was £31,500. Thus the shortfall was £20,500. The Judge adopted the capitalised figures in the Duxbury Tables. These are postulated on a rate of return of 3.75%, and on life expectancy tables. As Briggs J observed of this approach; “it provides no security of its own against any of those assumptions proving to be incorrect”. In the present case the Claimant was a remainderman in respect of her own mother’s property. The release of funds from that source would ameliorate any hardship arising from the use of the Duxbury Tables. Where the survivor is elderly it is important to recognise that the prospect of outliving one’s life expectancy increases substantially.
(vii) Cunliffe v Fielden  Ch 361 and developments– This Court of Appeal case under the Inheritance Act concerned a marriage of 1 year only, and an estate of some £1.4 million. It was post White, but pre Miller v Miller  2 AC 168. The widow secured some 43% of the Estate. In that instance the life expectancy of the widow gave a rise to the need for a substantial Duxbury fund. Briggs J was careful to observe the Cunliffe case, set no precedent of percentages etc…. Clearly this must be so where the issue of what amounts to reasonable financial provision is fact specific depending upon the size and nature of the estate, and all the S3 criteria.
The Cunliffe case pre-dates the matrimonial courts’ development of clearer principles relating to non-matrimonial property. If the same facts were to come before the family provision court in 2012, I suggest that the award to the widow would have been more conservative, and a more robust approach taken to her needs.
The award in Lilleyman is a relatively modest proportion of the Estate. There was a clear division between the pre-acquired business assets and those generated during the currency of the marriage. This case may provide some comfort to the first family, where there has been a late second marriage.
(viii) Clean break confusion – Briggs J was clear that the Claimant should recover funds outright and that there should be a clean break between the two factions of the families. The quantification of the award to achieve a clean break was on the premise that reasonable financial provision could only be achieved by providing for financial security for the Claimant for the rest of her life.
By contrast the divorce fiction would introduce the statutory consideration as to whether the divorcing spouse’s independence could be achieved in a reasonable time frame after divorce eg by a term order for maintenance for a limited period only. This is another reason why the wholesale application of the divorce fiction may illustrate a conflict between the different approach of the two jurisdictions.
The fundamental question in respect of an Inheritance Act claim is whether “reasonable financial provision” has been made. This means:
“Such financial provision as it would be reasonable in all circumstances of the case for a .. wife to receive, whether or not that provision is required for his or her maintenance” S1(2)(a).
It is not the same as answering the question what amounts to a fair division between the parties upon the occasion of a divorce. The Law Commission Report: Intestacy and Family Provision Claims on Death Law Com 31 addresses the concern that the divorce cross-check may be wrongly applied as setting either a cap or a floor on the provision to be made. The Commission’s recommendation was that the court should not be unduly constrained by the divorce cross-check consideration and that the draft Bill in the Report expressly confirms that such consideration does not set either an upper or lower limit for an award under the Inheritance Act.
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