Can you make any Will you want or is testamentary freedom an illusion?

 In Probate

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Inheritance (Provision for Family & Dependents) Act 1975 – estranged adult daughter – Ilott v The Blue Cross & others [2017] UKSC 17

This case is thCan you make any Will you want or is testamentary freedom an illusion?e first time a case involving the Inheritance (Provisions for Family & Dependents) Act 1975 (IPFD 1975) has come before the Supreme Court. It received huge publicity at every stage involving as it does a challenge to a parent’s Will by an able-bodied adult child who had been estranged from her mother for over 26 years. The daughter received nothing under her mother’s Will, which left her estate of something over £500,000 to four animal charities with which the deceased had little or no contact during her lifetime.

The Supreme Court examined the key features of the IPFD 1975 and concluded that the Judge at first instance had adopted the correct approach and was entitled to make the order he did. It therefore reinstated the award of £50,000 for the claimant.

The facts

Mrs Jackson was widowed after only four years of marriage whilst she was expecting her only child, now Mrs Ilott. The relationship between mother and daughter was severed permanently when the daughter left home at 17 to go and live with her boyfriend’s family. Subsequently, she married her boyfriend and they are still together with five children.

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Over the intervening years there were three attempts made at reconciliation but nothing came of them. The trial judge, District Judge Million, found that Mrs Jackson was capricious and unfair in the criticisms of her daughter and her decision to exclude her from her estate was harsh and unreasonable. Equally, he found Mrs Ilott and her husband contributed to some of the difficulties in sustaining reconciliation.
It was clear from the evidence that Mrs Jackson made a settled intention to exclude her daughter and her family from benefit from her estate as early as 1984. Mrs Ilott was made aware of this decision in 2002 and she managed her life without any expectation of benefit from the estate.

Mrs Jackson expressed her decision clearly in her Will and letter of wishes as to why she did not leave her daughter anything under her Will. She instructed her executors to resist any claim which Mrs Ilott might make against the estate.

Mrs Ilott lives with her family in a rented property owned by a Housing Association. She has not worked since the birth of her children and acts as her husband’s bookkeeper for the modest salary of £240 pa. Mr Ilott is a supporting actor and has only intermittent work with earning amounting to only £4,100 net per annum. Of the four children still living at home only one works and he makes a small contribution to the family income. Otherwise, they are reliant on benefits: Child benefit (£1,878); working tax credits (£8,112) and housing benefit & council tax benefit (together worth about £5,100 pa).

The family lived within their means and had modest savings of £4,000. However, the household equipment was old but they could not afford to replace it; the car kept breaking down and the carpets and decoration needed to be renewed but there was no money to provide for this. They had never been able to afford a family holiday nor extra lessons for the children, such as music or sport.

Housing benefit and council tax benefit are means tested benefits and so any award would affect the family’s ability to claim these benefits for a period of time. Mrs Ilott was entitled to buy the rented property at a concessionary price and this was said to be £186,000 at the time of the first instance hearing and £143,000 by the time of the Court of Appeal hearing. This figure and the impact of the loss of means tested benefits was at the heart of the decision by the Court of Appeal to increase the award made by the District Judge.

The law

Lord Hughes described the statutory framework under the IPFD 1975 by listing the relevant sections:

s.1 – which provides the list of potential claimants who may claim the Will or intestacy of the deceased did not make adequate financial provision for them.
s.2 – which sets out the powers of the court to make orders: in the case of a spouse or civil partner this includes a similar range of orders to that of the divorce court; in the case of other potential applicants, the order must focus on that which is reasonable for their maintenance alone.
s.3 – which lists all the matters to which a court must have regard in exercising its powers under s.2.
He emphasised that in the present case, of an adult child, the type of award available under the Act, therefore, was for maintenance, which was a deliberate legislative choice. This rule used to apply to spouses too under a previous version of the law and in Lord Hughes’ view it demonstrates the significance of testamentary freedom under English law.

Lord Hughes accepts that the concept of maintenance is broad but it does not extend to any or everything that might be desirable for a claimant e.g. it includes the provision to meet everyday living expenses but not paying off a mortgage.

The level at which maintenance is set is flexible and will depend on the facts of the case. It is possible for a lump sum to be awarded (and it often is), from which income and capital can be drawn, on the Duxbury model used in family courts. The use of lump sum orders is expressly provided for by s.2(1)(b).

There is no reason why the provision of housing should not be maintenance in some cases but it cannot be a capital award and may be by way of provision of a life interest in a trust fund with possibly a power of advancement.

The use of the words ‘reasonable financial provision for the claimant’ in the IPFD 1975 sets an objective standard for determination by the Court. It does not say the Court can make an order when the deceased acted unreasonably.

The reasonableness of the deceased’s decisions is a factor to be considered (s.3(1)(g) & (d)) but it is not the test.

The right test was set out by Oliver J in In re Coventry [1980] Ch 461:

“It is not the purpose of the Act to provide legacies or rewards for meritorious conduct. Subject to the court’s powers under the Act and to fiscal demands, an Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases or, if he chooses to do so, to leave that disposition to be regulated by the laws of intestate succession. In order to enable the court to interfere with and reform those dispositions it must, in my judgment, be shown, not that the deceased acted unreasonably, but that, looked at objectively, his disposition or lack of disposition produces an unreasonable result in that it does not make any or any greater provision for the applicant – and that means, in the case of an applicant other than a spouse for that applicant’s maintenance. It clearly cannot be enough to say that the circumstances are such that if the deceased had made a particular provision for the applicant, that would not have been an unreasonable thing for him to do and therefore it now ought to be done. The court has no carte blanche to reform the deceased’s dispositions or those which statute makes of his estate to accord with what the court itself might have thought would be sensible if that had been in the deceased’s position.”

You therefore have to look at the needs of the claimant. Whilst this is not the measure for claimant spouses/civil partners; for all other claimants, the need for maintenance is a necessary starting point. To this must be added the relevant relationship to qualify as a claimant. Re Coventry is often also authority for reference to the moral claim which should exist for the applicant to be maintained by the deceased or by their estate. Not simply that the applicant is a child of the deceased but that morally inadequate financial provision for their maintenance arose. Necessitous circumstances are not enough.

Competing claims of other potential claimants may prevent or inhibit the ability of the court to wholly meet the needs of the claimant. In some situations estrangement or conduct may also mean that only part of the needs of the claimant should be met.

The two questions to which the court has to put its mind really overlap and are:

1. Did the Will/intestacy make reasonable financial provision for the claimant and
2. If not, what reasonable financial provision ought now to be made for him?

The decision of the judge at first instance will be a value judgment and highly individual in each case. That decision should not be altered by an appellate court unless the judge has erred in principle or in law.

The Court of Appeal suggested that the District Judge had made two errors:

a. He held that because of the long estrangement and the fact that Mrs Ilott had no expectation of any benefit under her mother’s estate and her independent life her award should be limited, without saying what the award would have been without these factors and therefore what reduction was attributable to them; and

b. He had made his award of £50,000 without knowing what effect it would have upon Mrs Ilott’s benefits.

Lord Hughes said that as regards (a) the Court of Appeal were wrong. The IPFD 1975 requires only a single assessment of what reasonable financial provision should be made in the all the circumstances of the case. There is nothing in the Act that says a judge should set some hypothetical standard and add or detract from it.

Lord Hughes was equally negative about the Court of Appeal’s second criticism. The District Judge did not fail to address the impact on benefits of any order he might make. He was not presented with this information by Mrs Ilott’s legal team but he was familiar with the structure of state benefits and he addressed its impact twice in his decision. If he had made the order he did in ignorance of the impact it might have on state benefits that might have been a legitimate error of principle to justify an appellate court setting aside his order.

The order made was not of little use to Mrs Ilott, taking into account the impact of benefits, because it is entirely up to her to use the money as she likes and maintenance would cover the replacement of everyday items, which, in the Ilott family case, were seriously in need of replacement. This would mean the ability to put the family on a stronger footing without having much capital above the then limit of £16,000 for very long.

The decision

Lord Hughes therefore decided that the District Judge did not make either of the two errors seized upon by the Court of Appeal and therefore his decision – an award of £50,000 – was re-instated.

Other considerations pressed by the claimant’s Counsel were said not to affect the ambit of the District Judge’s award, which was restored. He said it was not correct of the Court of Appeal to give little or no weight to the long period of estrangement and the wishes of the deceased. Wishes are not to be ignored. Once there is a qualified claimant and a demonstrated need for maintenance then those wishes are part of the circumstances to be taken into account in deciding on the award.

Lady Hale also gave a judgement (which was approved by Lord Kerr and Lord Wilson). She commented on the fact that the case raised some profound questions about the nature of family obligations and testamentary freedom which were not answered by the legislation. She referred to the work of the Law Commission in the run up to the coming into effect of the IPFD 1975.

She commented that freedom of testation is strongly supported by public opinion but so too there is recognition that in some limited cases descendants should be entitled to challenge the provision. From research she quoted, it was clear that there is a variety of reasons why people believe that descendants should be entitled to a share of the deceased’s estate.

Her complaint was that the Act, and the Law Commission Report which lead to it, provides virtually no help in deciding how to evaluate this range of opinion nor how to integrate it with the other claims in the estate. The state of the present law gives no guidance as to the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance. She expressed her regret that the Law Commission did not reconsider the fundamental principles when they looked at this topic again in 2011.

Practice points

Options for a client to consider

1. Making a small gift is better than making no gift at all – since it shows acknowledgement of the existence of the potential claimant and provides the opportunity to explain why modest rather than generous provision has been made for them.

2. Making the gift forfeitable in the event a claim is made or the Will challenged is permissible but excluding the provisions of the IPFD 1975 is not (unless part of the financial settlement on divorce). In Nathan v Leonard [2002] EWHC 1701 a condition to the effect that a beneficiary who challenges the Will would lose their legacy was held to be valid. It does not prevent the beneficiary from making a claim (and the loss of the legacy would be taken into account in the size of any award, if successful) but it could operate as a check on making a claim if the legacy is well judged since the costs and uncertainty of trial may make the beneficiary accept that ‘a bird in the hand is worth two in the bush’.

3. Making a gift into discretionary trust – either under the Will or over a life policy, where the potential claimant is only one beneficiary in the class and where beneficiaries can be added or removed can be a useful tool in negotiations for settlement of any potential claim. If a claim is made it is likely that the discretionary interests would be unlikely to be acceptable if left to the trustees to decide on distributions but could be invaluable if the potential claimant was entitled to means-tested benefits which they might lose or which might prohibit sensible absolute settlement of the claim.

The exercise of the trustees’ discretion to make a distribution for immediate needs might be all that is required to satisfy the potential claimant following which it might be agreed that they are removed from the beneficial class and the rest of the fund could be used for others.

Factors to document and discuss

Facts and evidence are going to be paramount. If there is a needy, estranged child (as in Ilott) and only charities benefitting (which was said to be a windfall for them as they are not needy) then as much sensible explanation which is as objective as possible will help the court:

a. If the potential claimant was only one of several beneficiaries who might have a reason to expect an inheritance from the testator, encourage explanation as to why they are not seen as deserving and others are more so e.g. the financial circumstances of a potential claimant may be better than others; the others may have provided support which was absent from the claimant in the later years of life of the testator when help was needed.

b. If the potential claimant was the only family member and the testator wishes to benefit charities instead (as with Ilott) then the client needs to be encouraged to support charities with which they have a connection – e.g. they personally have had support from the charity such as attendance at their lunch club or using a befriending service. It might be the testator has acted as a volunteer with the charity (such as serving in the charity’s shop; or providing food to a night shelter) or provided regular funds in support of their services. If so, the testator should set out in a memorandum to be kept with their Will as much information as possible about their connections with the charities concerned.

c. In these cases the court has to reach an objective conclusion as to what might be reasonable financial provision for maintenance for an eligible applicant. The views of the testator will be relevant e.g. In Ilott the reasons for the estrangement, and should be set out clearly and calmly and not with bitterness and hate. If at all possible, it helps if what is said can be independently verified – such as by yourself who knew the testator made a lifetime gift of a particular amount or asset on a particular day to the potential claimant. As was evidenced in an unsuccessful claim by an adult child, Wright v Waters [2014] EWHC 3614, financial mismanagement can be a very relevant factor in any decision. Again, as much accurate, factual information as possible about this, from a verifiable source, should help.

d. A factor that has assisted claimants in many cases is whether or not the funds in the testator’s estate were originally in the estate of, say, the first spouse to die who may have indicated to them, whilst alive, that ultimately the potential claimant would benefit. If the first parent to die was on good terms with the potential claimant and it is only the surviving parent who has become estranged; then, it would be prudent to acknowledge that fact and make some provision reflecting the proportion of the surviving parent’s estate which the estate of the first parent to die represented. Again, whatever the rationale for the gift made (such as its origin, size etc) should be documented in support of what is provided in the Will of the survivor.

See an example Memorandum as suggested in this article

See an example Memorandum that can be kept with a client’s Will.
Please note this download is provided as an example for training purposes only

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