Recent years have seen a rise in claims for provision from estates. It is, therefore, more important than ever to consider the purpose of the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”), who can benefit from it, the factors a court will consider and the type of awards available if successful.

The Purpose of the Inheritance (Provision for Family and Dependants) Act 1975

The law in England and Wales starts from the long-established principle that an individual is entitled to dispose of their estate as they see fit. However, the courts have a limited power to make orders which interfere with the effect of a will (or the effect of the intestacy rules where there is no will) where there is judged to be a failure to make reasonable financial provision for a defined class of people connected to the deceased. The Act offers recourse to such applicants but only if they can demonstrate that the provision made (which might be no provision at all) is not reasonable. The power is however limited to ordering only such provision as is reasonably necessary for the maintenance of the applicant. It has been said that this standard means the applicant should be able to live ‘at neither a luxurious nor poverty-stricken level’. If the applicant is a surviving spouse or civil partner of the deceased, they can claim at a higher maintenance standard, which is whatever is necessary for their maintenance in all of the circumstances. This is significant because with spouses and civil partners, the court can take into account the standard and style of living and reasonable expectations of the applicant, including what they might have expected to get if the relationship had ended with divorce instead of death, and that may well exceed what they need for their day-to-day maintenance.

Legal Advice

Taking early advice and ascertaining the date when a grant of probate or letters of administration are issued in the relevant estate, are both crucial. A claimant must issue a claim within 6 months of the date of a grant. In exceptional circumstances, the court may permit claims brought after this time, however, there is no guarantee that late claims will be allowed to proceed, and the claimant must produce persuasive evidence to explain their delay and demonstrate the strength of their claim to have the best chance of securing leave out of time.

Full Financial Disclosure

A claimant will be expected at a very early stage to provide full disclosure as to their own financial needs and resources. This is necessary so that the estate and the court have a clear picture of what the claimant has now and what will be needed in the foreseeable future. It is not uncommon for those who feel that they have been treated unfairly by a loved one in their will and advance a claim for provision, to regard this disclosure requirement as intrusive, and to feel as if it is they who are somehow on trial. However, the reality is that the burden of showing that reasonable provision has not been made falls on the applicant. Without this information, the estate – and the court – will not be able to form a view about what reasonable provision might be if it is accepted that the will failed in this respect. Those defending a claim, who are often the beneficiaries of the estate, are not required to provide disclosure of their financial needs and resources, although that which they are left by virtue of the will or intestacy rules will be known once a grant is extracted and the executor provides information about the estate, as they must in their neutral capacity in any claim. If a Defendant chooses not to disclose any information about their finances, the inference is likely to be drawn that they are well provided for and cannot mount a needs-based defence.

Who Can Claim Under the Act?

The classes of applicant who may bring a claim is defined under the Act, and includes:

• the spouse or civil partner of the deceased
• the former spouse or civil partner of the deceased (as long as that person has not remarried/entered into a subsequent civil partnership)
• a person who, for the two years prior to the death, was living with the deceased as if they were a spouse or civil partner
• a child of the deceased
• a person who was treated as a child of the family by the deceased
• any other person who was being maintained, wholly or partly, by the deceased immediately prior to their death.

A person is classed as being maintained by the deceased if they were financially supported by the deceased in some way during their lifetime and that maintenance continued until the death. This can include monetary maintenance in the form of regular payments or large gifts. Provision of housing can also be maintenance, such as the deceased allowing the claimant to live in their property either rent free or at a nominal or reduced rent.

Cases in recent years have involved growing numbers of adult children bringing claims under the Act and although it is certainly easier for a child under the age of 18 to prove they were financially dependent on the Deceased and/or that the Deceased has a moral obligation to provide for them, significant awards can and have been made to independent – even estranged - adult children.

In the leading case of Ilott v Mitson [2011], a substantial award was given to an adult daughter who, despite a long estrangement from her late mother, was in difficult financial circumstances and made her application having been left out of her mother’s will altogether in favour of a number of charities. On appeal, the original award of £50,000 from an estate worth £486,000 was increased to £143,000. The charities appealed the increase and although they ultimately succeeded in having the daughter’s award limited to £50,000, the case demonstrates that even where an adult child has been living independently of their parent for many years, had no relationship with them at all and where the estate is modest, it is still possible that the court will find that reasonable financial provision has not been made for an adult child.

Factors for Consideration

The Act provides a clear list of factors the court must consider. Financial needs and resources will always be central, but not all of the other factors will be relevant in every case:

• the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future
• the financial resources and financial needs which any other applicant for an order under section 2 of this Act has or is likely to have in the foreseeable future
• the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future
• any obligations and responsibilities which the deceased had towards any applicant for provision or towards any beneficiary of the estate of the deceased
• the size and nature of the net estate of the deceased
• any physical or mental disability of any applicant or of any beneficiary of the estate of the deceased
• any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant. Conduct can include the conduct of the deceased, not just those interested in their estate.

Awards

The court can make an award in a range of formats including an order to sell or transfer an estate property or the award of a lifetime right to occupy a property which then reverts to the estate. This remedy is most likely to be applied in cases where a housing need can be met by an applicant being allowed to stay in an estate property, but the capital is preserved for the other beneficiaries, often the next generation. The court might also award the claimant a lump sum one off payment, or payments at regular intervals. These types of awards are less common but may be appropriate if the claimant is particularly vulnerable and therefore having access to such a large sum may pose as too much of a risk. Applicants should bear in mind that unless they are a surviving spouse or civil partner of the deceased, the award is limited to what is required for maintenance. The function of the court is not to make awards of capital to those who might be disappointed with the terms of the will but who cannot show any real maintenance need.

Costs

It is a common misconception that the costs of litigants will be borne by the estate as a matter of course; this is incorrect.  The courts take the view that a person challenging a will is participating in a commercial transaction and must accept the risk of litigation (see Lilleyman v Lilleyman [2012]).  The costs of an unsuccessful claimant can be ordered to be paid from the estate where there were reasonable grounds for questioning proper execution of the will or the capacity of the testator, but this is by no means certain.  Conversely, where an unsuccessful challenger’s costs are ordered to be met from the estate, this can have the effect of eroding the estate, rendering litigation fruitless.

In actions relating to the validity of a will, personal representatives can expect an indemnity from the estate, save where their conduct violates their statutory duties.  This rule does not apply, however, where the PR is also a beneficiary and costs are likely to be awarded against their class of beneficiary.  As one would expect, the rule is also not applicable in circumstances where the PR knows that the will is invalid but asserts otherwise.

Care should be taken when issuing claims, as, if issued as a money claim, with an amount sought specified, the fee will be up to £10,000.  If, however, the Claimant states that, rather than a fixed sum, they are seeking “provision” from the estate, it should be possible to issue as a non-money claim, attracting a significantly lower court fee.  As Inheritance Act claims more commonly follow the Part 8 procedure under the CPR, it is not necessary to specify the value of the claim on issue, therefore supporting the classification of such claims as “non-money”.  As it is often necessary to issue protective proceedings in IA claims, due to the narrow limitation period, this can be an important saving to be made.

In the event that an IA claim proceeds to trial, the costs can mount into the tens of thousands of pounds.  It is imperative that the value of the estate is kept in mind at all times and that prospects are reviewed very regularly.  An offer to engage in ADR should be made within the initial letter of claim and should be repeated at each stage of the proceedings.  These are claims which lend themselves to a mediated settlement, as the matters in issue are often non-monetary and can be resolved in a guided discussion rather than an adversarial arena.

Recognising a need in the market, Box Legal has created an insurance product to help you and your clients, which provides cost effective legal expense cover for disbursements and adverse costs and if you obtain a loan to cover your disbursements and/or your own Work in Progress then there is the ability to extend the policy to cover that borrowing*. We are even able to put you in touch with litigation funders and help arrange that lending if you do not have your own line of finance immediately available.

We arrange standard premiums for reasonable provision claims, brought by dependents of the deceased pursuant to the Inheritance Act 1975, but we are also happy to arrange all other types of contentious probate claim through our bespoke policy procedure where premiums will be assessed and offered on an individual basis, based on our short application form.

As with all of the policies we arrange, premiums are fully deferred until the conclusion of the claim and self-insured so they are only payable if the claim is successful, i.e. where the Policyholder betters the provision made to them under the terms of the deceased’s will.

If you are interested in arranging a policy or would like a copy of our contentious probate brochure, please contact us either by telephone (0870 766 9997) or by email (info@boxlegal.co.uk) and we will be happy to help.

*     Cover for loans used to fund disbursements/own costs must be agreed before the policy is incepted. An additional premium, to be assessed and agreed, will be payable and additional terms and conditions may be applied.