The press reported last week on a highly acrimonious inheritance dispute that has broken out between the surviving spouse of the former owner of Sotheby's and her step-children. The row is said to have involved Mr Taubman's widow being barred from access to his prestigious London property and several valuable paintings.
We have seen a rise in inheritance disputes in recent years, partly due to ever more complex family set-ups and increasing wealth to be inherited. The fact that the media are fascinated with these tales can often add to the acrimony involved.
There are five key factors fuelling the trend for inheritance disputes:
Complex family structures involving second and third marriages usually mean step-children and half-siblings. This can lead to fractured relationships and tensions, especially when the person that held the family together passes away and when there is an asset imbalance between the joining families. Feelings of entitlement and long-simmering family disagreements can lead to disputes when some are left different portions of an estate. It is also quite common that individuals pass away without updating their will to reflect a change in their family circumstances - indeed, many people are unaware that a previously made will would be invalidated by a new marriage.
The value of assets, particularly real estate, has increased substantially over the past decade, meaning there is a larger pot of money to fight over. Traditionally, the cost of litigation was considered a barrier for beneficiaries wanting to challenge a will.However, with larger estates at stake, claimants can now find creative ways to fund litigation, including litigation loans, 'no win no fee' arrangements or agreeing that lawyers will be paid at the end of the case. With more to 'play' for, situations such as forging wills and coercing people to change their wills can also occur, which in turn leads to litigation.
'Homemade' and 'pre-packed' wills can lead to confusion, inconsistencies and suspicion. They can be easier to challenge because of the lack of formality and proper contemporaneous record of what instructions were given and why.
Our increasingly cosmopolitan society can create issues too. When individuals have lived in different countries, there may be other assets to take into account and different expectations of succession laws.The passing of assets will often depend on whether assets are moveable (like real estate) or immoveable (like bank accounts). Many people do not think of such issues when estate planning but it is particularly important to obtain specialist advice if other jurisdictions need to be considered.
There is also frequently litigation because of the complex way in which assets are held, such as in trusts, commonly offshore. Trustees will often have a wide discretion when dealing with a trust and making distributions, which can be of great frustration to beneficiaries.
Likewise, it is a recipe for problems when individuals hold assets in such a way on paper that does not reflect the true beneficial ownership of those assets. This may, for example, be because of creative tax planning or even because they have not got their affairs in order. Quite often, people do not realise that they are leaving these problems behind before they pass away.
Inheritance disputes make great reading in the press but are sadly no longer the preserve of the few. Of course, the risk of dispute is reduced if individuals take advice on the proper steps to put their affairs in place, particularly where an estate involves substantial assets (especially cross-border) and if there are a complex family structure and different cultures to consider.
This blog was first published in Spear's on 22nd September 2015