What if you’ve been left an inheritance, but not in the way that you want?

4 March 2019

On 8 November 2018, almost 17 months out of time, Mary Jane Cowan made an application under Section 4 of the Inheritance (Provision for Family and Dependants) Act 1975 for permission to make an application under Section 2 of that Act against the estate of her deceased husband, Michael Anthony Cowan (Cowan v Foreman, [2019] EWHC 349 Fam).

The 1975 Act provides that applications under the Act should be made within 6 months of the date of the grant of probate. If applications are made outside of this time limit, then the applicant must prove that their claim has a reasonable prospect of success.

On an application to bring a claim out of time, the Court has a wide judicial discretion whether to allow the claim to proceed. The burden will be on the claimant to show that he/she should be allowed to bring the claim out of time. The factors to be considered are derived from Re Salmon [1981] Ch 167 and Berger v Berger [2014] WTLR 35. They are:

a. How long has there been a delay and what is the reason?
b. Have negotiations commenced within the time limit?
c. To what extent has there been distribution?
d. Has the claimant a remedy against anyone for failing to bring the claim in time?
e. What are the overall merits of the claim?

In this case, when Mr Cowan was diagnosed with a terminal brain tumour in February 2016, he married his second wife, Mary Jane. He also prepared a new will, which was accompanied by a letter of wishes. At the time of his death, his estate was worth approximately £16million.

His clear wish upon making his will was that Mary Jane’s every reasonable need would be met for the rest of her life. However, rather than making an outright provision, he set up two trusts with Mary Jane as the principal beneficiary to take advantage of various tax planning mechanisms. The first trust, a business property trust, qualified for 100% inheritance tax relief. The second trust, a residuary trust benefited from the spousal exemption due to Mrs Cowan’s life interest.

The letter of wishes set out Mr Cowan’s intentions clearly. The business property trust was also to provide for the education needs for his grandchildren and to provide a “safety net” for his son and daughter-in-law and his stepsons and their children.

Since his death, the trustees supported Mrs Cowan with large monthly payments from the trust, and she retained her matrimonial home in California.

Mostyn J confirmed that the reasons for Mr Cowan making provision through trust structures had not been set out explicitly, but ought to have been “easily deduced” as saving Mrs Cowan (74 at the time of the application) the burden of dealing with large sums of money, and allowing trustees the flexibility and ability to pay any remaining sums to the other beneficiaries.

However, by December 2017 Mrs Cowan (now 76 years old) was concerned, confused and stressed about the trust arrangement and felt that she was left at the “mercy of the trustees who could cut her adrift with no access to money at all”. She therefore made an application to vary Mr Cowan’s will.

Mostyn J did not agree that Mrs Cowan’s application was likely to be successful. He considered that Mrs Cowan had been left with reasonable financial provision with her entitlement being in trust. He
confirmed that to vary the provision would be “tantamount to saying that every widow has an entitlement to outright testamentary provision from her husband. This would, in effect, introduce a form of forced spousal heirship unknown to the law. Plainly, this cannot be right. It must be possible for a testator to provide for his widow by a generous trust arrangement such as this, without the fear that it will be interfered with at huge expense in proceedings under the 1975 Act.”

Further, if Mrs Cowan had concerns that the trustees may defy Mr Cowan’s wishes, this would “likely amount to a breach of trust which would be actionable”.

Mostyn J decided that Mrs Cowan had failed to establish a reasonable prospect of success for her 1975 Act claim, and dismissed her application for an extension of time. He also refused her leave to appeal.

Applications For Reasonable Financial Provision

Generally, if a surviving spouse has not been left reasonable financial provision under a will, they would be considered to have a good claim under the 1975 Act to a further provision (taking into account all of the circumstances). It is at the court’s discretion how that further provision will be structured – for example, they do not have to award a lump cash sum. However, in this case Mrs Cowan had been left a reasonable financial provision.

Further, it may be possible to vary the provisions of a will if the beneficiaries who are going to be affected by the variation all agree. This must be done within 2 years of the deceased’s death.Variations can be agreed to vary the will in a number of ways including:

  • To reduce the amount of Inheritance or Capital Gains Tax payable;
  • Provide for someone who has been left out of the will;
  • Move the deceased’s assets into a trust; or
  • Clear up any uncertainty over a provision in the will.

However, as demonstrated in the decision above, a Court will not necessarily step in and simply disregard a testator’s wishes in order to satisfy beneficiaries (even surviving spouses) who are not happy with either the amount, or the structure, of the deceased’s will.

From a practical perspective, disappointed beneficiaries should really take legal advice as early as possible after becoming aware of the contents of a will. It is generally much easier to engage with other relevant parties about varying a will or trust before any distributions are made and before litigation.

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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