Charities and internal investigations
The Supreme Court’s decision in Ilott v Mitson has been reported in all the papers; you’ve probably read about it.
A daughter, Heather Ilott, long estranged from her mother, and in impecunious circumstances, was left nothing in her mother’s will, which passed the whole estate to three animal charities. Heather made a claim for “reasonable financial provision” from her mother’s estate under the Inheritance (Provision for Family and Dependants) Act 1975. Heather had originally been awarded £50,000 by the Court; the Court of Appeal increased the award substantially; the Supreme Court reinstated the award at first instance.
While English Law has long championed “Testamentary Freedom” (the power to leave your estate to whoever you wish), the law has nevertheless since 1938, recognised that this must be subject to the duty to provide for those dependent on you, such as your wife, or your infant children.
The problem cases are where a child is neither infant nor dependent. The 1975 Act allows a child of whatever age to bring a claim for “reasonable financial provision” from the estate for his or her “maintenance”.
Heather was hard up but in no way dependent on her mother; they’d had no contact for years. But the Court considered, in all the circumstances, that Heather’s financial position and the somewhat lesser moral entitlement of the animal charities, with whom mother had little or no personal connection during her lifetime, meant that it was “reasonable” for Heather to receive a share of the estate that went some way to improve her financial circumstances.
The problem for legal advisers and their clients arises at the point when a client is considering excluding someone (usually an adult child) from their will, being more generous to the child’s brothers and sisters, or, indeed, leaving the estate to all the children equally if one of them is in straightened financial circumstances and the others are well off.
What to do? What is “reasonable”? What is “maintenance”? What help is a judgment which says (properly), that all will depend on the facts of each individual case? Whilst the concept of reasonableness is woolly, there are nevertheless a number of factors which can be considered with some degree of certainty.
The first of these is the impecunious financial situation of the adult child; those with adequate financial resources of their own need not apply.
Secondly, one needs to look at the competing needs of, say a surviving (second) wife or husband. Their needs will take a moral (and probably legal) priority.
Thirdly, one needs to look at the conduct of the adult child it’s sought to exclude. If you’re able (and most people aren’t) to look dispassionately at your own part in the breakdown of the relationship, so much the better. The Supreme Court made it entirely clear that “reasonableness” neither rewards good behaviour nor punishes bad, but the conduct of the parties is specifically referred to as a relevant factor in the 1975 Act. In Ilott v Mitson, the Court found that the mother, herself, was in part responsible for the breakdown of the mother-daughter relationship.
Lawyer-client discussion of the risk of a 1975 Act claim is essential if the client wishes to exclude someone from their Will who might otherwise have been expected to benefit. A clear record of that discussion, evidencing that the client reflected on their will instructions in the light of advice on potential 1975 Act claims, acknowledged the risks, and provided a reasoned motive, will constitute useful evidence of intention further down the line. It might not prevent a potential claimant rattling the cage with the threat of a 1975 Act claim but might help keep it contained or permit early settlement with limited cost.
Further, a letter of wishes recording why the testator has chosen not to benefit someone in their will can be telling. Such letters are not legally binding and do not have to take a prescribed form. Such letters often emphasise the poor relationship between the testator and the disinherited individual; remember, conduct isn’t the only factor and works both ways. A letter of wishes full of vitriol which reflects more badly on the testator than the disinherited can be counterproductive! Conversely, making a positive case as to why other beneficiaries have been chosen in favour of the disinherited individual can be persuasive. For example, if you intend to give your estate to a charity, then demonstrating why you support that charity and the reasons you would like to give that sum to charity are helpful points to include in support of your decision.
At the end of the day, it’s all about the money. It has long been accepted practice to deflect a 1975 Act claim by leaving an amount to an undesired beneficiary of a sum expected to disappoint, but large enough to deflect a claim or at least to provide a focus for settlement negotiations.
The Supreme Court judgment highlighted the ‘unsatisfactory state of the present law’ in respect of 1975 Act claims made by adult children. “Reasonable provision” implies a right based on moral expectation rather than dependency but gives no clue as to how this might be assessed against a background of a testator wanting to make no provision whatsoever. Against this background of uncertainty, reasoned discussion, with evidence of an understanding of potential claims and the pull of moral obligation against personal wishes, all duly documented at the time the will is made, are absolutely key.
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