Heed the warning

Great consternation in the legal profession followed the Court of Appeal's recent (second) decision in the case of Ilott v Mitson [2015] EWCA CIV797 to triple the award to Mrs Ilott (estranged since eloping to marry at 17) to £164,000. Now the dust has settled, what can we learn from this?

The court decided Mrs Jackson had 'acted in an unreasonable, capricious and harsh way towards her only child'. 'The appellant's resources, even with state benefits, are at such a basic level that they outweigh the importance that would normally be attached to the fact that the appellant is an adult child, who had been living independently for so many years'.

Lessons for practitioners

Whenever a client gives instructions for a will, always ask whether anyone might have a claim, such as a spouse, former spouse, partner, children, dependants or people treated as children of the family, or where in the role of a parent, or whether any others might expect to inherit from the estate.

If so, you need to advise upon the Inheritance (Provision for Family and Dependants) Act 1975, the limits it places upon testamentary freedom, and potential claims for reasonable financial provision from the estate.

For claimants, other than spouses, an award from the estate is for what is reasonably required for their maintenance (i.e. to meet their normal living expenses). When advising, identify the factors which the court has to consider, both when deciding whether it is unreasonable for no (or only limited) provision to be made; then, if so, what would be reasonable financial provision.

Look at the section 3 factors under the act, particularly the financial needs and resources of the potential applicant now, or in the future, and of any other applicant or beneficiary.

When advising clients, bear in mind that these factors will be determined by the court at the date of the hearing. So even if at the time of making the will the potential applicant is not in difficult financial circumstances, therefore being unlikely to have a claim, their financial position may have deteriorated by the date of death or hearing.

The provision for spouses (or former spouses) is what is reasonable in all the circumstances, including what they might receive if divorce, rather than death, separated them.

'No contest clause' in a will?

It can often be helpful to leave a legacy to the potential claimant coupled with a no contest clause, which may be enough to put them off bringing a claim with the risk of losing the legacy.

The validity of no contest clauses is unclear, so you should advise the testator that case law has not determined whether such clauses can work, or whether they would be against public policy. With a claimant in very difficult financial circumstances, the court is likely to find in favour of making provision for them, whatever the will says.

Record your advice carefully, including both in your attendance notes and (preferably) in a letter or statement from the testator, the detailed reasons for making the limited provision for the potential claimant, and reasons for choosing the alternative beneficiary.

Where the chosen beneficiary is a charity, this is particularly important.

In Ilott the testator had no particular connection with the charities to which she had left all her estate, a key reason why the court considered it unreasonable.

Record as much detail as possible, listing all of the reasons for the choice of charity, including details of previous support.

Testamentary intentions that could appear spiteful, vindictive or unusual are more likely to be successfully challenged, so extra care is needed. More detail is needed to explain why the lack of (or limited) provision for the claimant was reasonable in all the circumstances.

In such cases, consider with the testator whether there are witnesses, (for example, of bad conduct by the potential claimant) to explain the reason for not making provision, and consider seeking statements from them to place with the will along with the testator's statement.

After the testator's death, often many years later, witnesses may no longer be around or may not be known to the intended alternate beneficiaries, particularly charities. 

Margaret Windram is an associate at Thomas Eggar

She writes the regular in-practice article on wealth structuring for Private Client Adviser