Rising will disputes and the need for practical advice
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Testators should be encouraged to consider the potential impact of litigation on their estate, and, more specifically, on their beneficiaries, explains Emma Saunders
The continuing rise in inheritance disputes has reached the Supreme Court, which heard the landmark appeal in Illot v The Blue Cross and others on 12 December 2016. Judgment is expected in early 2017. Whatever the outcome, the publicity surrounding this high-profile case is likely to raise general awareness of the possibility of challenging someone’s estate.
However, it is not only claims under the Inheritance (Provision for Family and Dependants) Act 1975 that are increasing, but also will challenges and disputes between executors. As many of these settle without a claim ever being issued it is difficult to put figures on the precise number of such cases, but anecdotal evidence and an increase in the number of firms advising in this area suggests significant growth.
The reasons for this are numerous. The changing nature of family structures, with an increase in second and third marriages, creates family tensions, particularly between surviving spouses and their step-children. Those cohabiting outside of marriage, without the protection of intestacy provision (which would often be insufficient in any event), also make up a significant proportion of claims.
The way we live now, with many families scattered across the country (or indeed the globe), means many elderly or vulnerable people become more reliant on neighbours and paid carers and look to reward such people for their assistance. The flipside of this is these individuals may be vulnerable to persuasion or undue influence. There are of course two sides to every story.
It may well be that the continued increase in house prices, resulting in larger estates, is partially responsible for fuelling the rise. Many older people are asset-rich, yet cash poor, meaning they are unable to assist their children during their lifetimes and yet leave a substantial estate on their death. Put simply, more estates are worth fighting over and their distribution (or lack thereof) can be life-changing for the generation below. Some litigants may consider they have nothing to lose by bringing a claim, or mistakenly believe that the estate will foot the bill. It may also be that people are more litigious anyway.
In addition, we often find that wills are impractical. Successful business people leave interests in owner-managed businesses that simply do not align with the interest of the business itself, or its shareholders. Practical advice needs to be taken.
The inherent uncertainty of estate litigation (particularly in will disputes when the outcome could be an all or nothing situation) means this area is ripe for mediation and negotiated resolutions. The Chancery Division is encouraging early neutral evaluation and financial dispute resolution in an attempt to reduce the number of contested trials. However, the majority of claims settle without any (or very limited) court involvement, with mediation often successful if the parties’ expectations are managed from the outset.
Solicitors need to highlight the importance of having a will to their clients, whether this is a document the solicitor would draft themselves, or they would refer on to a colleague specialising in private client work. Yet making a will is not enough; it must be updated on a regular basis to reflect any changes in personal circumstances.
Testators should be encouraged to consider the potential impact of litigation on their estate, and, more specifically, their beneficiaries. A contested trial could easily see legal costs rise to sums in excess of £100,000. Even if the will challenge is successfully defended there will be some shortfall in the costs recovered by those defending. Further, if there is an impecunious opponent a costs order in the defendant’s favour may be worth little or nothing. Testators should also be advised to take into account the emotional cost of future litigation – not to be underestimated – on their loved ones.
In this regard, if a testator is seeking to exclude someone who they might otherwise have expected to benefit, or wishes to make a will that might be considered in any way contentious, they should be advised about the importance of obtaining a testamentary capacity report, or, at a minimum, leaving a detailed (unbinding but helpful) letter of wishes. Clients may be resistant to the costs but in the long run it could save their estate, and their beneficiaries, a significant amount.
A professionally drafted will with a contemporaneous capacity report (addressing the limbs of the Banks v Goodfellow test) is difficult to challenge and the courts are resistant to overturning them, the burden of proof being with the challenger. It can mean that potential litigation can be disposed of at the earliest opportunity and with minimum expense.
Further, a good, detailed file note, addressing capacity issues and detailing the reasons for anyone’s exclusion from the will, can make dealing with a Larke v Nugus request much easier and, therefore, less costly for your firm.
Emma Saunders is an associate at Russell-Cooke