The end of the Ilott saga: A victory for testamentary freedom

Last month saw the conclusion of Ilott v The Blue Cross and others [2017] UKSC 17, a case which has lasted more than a decade, as the Supreme Court handed down its ruling, finding unanimously in favour of the charity appellants.

This was a significant moment for many across the charity and legal sectors, not least because of the intense media interest around the saga. This was the first time a case on the Inheritance (Provision for Family and Dependants) Act 1975 had come before the Supreme Court, so all eyes were on the judgment and what it would say about the principle of testamentary freedom.

It’s likely there was a collective sigh of relief among those in the charity sector as the judgment was handed down, when it confirmed very clearly that it is in general a person’s right to choose how we dispose of our assets after we die. Indeed, the Supreme Court’s decision clears up a number of uncertainties and misunderstandings about the 1975 Act after several years of confusion and concern.

Ilott case

By way of background, the case concerned a Mrs Jackson, who died in 2004 leaving an estate worth just under £500,000. Mrs Jackson’s estranged daughter, Mrs Ilott, made a claim under the 1975 Act and in 2007 was awarded £50,000 – just over 10 per cent of the estate – by way of ‘maintenance provision’ by District Judge Million.

Mrs Ilott appealed the sum, and the matter was eventually remitted back to the High Court. Mrs Justice Parker then endorsed the award made in 2007. Mrs Ilott appealed to the Court of Appeal, which held in 2015 that the award should be increased to over £163,000 – more than treble the previous award – to provide her with enough money to buy the housing association property where she lived and a capital sum.

The Supreme Court heard the appeal of the charity beneficiaries on 12 December 2016 and delivered judgment on 15 March 2017, reversing the Court of Appeal’s decision and restoring the 2007 award of £50,000.

What this means for donors

Legacy giving is an important and personal decision, reflecting the values of the testator. Therefore, it is encouraging that the Supreme Court ruling will reassure donors that having an up-to-date and professionally written will offers a reliable guarantee that their final wishes will be honoured.

While it remains the case that family members and dependants can seek financial provision from a deceased’s estate under the 1975 Act, the ruling made clear that judges will only use their powers in limited and particular circumstances, and will not rewrite wills because they think a testator should have acted differently.

The clarification provided by the ruling should help people drafting wills to give clearer advice to their clients regarding the possibility of family members and dependants making a claim. Following this advice the testator can decide whether they wish to make provision in their will for these people for the sake of certainty.

The judges emphasised that the test of reasonable financial provision for children that practitioners must try to satisfy with their clients is limited to such provision as it would be reasonable for the applicant to receive for maintenance. Provision for spouses and civil partners, however, is not limited in this manner.

The ruling means that donors and advisers can now approach the will-making process with a greater sense of clarity, which is good news for everyone involved.

What this means for charities

Charities have, understandably, been watching Ilott with some concern for its wider, long-term implications. Legacies are an important income stream for these organisations, without which many wouldn’t be able to carry out their work, a fact recognised by the Supreme Court judges.

Lord Hughes acknowledged that ‘charities depend heavily on testamentary bequests for their work, which is by definition of public benefit and in many cases will be for demonstrably humanitarian purpose. More fundamentally, these charities were the chosen beneficiaries of the deceased. They did not have to justify a claim on the basis of need under the 1975 Act, as Mrs Ilott necessarily had to do.’

This marks a significant point of difference from the view of the Court of Appeal in 2015, which considered the bequest as a ‘windfall’ as the charities had no expectation of benefiting under the deceased’s will. By increasing the daughter’s award the court placed more importance on the needs of the claimant.

The Supreme Court ruling is therefore encouraging for charities, for whom the decision to take the case to court was difficult. While they have a certain moral obligation to fulfil donors’ wishes, they must also bear in mind the not-insubstantial difficulties involved, not least protecting the charity’s reputation, which itself is of enormous value. If, for example, negative press around a case makes people reconsider supporting that charity, in life or in a legacy, this could significantly affect the ability of the charity to do its work.

The vast majority of legacy disputes settle by agreement (Ilott is very much the exception, not the rule), and hopefully the clarification of the definition of ‘need’ and advice on appropriate awards will mean fewer disputes will end up before the courts. But despite the numerous risks it remains important to consider, this ruling has confirmed the charities’ right to money bequeathed to them – meaning others should not be discouraged from pursuing the right case in the right circumstances.

There is also hope that the increase, whether theorised or factual, in similar claims brought by family members encouraged by previous rulings will be tempered by the Supreme Court’s judgment.

The lasting significance of Ilott is likely to be substantial for donors and charities. By resolutely confirming the validity of the principle of testamentary freedom, and providing additional necessary guidance on the application of the Inheritance Act, the future now looks much brighter for donors and charities, and for the good that together they achieve through legacy gifts.

Chris Millward is chief executive of the Institute of Legacy Management

@Legacy_Mngment

legacymanagement.org.uk