The recent Court of Appeal decision to award £163,000 to an estranged daughter who had been disinherited by her mother has attracted considerable media attention, including suggestions that there has been a dramatic change of law. Has the previously sacrosanct principle of testamentary freedom been sacrificed on an altar of judicial political correctness, or is this case simply an application of the law as it stood before? We would suggest more the latter than the former; the media and public disquiet over the decision simply provides a useful reminder that the scope of the Inheritance (Provision for Family and Dependants) Act 1975 (commonly known as the “1975 Act”) is frequently forgotten or misunderstood.

SPEED READ

Much of the controversy stems from the fact that the claim was brought by a daughter of the deceased in her 50s, who had lived entirely independently of her mother since aged 17. The two were estranged, and the claimant daughter had no expectation of inheriting.

It is a common misconception that independent, able-bodied, adult children without any expectation of inheriting have no realistic chance of bringing a claim under the 1975 Act. In fact they will always have a claim to reasonable financial provision for their “maintenance” and this decision is now the leading authority on how judges should approach assessing whether on a given set of facts any such provision has or has not been made.

TESTAMENTARY FREEDOM IN ENGLAND AND WALES AND THE IMPACT OF THE 1975 ACT

The starting point under English law is that individuals are free to choose who will inherit their net estate and in what shares (contrast systems of law which impose minimum entitlements for family members, or “forced heirship” rules). However, since 1938 this general rule has been limited; the 1975 Act being the current legislation which does so. A flow chart summarising the effect of the 1975 Act is set out at the end of this note for ease of reference but the key points are:

  • The 1975 Act is only relevant if the deceased died domiciled in England or Wales (deemed domicile for tax purposes does not count).
  • Certain categories of person are entitled to bring an application under the 1975 Act, including spouses, civil partners, children (whatever their age) and dependants.
  • The threshold question for the court will always be whether reasonable financial provision been made under the will or intestacy rules (or a combination of both). If not, the court can make a broad variety of orders making such financial provision for the applicant.
  • “Reasonable financial provision” has a differing meaning depending on the relationship to the deceased:
    • Spouses and civil partners (including former spouses and civil partners in certain circumstances) are entitled to such financial provision as would be reasonable irrespective of their maintenance needs. One factor considered here is the amount that they might be expected to receive on a divorce.
    • Any other applicant, including a child of the deceased, can make a claim against the estate for reasonable financial provision for his or her maintenance only.
  • “Maintenance” is not defined in the statute but is generally understood to mean payments which enable the applicant to discharge the costs of their daily living at whatever standard of living is appropriate to them.
  • The 1975 Act obliges the court to have regard to certain matters when determining whether reasonable financial provision has been made for an applicant. The list includes:
    • the financial resources and needs which the applicant, any other applicant or any beneficiary of the estate has or is likely to have in the foreseeable future;
    • any obligations and responsibilities which the deceased had towards the applicant, any other applicant, or any beneficiary;
    • the size and nature of the estate;
    • any physical or mental disability of the applicant, any other applicant, or any beneficiary; and
    • any other matter, including the applicant’s (or any other person’s) conduct, which the court may consider relevant.

FACTS OF THE CASE

Mrs Jackson died in 2004, leaving a net estate worth just under £500,000.  By her will made in 2002 she left almost the entire estate to three animal welfare charities and made no provision for Mrs Ilott or any other family member. This was no surprise  to Mrs Ilott; before her death Mrs Jackson had warned her daughter to expect nothing from her.

Mr Jackson had been killed in accident at work shortly before Mrs Ilott’s birth, and she was bought up by her mother.

Mrs Ilott had been estranged from her mother, Mrs Jackson, since she ran away from the family home at the age of 17 to live with her then boyfriend (they later married and had five children). Three attempts at reconciliation between her and her mother had failed. The court accepted earlier findings in the course of the litigation that both mother and daughter shared the blame for these failures, while noting DJ Million’s findings that Mrs Jackson had acted in an unreasonable, capricious and harsh way.

At all relevant times, Mrs Ilott and her husband had very limited means. In 2013/14 and 2014/15 their combined income amounted to less than £8,000 and evidence of their expenses suggested they did not spend money on holidays, expensive items or even replacement clothing for themselves. Their home since they began living together was a housing association property, which at the time of the Court of Appeal’s hearing they had the right to buy at a price of £143,000.

RESULT

Much of the press concerning the case has failed to remind readers that an award for financial provision being made to an independent adult child such as Mrs Ilott is not actually new news. In fact Mrs Ilott had been successful in her first claim before DJ Million in 2007, where she was awarded £50,000.

Arden LJ gave judgment for the court, and determined that DJ Million had made two fundamental errors in his judgment in 2007. First of all, DJ Million stated that he had limited the award as result of the applicant’s ability to live within her means, and  her lack of expectation of inheritance but failed to explain how he had done so. Second, having not had the benefit of detailed evidence on the point, he failed to determine the effect which the £50,000 award would have had on Mrs Ilott’s state benefits. The £50,000 award was meant to represent an annual income (for Mrs Ilott’s maintenance) of £4,000 p.a., but this was less than the housing and council tax benefits she already received, and unless she took steps to spend £34,000 of the £50,000 capital, its award was going to deny her entitlement to these benefits.

In the light of the errors identified, Arden LJ, having gone through each of the relevant factors as required by the 1975 Act, substituted an award of £143,000 to enable Mrs Ilott to purchase her rented home, together with an additional £20,000 lump sum (which was made optional so that Mrs Ilott could choose not to take it, or take it in tranches, if it would result in the loss of state benefits). It should be noted that Arden LJ had regard in doing so to Mrs Ilott’s future needs as well as her immediate needs.

AN ADULT CHILD’S RIGHTS UNDER THE 1975 ACT

Counsel for the three animal welfare charities, which were defending Mrs Ilott’s claim, submitted that adult children can only succeed in making a 1975 Act claim where there are special circumstances or a moral obligation on the part of the deceased. This view can be traced back to Oliver J’s judgment in Re Coventry in which he stated that it is not sufficient for a child to show that they have a need and that the assets of the estate are sufficient to meet it; the applicant must also establish some sort of moral claim.

However, when that case reached the Court of Appeal, Goff LJ clarified that Oliver J had not meant that a moral obligation was a pre-requisite for such a claim to succeed, simply that there must be some reason why making no provision for an adult child was unreasonable (which in Re Coventry was the existence of the moral obligation).

This was confirmed in Re Hancock which emphasised that all of the matters mentioned in the 1975 Act must be taken into account. The fact that an adult child is financially independent and living separately will weigh against their claim but it is perfectly possible for another factor or factors to re-address the balance.

A few aspects of Arden LJ’s reasoning in considering these matters are particularly worthy of note:

In considering the relevance of Mrs Jackson’s testamentary wishes (and balancing the role of the court under the 1975 Act):

“Ms Stevens-Hoare [(counsel for the applicant)] submits that the judge was wrong to pay such high regard to the deceased’s testamentary wishes. There was no other beneficiary’s needs to which the court had to pay attention. Since the trial judge had found that it was unreasonable to exclude the appellant, there had to be consideration of reasonable provision. Ms Reed [(counsel for the three animal welfare charities)] submits that DJ Million was correct to have regard to the deceased’s testamentary wishes: see per Oliver J in Re Coventry dec’d [1980] Ch 461 (“An Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases.”).

In my judgment Parliament has entrusted the courts with the power to ensure, in the case of even an adult child, that reasonable financial provision is made for maintenance only.In my judgment that limitation strikes the balance with the testamentary wishes of the deceased whose estate is used for the purposes of making an award, at least in this case where there is no other claimant apart from the Charities. They have no demonstrated need or expectation.”

Arden LJ also dealt with submissions about whether or not the fact that Mrs Ilott was apparently managing to live within her means, despite their very limited nature, should weigh against her claim. Arden LJ thought that it should not, stating that “existing means are not conclusive as to the appropriate level at which a claimant is entitled to be maintained”.

And in assessing maintenance needs, she stated:

“I consider that 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.

The first question which I have to decide is whether the current living standard is sufficient. This is the correct test, and the court’s assessment should not be motivated by a desire to provide an improved standard of living as opposed to a desire to meet appropriate living needs. Nor on the other hand is the court bound to limit maintenance to mere subsistence level. In my judgment, the appellant’s present income is not reasonable financial provision for her maintenance in the context of this application given the restrictions which….. she has to impose on her own expenditure and the lack of any provision to meet her future needs, for example when she grows older or if she suffers any ill-health.”

The capital sum to purchase the home had important longer term benefits for the applicant in terms of giving some potential for her to meet her future funding requirements, e.g. by equity release.

It is apparent from the last extract of the judgment that Arden LJ agreed with DJ Million that it was not reasonable for Mrs Jackson to have made no provision at all for Mrs Ilott in the light of her very basic level of resources. This is the most important point to note for both practitioners and clients; testators must consider carefully the needs of their children, including adult independent children, (and any others with equivalent claims under the 1975 Act) when deciding the terms of their wills. The fact that a child may be a financially independent adult is just one factor amongst many that must be considered and a detailed analysis of all the circumstances of the case will be needed to determine whether reasonable financial provision has been made.

This warning can be tempered, however; it should be remembered that for children under the 1975 Act, the role of the court is only to assess and if necessary make provision to deal with an applicant’s maintenance. Arden LJ’s judgment is significant in ensuring that advisors and clients each consider future needs of children in this context, but those media sources suggesting that the law has been dramatically altered may otherwise safely be ignored.

CONCLUSIONS

When making a will, clients (and their advisors) should consider potential 1975 Act claims against their estate. Children’s rights to bring claims for their maintenance must be remembered; it should not be assumed that independent adult children can be discounted, and it should be remembered that reasonable financial provision required for maintenance may include a child’s future needs. Anyone considering making limited provision for their children (or indeed, their spouse or a dependant) should give careful thought to the scope of the 1975 Act and the breadth of discretion afforded to the court under it.

That being said, the decision in the case must be kept in perspective: save for clarification of how needs are to be assessed in determining reasonable financial provision required for maintenance of a child, the law remains the same, and the balance between testamentary freedom and the ability to claim under the 1975 Act is unchanged. Let us not forget that three charities with which Mrs Jackson had no relationship during her lifetime still took the lion’s share of her estate.

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