The controversial and fascinating case of Ilott v The Blue Cross & Others concluded on 15 March 2017 with the Supreme Court unanimously ruling in favour of the animal charities in a daughter’s claim under the Inheritance (Provision for Family and Dependants) Act 1975.

The Supreme Court’s landmark decision offers helpful guidance on how to determine ‘reasonable financial provision’ where a claimant is an adult child with financial independence.

Background

The claimant, Heather Ilott, was originally awarded £50,000 at first instance after she challenged her Mother’s will under the Act. Mrs Ilott had been estranged from her mother after leaving home aged 17 and was excluded from her mother’s will in favour of three animal charities: the Blue Cross, the RSPCA and the RSPB.

Mrs Ilott appealed to the Court of Appeal on the grounds that £50,000 was too low and would unfairly deprive her of means-tested benefits. The Court of Appeal allowed her appeal and awarded her £143,000 to buy the rented home she lived in and an additional £20,000 income, structured so as to preserve her state benefits. The charities appealed against this decision.

The Supreme Court judgment

The Supreme Court was asked to consider whether the Court of Appeal:

  1. Was wrong to set aside the £50,000 awarded at first instance
  2. Erred in its approach to maintenance
  3. Was wrong to structure an award so as to allow Mrs Ilott to retain her state benefits
  4. Erred in its application of the balancing act required under the Act.

On 15 March 2017, in what many will see as a major victory for testamentary freedom, the Supreme Court unanimously allowed the appeal and reinstated the original decision to award Mrs Ilott £50,000.

The Supreme Court gave the following reasons for its decision that £50,000 represented reasonable financial provision for Mrs Ilott:

  1. The concept of maintenance ‘cannot extend to any or every thing which it would be desirable for the claimant to have. It must import provision to meet the everyday expenses of living.’ The Supreme Court stressed the importance of restricting awards to adult children to ‘maintenance’, which is distinct from providing legacies and certainly does not mean providing for all of the applicant’s needs.
  2. ‘Need is a necessary but not a sufficient condition for an order.’ Even though Mrs Ilott could demonstrate a need for maintenance due to her straitened financial circumstances, her needs must be balanced against her mother’s wishes and other factors in Section 3 of the Act.
  3. ‘The circumstances of the relationship between the deceased and the claimant may affect what is the just order to make.’ A long period of estrangement was the reason the mother did not include her daughter in her will. Whilst that meant there was a failure to make reasonable financial provision for Mrs Ilott, what constitutes reasonable provision will be ‘coloured by the nature of the relationship between mother and daughter.’
  4. A testator’s chosen beneficiaries do not have to justify their entitlement either by need or expectation of benefit. This judgment can be seen as a major victory for charities generally. The Supreme Court acknowledged the reliance of charities on the legacies they receive in wills and made particular reference to the fact that Mrs Ilott’s mother had no connection with the charities during her lifetime. In spite of this, the Supreme Court ruled that the charities represented ‘her freely made and considered choice of beneficiaries’, and as such her will should be carried out.
  5. £50,000 constitutes a reasonable award as it would allow Mrs Ilott to purchase essential household items and improve her standard of living. If she spent enough, she could leave behind a sum small enough not to affect her state benefits.
  6. Awarding appreciating capital goes beyond the scope of maintenance. The Supreme Court made it clear that if housing is to be included as maintenance, it is more likely that this provision will be made by way of a life interest rather than by a capital sum.

In Lady Hale’s supplementary judgment, she remarked upon the ‘unsatisfactory’ state of the present laws on inheritance and called for stronger ‘guidance as to the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance.’

What could this ruling mean?

The Supreme Court’s decision strengthens the right to testamentary freedom and will be a welcome result for charities, many of which rely heavily on the legacies they receive in wills.

However, this ruling could make it harder for adult children to challenge a parent’s will if they have not been left with what they deem to be a reasonable provision. We may also see further guidance being issued on what constitutes maintenance and reasonable financial provision after Supreme Court judges were critical of the current legislation and guidance.

This case is a classic example of the need for expert advice when you are dealing with your will and succession planning.