The Court of Appeal this week delivered a surprising decision in the case of Ilott v Mitson  EWCA Civ 797 which is likely to cause an upturn in the amount of contested probate claims and will be of significant concern to charities that raise funds through legacy giving.
The case concerns the estate of Melita Jackson (D) who died at aged 70 leaving an estate worth £486,000. Her will left the bulk of her estate to 3 charities – RSPB, RSPCA and the Blue Cross, but made no provision for her only child, Heather Ilott (C).
C was in her 40s by the time D died and was completely estranged from her having left home at 17 following a row about her boyfriend (who she went on to marry). D never forgave her and C lived independently of her mother from then on. She was not invited to C’s wedding and cut C out of her will entirely, even leaving 2 side letters explaining why and indicating that any claim by her should be vigorously defended.
C has 5 children (the oldest is an adult and the youngest a teenager) and lives in fairly straightened circumstances with the family having little income over and above state benefits.
C did not receive any financial provision from her mother during her lifetime and had no expectation that she would inherit from her mother. Despite this, she brought a claim for provision from the Estate under the Inheritance (Provision for Family and Dependents) Act 1975 (the 1975 Act).
The starting point in English Law is that individuals are entitled to leave their Estate to whoever they choose (known as testamentary freedom). Testamentary freedom is however subject to certain restrictions and one of those is the 1975 Act which allows spouses, children or other dependents of a Deceased to claim “reasonable financial provision” in circumstances where the court deems the provision left for them under the will to be unreasonable. The 1975 Act allows the judge hearing the claim quite a wide discretion to decide what constitutes reasonable financial provision by reference to a list of factors, including the size of the Estate, the conduct of the individuals involved and the various demands on the Estate. However, any provision is limited to awards of maintenance, a standard which is not defined in the 1975 Act, but which is calculated by reference to the specific facts of the case.
This case has been flip-flopping through the appeal courts since 2007. The first instance judge found that C’s straightened circumstances, the absence of other demands on the Estate and D’s unreasonable conduct towards C warranted an award of £50,000. This decision was reversed and then re-reversed on appeal, with a 2011 appeal upholding the original award of £50,000.
In the eyes of many practitioners, the 2011 judgment was the leading authority on claims by adult children and confirmed the established rule that the way in which the trial judge decides to exercise his/her discretion under the Act should not be interfered with lightly.
This latest decision appears to cast doubt on that proposition, with the Court of Appeal judges finding that the original judge made many errors when carrying out his original quantification of the award, including:
- seeking to make an award that replicated C’s existing state benefits;
- failing to assess what C might reasonably require for her maintenance other than by analogy with state benefits;
- ignoring the fact that half of the estate came from a life insurance payment following the death of C’s father;
- failing to take account of C’s expenditure on rent; and
- failing to get to the bottom of how any award would affect C’s state benefits.
By re-assessing the relevant facts and applying the provisions of the 1975 Act, the Court of Appeal found that C’s award should increase to £143,000.
The implications for our clients
This is arguably a landmark change to the legal landscape in this area. Not only is it likely to increase the risk of claims by disinherited adult children, it may also make it easier for claimants to challenge awards that they don’t like. That said, it is possible that the ruling could yet again be reversed by an appeal to the Supreme Court by the charities
Furthermore, even if the decision stands, its effect should be approached with caution. The media have already begun to significantly overplay the implications of the case on testamentary freedom, and it risks being misinterpreted as amounting to effective forced heirship. This is entirely incorrect – even after this decision claims under the 1975 Act by adult children remain highly fact specific and there is no automatic right to inheritance, even for children with necessitous financial circumstances.
The best way of minimising the risk of a claim is to talk the situation through thoroughly with your trusted advisers at an early stage and where possible address the situation head on through a combination of effective Estate planning and communication with the family members (and where appropriate the charities involved).
Charities perhaps face greater challenges given the adverse PR that will follow this ruling and a number of other adverse decisions in recent years. Charities are in an awkward position; their obligation is to seek to maximise the value of assets in their hands, and that can mean challenging claims under the 1975 Act, even in the face of adverse publicity. But it must not be forgotten in this case that the charities still stand to receive 2/3rds of Mrs Jackson’s Estate, and legacy giving remains an entirely appropriate way of leaving all or part of one’s Estate in the right circumstances.