It is unfortunate but not unusual to find that following the death of a family member a dispute arises amongst those with an entitlement to or an expectation of an inheritance.

The risk of this can be best avoided - but even then not wholly eliminated - by making a Will. That is the best way to ensure that the persons' estate passes as planned. Setting out who is to inherit is also a fundamental tool for estate tax planning, particularly in relation to farming families, by which you can minimise the tax that could otherwise be payable on death.

Even with a Will in place there remains scope for disputes following death. In the context of farming families, it is not uncommon to find a claim being made where promises were made by the farm owner that others working on the farm (not necessarily only family members) would inherit the farm or part of it. Those circumstances could give rise to a claim to require the farm owner (or his or her estate) to make good on those alleged promises irrespective of what the terms of any Will may say.

In order to bring a successful proprietary estoppel claim the following must be shown:

  • That a promise to a right over something was made;
  • That the person who was promised the right, relied upon that promise and acted to their detriment;
  • That it would be unjust and/or inequitable to allow the person (or their estate) to go back on that promise.

A proprietary estoppel claim arose in a farming context in the case of Davies and Davies [2016] where the daughter of a farming family had a claim based on proprietary estoppel. Unusually Ms Davies' parents were still alive so this was a case where both promisor and promisee could give evidence of what was said and when.

In this case the parents had a pedigree dairy farm. Their daughter Eirian Davies (who was one of three siblings) claimed that she had, over many years worked on the farm at a low wage for long hours, in reliance upon her parents’ assurance that the farm would one day be hers. It was recognised that the parents and daughter had an unsettled relationship and that Eirian had at one stage left the farm to take up employment elsewhere, before eventually returning to the farm. The case went before the Court on several occasions before finally being decided by the Court of Appeal in May 2016. In the course of the previous hearings the Court concluded that Eirian had a valid claim and that she should be compensated for the detriment suffered in reliance on the promises made. The Court initially awarded Eirian just over one third of the net value of the farming business but her parents appealed. The Court of Appeal took into consideration many different factors including the fact that the parents had built up the successful farming business a over a period of 50 years and continuously reinvested the profits into their business - which Eirian had never done. The Court of Appeal hold that the first award was too generous and concluded that £500,000 was the correct sum to satisfy the equity in this case. The Judge in the High Court expressly stated that he recognised that it may be necessary for some, or perhaps all, of the farm to be sold to pay the sum awarded - even at the reduced sum of £500,000.

The lesson for landowners is to plan ahead and be careful not to make promises unless it is intended that those gifts are made. That extends even to merely allowing a person to believe that a promise has been made. The consequences otherwise are potentially massive: all concerned could incur significant costs, and the losers will usually have to pay the lion's share of the winners costs as well as their own; and the steps that may need to be taken to raise the monies (for costs and for the claim itself) could even involve the sale of the farming business itself - which of course could also have very significant tax consequences with the loss of Agricultural Property Relief.

The other part of the answer is to make a Will as that will make your testamentary wishes as clear as they can be - and if that is combined with good tax planning, it should maximise the chances that your wishes for the future will be made good.