Introduction
Before making wills
Preparing family members
Accidentally "creating" dependants can lead to litigation
Estate planning for international families
Making wills
Choosing executors carefully to avoid disputes
Executing will with witnesses in person
Competing wills in different jurisdictions can lead to litigation
After making wills
Comment
Any individual fortunate enough to have generated wealth, or to have been a custodian of family wealth, during their lifetime should plan for how it will be dealt with after their death.
This article considers nine key steps individuals can take to help ensure that their estates pass to the next generation without disputes or litigation.
Most take a smooth generational transfer of wealth for granted, but statistics from the Ministry of Justice show that this might not be the case. Over the past 10 years, the High Court has heard over 2,300 wills disputes. Many thousands more did not end up in court but did destroy numerous family relationships and incur a great deal of costs before being settled.
Figure 1: wills disputes
Before making a will, a testator should undertake a capacity assessment to avoid disputes. A medical practitioner, either a general practitioner (GP) or a psychiatrist, should prepare a report. The report can be used to show that the testator had mental capacity when instructions were given for the will to be prepared and executed.
If the testator is particularly elderly, vulnerable, unwell, or is making significant changes to their will, it is possible that the will could be challenged after death on the grounds of lack of capacity. A capacity assessment and report should make it more difficult for the will to be challenged on these grounds.
It is important to note that the instructions to the GP or psychiatrist must explain why the assessment or report is required, following the rule in the case of Banks v Goodfellow.
Preparing family members in advance is important if the testator has unusual plans for their wealth.
Most family members expect wealth to be primarily kept within the family. If this is not how they intend to structure their estate, it is advisable to inform the family of their intentions, however difficult this might seem.
Accidentally "creating" dependants can lead to litigation
Another key argument individuals may use to challenge a will is that they were financially dependent on the deceased, and that they have not been properly provided for by the will or under the intestacy rules. It may be surprising to learn that a testator can "create" a relationship of dependency accidentally, by establishing a regular and long-term pattern of making gifts. If the testator wishes to give money to someone – a child or a grandchild perhaps – it is better to do so in a single lump sum, as this cannot create a relationship of dependency, making it far more difficult for them to challenge the will.
Estate planning for international families
It is critical for specialist advice to be taken on the international aspects of a will if the testator and their heirs are living in multiple jurisdictions. Different countries handle inheritance differently, and that can easily end up with the testator's wishes not being followed. For example, some countries do not view a child as a legitimate heir to an estate if their parents were unmarried when the child was born. It is important for legal professionals preparing the will to have a complete understanding of the family circumstances – this should ensure that the testator's wishes can be adhered to irrespective of where they or their heirs live.
All wishes should be recorded in the will. A testator can also leave a detailed letter of wishes if the will creates a discretionary trust (for further details please see "Letters of wishes in UK inheritance").
Recording everything appropriately and/or preparing a letter of wishes if a discretionary trust is created will help prevent challenges to a will. However, it might not prevent a claim being brought under the Inheritance (Provision for Family and Dependant's) Act 1975 or a claim for undue influence or promissory estoppel.
Choosing executors carefully to avoid disputes
If the testator is leaving real estate as part of the will, it is advisable to name at least two executors. These two individuals should be chosen carefully, as executors with a poor relationship can easily lead to disputes, as happened in the estate of the renowned architect Zaha Hadid. A dispute between the executors of her estate led to more than four years of litigation following her death, depleting the value of the estate significantly.
Executing will with witnesses in person
The will should be executed properly, with witnesses in person. The covid-19 pandemic led to difficulties for some families in executing a will correctly. Social distancing and lockdown restrictions during 2020 and 2021 meant that some found it challenging to get two witnesses to sign the will in person at the same time. Failure to follow this requirement, set out in section 9 of the Wills Act 1837, can render the will invalid. If a testator is concerned that their will was not executed properly during lockdown, it is recommended to seek legal advice on whether it should be corrected.
Competing wills in different jurisdictions can lead to litigation
There have been cases where an individual has significant assets in two different countries, and a different will in each jurisdiction that covers all assets globally. This kind of "competing will" situation can end in costly cross-border litigation. If it is necessary to have different wills in different jurisdictions, it is important to make sure that they complement each other.
Some individuals may feel it suitable for their wishes to have even more protection from future disputes. This may be achieved by having their spouse's acceptance of their will confirmed by a postnuptial agreement. If the spouse has read the will, accepted it in full and contracted separately to respect it following the testator's passing, it is much more difficult for them to challenge it.
An estate dispute between loved ones is difficult for many to contemplate. But, as disputes like these become more common, and the stakes involved in them continue to rise, anyone with significant assets to pass on must consider the steps they should take to minimise the risk of it happening in their own family.
For further information on this topic please contact Fiona Smith or Roberta Harvey at Forsters LLP by telephone (+44 20 7863 8333) or email ([email protected] or [email protected]). The Forsters LLP website can be accessed at www.forsters.co.uk.