Addressing complex family dynamics under the Inheritance (Provision for Family and Dependants) Act 1975 (‘the 1975 Act’).
Private client solicitors are increasingly meeting clients who, for one reason or another, risk an increased likelihood of claims under the 1975 Act. Often these clients have had complex relationship break-ups, illegitimate and secret children and in some cases have totally disinherited their spouse, children or financial dependents. When deciding who inherits what, they need advice on how to mitigate claims that may be brought under the 1975 Act.
England and Wales have total testamentary freedom; you can leave your estate to whoever you wish. This is in contrast to countries such as France and Switzerland, where “forced heirship” dictates how a portion of one’s estate needs to be distributed and to whom. Whilst the law in England and Wales is not so prescriptive, if you fail to make reasonable financial provision for a financial dependent, they can claim against your estate.
Who can claim?
According to the 1975 Act:
- family members, including spouses and adult children
- anyone else “financially maintained” by the deceased immediately before death.
What is financial maintenance?
A person is classed as being maintained if they were financially supported by the deceased in some way during their lifetime and that maintenance continued until the death. This can include monetary maintenance in the form of regular payments or large gifts. However, provision of housing can also be considered as maintenance, such as the deceased allowing the claimant to live in their property either rent free or at a nominal or reduced rent.
Claims by spouses are assessed at a higher level of maintenance.
What is the time limit?
A claim can be made under the 1975 Act within six months of the Grant of Representation being issued, and a claimant has four months after that in which to serve the claim.
Can you get around it?
Unfortunately not. Ultimately a testator cannot do anything to prevent a claim if someone is determined to bring one. However, here are some practical tips to help mitigate the likelihood of a claim.
- Think about who you have financially maintained, in what way and whether you have made reasonable provision for them. If not, why?
- Consider leaving the potential dependent a small or large legacy if appropriate and if you think it might satisfy them. But include a forfeiture clause – if a claim is brought they forfeit the legacy in the Will. A court may not enforce this clause but hopefully it will be a disincentive.
- Explain your reasoning. Prepare a side letter of wishes for your trustees with the reasons why you haven’t provided for that person. Depending on the relationship dynamic, you may ask your trustees to show the claimant the letter, in the hope it would morally compel the would-be-litigant against claiming. After all, “no legacy is so rich as honesty”.
- Instruct your trustees to settle a claim before it goes to court.
- “All that glisters is not gold” – just because a claim is brought against the estate doesn’t mean it will be successful. However, it will inevitably slow down the administration and increase the legal fees.