The recent case of Herring & Another v Shorts Financial Services is an interesting case involving the interaction between a Will and a financial services product, in this case being a loan trust.
Following the Deceased's death in 2012, two beneficiaries of her estate (Mr Herring and Ms Hartley) issued proceedings against the Deceased's financial adviser at Shorts Financial Services and against the solicitor who drafted the Will, after they did not receive the full amount of the £200,000 legacy which was intended to be left to them by the Deceased.
The claim against the solicitor was settled at a mediation at the end of 2015. However, the claim against the financial adviser continued to trial.
The claim against the financial adviser concerned whether he sufficiently explained that a loan trust he had advised the Deceased to set up (which named the two claimants as the sole discretionary beneficiaries) in order to mitigate inheritance tax payable on her death, would not automatically transfer to the two claimants on her death. Instead, the loan trust passed to her estate when she died. The Deceased intended for the claimants to receive from her estate some £200,000 each. The solicitor therefore prepared the will including legacies of £54,000 for each of the claimants as it was assumed that they would also receive £146,000 each from the trusts. They were however both left £62,500 short of the full amount intended for them.
Judge Behrens held that the financial adviser did not have a duty of care to the claimants as he had not been involved in the Will-making process. He therefore dismissed the claim. He commented however that the solicitor had breached his duty of care to both the claimants and his Deceased client. According to the judgment, the solicitor had not asked the financial adviser about the trusts before drafting the will and instead simply relied on a short conversation and information contained in an aide-memoire which the financial adviser had prepared for his own benefit for a meeting.
Judge Behrens said that in his view the solicitor "should have made sufficient enquiries to satisfy himself that the relevant trust monies would in fact pass on to the claimants on [the deceased's] death… In my view it was negligent to draft the Will based solely on the material in the aide-memoire and the short conversation. This is not case where the claimants have no claim against anyone."
This case is a reminder for Will drafters to check thoroughly how such products pass on death and to ensure they make adequate enquiries to satisfy themselves in this regard.