Charity Begins At Home: Reasonable Financial Provision In Inheritance Act Claims

Testamentary freedom has long been recognised in English law, the ability of an individual to dispose of their assets as they wish. Default intestacy provisions apply where there is no will however the testator’s intention as provided for in their will takes priority. The only qualification to this rule is that now contained within the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).

Case Law

The Supreme Court this month delivered its long awaited Judgment in Ilott v The Blue Cross and others [2017] UKSC 17, seeking to clarify the provisions of the Act. The Appellants (The Blue Cross), an animal charity appealed the decision of the Court of Appeal awarding Mrs Ilott (the deceased’s estranged daughter) a total of £163,000 from an estate valued at circa £486,000.

The facts of the case are well known, but in short, the deceased, Mrs Jackson, died in 2004 at the age of 70 leaving her entire estate to a selection of charities with whom it was accepted she had very little connection with during her lifetime. Mrs Jackson had become estranged from her only daughter, Mrs Ilott, in 1978. Mrs Ilott was 17 at the time and left home secretly to live with her boyfriend, of whom Mrs Jackson did not approve. Mrs Ilott subsequently married the boyfriend in question and together they have had five children. Despite three unsuccessful attempts at reconciliation over the years Mrs Ilott remained estranged from her mother at her death, accordingly Mrs Jackson intentionally made no provision for Mrs Ilott in her will. Accordingly Mrs Ilott brought a claim under the Act for reasonable financial provision.

At first instance District Judge Million determined that the will had not made reasonable financial provision for Mrs Ilott and awarded her £50,000. Following determination of a separate appeal the case eventually reached the Court of Appeal,[1] which held that the District Judge had made two ‘fundamental errors,’ namely:

  1. he had held that the award should, in light of the long estrangement and Mrs Ilott’s independent life and lack of expectation of benefit, be limited, but he had not identified what the award would have been without these factors and thus the reduction attributable to them; and
  2. he had made his award of £50,000 without knowing what the effect of it would be upon the benefits which Mrs Ilott and her family presently received.

Accordingly the Court of Appeal had increased the award from £50,000 to £163,000, being £143,000 to enable Mrs Ilott to purchase the property in which she lived and a further award of £20,000 expressed as an option with provision for drawing in instalments at Mrs Ilott’s election. The Court of Appeal’s award was calculated to ensure the preservation of Mrs Ilott’s entitlement to state benefits.

The Supreme Court held that the District Judge had not, ‘on fuller analysis,’ made either of the two errors cited by the Court of Appeal, on the basis of which it had revisited the award.

In respect of the first perceived error the Supreme Court stated that, ‘The Act requires a single assessment by the judge of what reasonable financial provision should be made in all the circumstances of the case. It does not require the judge to fix some hypothetical standard of reasonable provision and then either add to it, or discount from it, by percentage points or otherwise, for variable factors.’ Moreover the Supreme Court held that ‘the District Judge did not make the suggested error in taking into account the nature of the relationship between the deceased and the claimant. In many cases this will be of considerable importance.’

With regard to the second perceived error the Supreme Court held that the District Judge ‘did not fail to address the impact on benefits of any order which he might make.’ ‘The real gravamen of the Court of Appeal’s criticism is not so much that the District Judge did not “verify” the benefits rules, but that he had produced an award which had little or no value to the claimant because of the impact of benefits… But in fact it was not only not done in ignorance; it was not an award of little or no value to the claimant.’

Accordingly, the Supreme Court set aside the order of the Court of Appeal and restored that of the District Judge.

Guidance

Within the leading Judgment, Lord Justice Anthony Hughes reaffirmed existing case law that neither side can request that the appellate court simply reconsider the case from scratch, an appeal will only be successful if the judge made an error of principle.

Lady Hale provided a supplementary Judgment wherein she approved the leading Judgment but also went on to criticise the current state of the law in this area, ‘giving as it does no guidance as to the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance.’

Whilst there is no doubt that the current legal framework in this area is far from perfect, one point that is clear from the Supreme Court’s decision is that careful consideration should be given when wrestling with the issue of what does and does not constitute ‘maintenance.’ Anthony Hughes LJ cited the summary of Browne-Wilkinson J[2] with approval, which provides that ‘…the word ‘maintenance’ connotes only payments which, directly or indirectly, enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him. The provision that is to be made is to meet recurring expenses, being expenses of living of an income nature. This does not mean that the provision need be by way of income payments. The provision can be by way of a lump sum…’

When considering the issue as to whether an applicant has been provided with ‘reasonable financial provision’ Anthony Hughes LJ signalled agreement with Oliver J[3] who stated that: ‘It is not the purpose of the Act to provide legacies or rewards for meritorious conduct. Subject to the court’s powers under the Act and to fiscal demands, an Englishman still remains at liberty to dispose of his own property in whatever way he pleases or, if he chooses to do so, to leave that disposition to be regulated by the laws of intestate succession. In order to enable the court to interfere with and reform those dispositions it must, in my judgment, be shown, not that the deceased acted unreasonably, but that, looked at objectively, his disposition or lack of disposition produces an unreasonable result in that it does not make any or any greater provision for the applicant – and that means, in the case of the applicant other than a spouse for that applicant’s maintenanceThe court has no carte blanche to reform the deceased’s dispositions or those which statute makes of his estate to accord with what the court itself might have thought would be sensible if it had been in the deceased’s position.’

Thus whilst it is unclear whether the reform Lady Hale seems to invite is forthcoming, the case of Ilott v The Blue Cross does provide assistance with regard to the law as it stands, as contained within the Act, as imperfect as it may be.

[1] Ilott v Mitson [2015] EWCA Civ 797

[2] In re Dennis, deceased [1981] 2 All ER 140 at 145-146

[3]  In re Coventry [1980] Ch 461 at 474-475