Crystal ball gazing: the dilemma of future inheritance prospects in finance cases
The prospect of one party receiving an inheritance is often cited in financial relief cases as a reason to depart from equality. But to what extent is the court likely to take it into account? What factors are relevant in assessing what is sufficiently certain and what is impossibly vague? The decision in Alireza v. Radwan & others [2017] EWCA Civ 1545 reviews the existing authorities and gives fresh guidance.
Section 25(2)(a) of the Matrimonial Causes Act 1973 requires the court to consider “the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future.” It was confirmed in the case of Michael v. Michael [1986] 2 FLR 389 that section 25(2)(a) is not “some strait-jacket tailored to the sober uniforms of property law” but is so widely drafted that it can include “a mere expectancy”, such as an inheritance. However, Nourse LJ was clear in that case that the occasions when an inheritance could be taken into account “are likely to be rare. In the normal case uncertainties both as to the fact of inheritance and as to the time at which it will occur will make it impossible to hold that the property is property which is likely to be had in the foreseeable future.”
An example of the limited circumstances in which the court would take an inheritance into account was the case of C v. C (Ancillary Relief: Trust Fund) [2009] EWHC 1491. The husband’s interest was already vested in a property under a trust, to be received upon the death of his widowed step-mother. Munby J had to consider whether it was sufficiently foreseeable to meet the section 25(2)(a) test. The actuarial life expectancy of the step-mother was 15 years. The judge stated that “this case is at or very close to the outer extremity of what can properly be considered a ‘financial resource’ which a spouse is ‘likely to have in the foreseeable future’. At best it is… only dimly visible.” On balance the judge was willing to consider it a resource, because it was already vested. He remarked that had the step-mother’s life expectancy been longer, he may have taken a different view.
However, Munby J was clear that just because the inheritance could be considered a financial resource, it did not follow that it would be appropriate to make any order in relation to the trust fund. It was simply a matter for the trial judge to have regard to.
Against this backdrop, the Court of Appeal considered the case of Alireza v. Radwan. The parties were both dual British and Saudi Arabian nationals. The wife’s father was described as “a man of extraordinary wealth” and under the Saudi Arabian rules of “forced heirship” – meaning that children and spouses automatically inherit a portion of the deceased’s estate, which cannot be undermined by Will – the wife would receive tens of millions of pounds upon her father’s death. On this basis the husband sought to limit any award for the wife’s needs to those required to maintain her until she remarried or her father died.
The wife argued that any number of events might occur to limit or prevent her inheritance, such as a “cataclysmic political event” or the father giving away his money to charity. However she did not present any evidence that these events were likely.
In giving the lead judgment, King LJ approved the words of Nourse LJ in Michael v. Michael, namely that “in the ordinary course of events uncertainties both as to the fact of inheritance and as to the times at which it will occur, will make it impossible to hold that an inheritance prospect is property which is “likely to be had in the foreseeable future””. He considered that, on the very specific facts of the case – namely forced heirship – the inheritance (which, upon actuarial calculations was likely in around 16 years’ time) was sufficiently foreseeable to fall within section 25(2)(a). However, he too pointed out that such a finding does not mean that it would be appropriate for the court to make an order dependent upon such inheritance. The fact that the wife was young, had minor children to care for and would likely not inherit until she was in her 50s, meant that her immediate needs had to be met from the husband’s resources.
In the circumstances the court ordered the husband to pay to the wife a lump sum which enabled her to meet her own needs, now and in the future, and was not therefore dependent upon her inheritance. However, it is important to note that the husband had sufficient wealth to meet such an award. Undoubtedly different considerations would be taken into account in a case involving limited assets.
In summary, the guidance from case-law is that it will be extremely rare that an inheritance prospect will be considered a resource that the court should take account of. Its level of certainty and the likely timeframe will both be relevant factors, and the parties should expect to provide actuarial evidence as to life expectancy in appropriate cases. Even if a future resource is taken into account, it will not necessarily affect the final award. The judge will have to weigh in the balance all of the section 25 factors in considering whether it would be appropriate to do so.