Landmark inheritance case set for the Supreme Court
Posted on 9th December 2016
Next week, for the first time, the Supreme Court will hear a case under the Inheritance (Provision for Family and Dependants) Act 1975 (‘the 1975 Act’). The case relates to an award made under the 1975 Act to Mrs Ilott from the estate of her late mother, Mrs Jackson. It is hoped that the ruling will provide clarity and guidance concerning the scope of the Court’s power to use the 1975 Act to interfere with a person’s testamentary freedom.
The brief facts of the case are:
- Mrs Jackson died in 2004 leaving a net estate of £486,000.
- Her will left a legacy of £5,000 and the rest of her estate to three charities.
- She made no provision for her only daughter, Mrs Ilott, from whom she had been estranged for over 25 years.
- Mrs Illot does not work and lives in modest circumstances, with her husband and five children, surviving largely on state benefits.
- Mrs Illot made a claim under the 1975 Act.
Unlike the law in many countries on the Continent, English law provides that a person can choose to leave their estate to whoever they want. But the 1975 Act allows children, among other limited categories of people, to apply for funds from the estate of their parent (in this case) where the estate does not make ‘reasonable financial provision’ for them. In the case of a child of the deceased, as here, if it is accepted that the estate did not make reasonable financial provision for them, the court can make an order in their favour for their maintenance. In doing so, the factors the court should take into account include:
- The financial needs and resources of the applicant – now and in the future;
- The needs and resources of the other beneficiaries – now and in the future;
- The size and nature of the estate;
- Any obligations and responsibilities owed by the deceased to the applicant;
- Any other matters the court consider are appropriate to the case.
Mrs Ilott’s claim was heard originally in 2011 and the High Court found that her mother’s will did not make reasonable financial provision for her taking into account the size of the estate, Mrs Ilott’s financial circumstances and the absence of other demands on her estate – i.e. this was a windfall for the charities and they would have had no expectation of receiving money from her estate. They awarded her £50,000, with the remainder going to the three charities. There were various appeals and cross appeals and the matter was eventually decided in the Court of Appeal in 2015 where Mrs Ilott was awarded £143,000 to buy her housing association property, the reasonable costs of buying it and payments up to a maximum of £20,000 structured so that Mrs Ilott could preserve her state benefits. The remainder went to the charities. The three charities have now appealed to the Supreme Court.
The issues to be considered by the Supreme Court are:
- Was the Court of Appeal wrong to increase the award from £50,000?
- Was the Court of Appeal wrong to take into account the daughter’s financial situation at the date of the Appeal rather than at the date of the original hearing.
- Did the Court of Appeal apply the ‘maintenance’ standard correctly?
- Was the Court of Appeal wrong to structure the award in a way which allowed Mrs Illot to keep her entitlement to state benefits?
- Did the Court of Appeal apply the 1975 Act correctly in balancing the competing claims of Mrs Illot and the three charities?
Many commentators think that the outcome of this case so far has threatened the principle of testamentary freedom. There is also considerable consternation among charities about what the repercussions could be for them, reliant as they are on legacy income. As things stand, there are concerns that bequests to them are more likely to be challenged by disinherited children or by children who have inherited less because of the bequests.
The ruling of the Supreme Court is eagerly awaited by all parties.
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