Inheritance Law Clarity for Adult Children
Hayley Bundey, Head of MW's Estate & Trust Dispute Team, discusses today’s landmark decision by the Supreme Court which brings to an end the long-running battle of Ilott v Mitson. This is the first judgment handed down by the highest Court in the land on the important issue of how to deal with adult children bringing claims against their deceased parent’s Estate.
Partner & Head of Estate & Trust Disputes
As discussed in previous articles, the years of developments in the Ilott v Mitson case date back to the original judgment which was made in 2007 following Mrs Jackson’s death in 2004. It has therefore taken some 13 years to reach a final resolution to this case.
In summary, Heather Illott pursued her claim against her mother’s Estate pursuant to section 1(1)(c) of the Inheritance (Provision for Family & Dependants) Act 1975 (“the 1975 Act”). She argued that as a child of the deceased, she did not receive reasonable financial provision from her mother’s Will from which she was specifically excluded (with reasons provided in a side letter of wishes relating to Mrs Ilott’s choice of husband and which had led to an estrangement from her mother for some 26 years). Instead Mrs Jackson left her £486,000 Estate to three charities; The Blue Cross, the RSPB and the RSPCA (with whom she had little or no involvement during her lifetime).
In 2007 the original judge decided that it was unreasonable for Mrs Ilott to be excluded from her mother’s Estate, due in part to her straitened financial circumstances, and she was awarded £50,000 from the Estate. Mrs Ilott argued that £50,000 was not enough and so she made an appeal to increase the value of the award to the High Court. The charities, also dissatisfied, cross-appealed making a claim that no award should be made. The outcome of the second judgment overturned the first Judge’s ruling thereby cancelling Mrs Ilott's original award, leaving her with nothing.
Mrs Ilott then appealed this second decision to the Court of Appeal who, in 2011, reinstated the first judge’s decision (that it was unreasonable for Mrs Ilott to be excluded from the Will) and sent it back to the High Court for a further assessment of the value of the claim to be made. In March 2014 the High Court dismissed Mrs Ilott’s second appeal on the value of the claim (so the £50,000 award remained).
In 2015 Mrs Ilott took her appeal back to the Court of Appeal (but this time solely on the issue of the value of her award) and in July 2015 the Court of Appeal overturned the first judge’s order of £50,000 and replaced it with one for circa £164,000 (nearly 1/3 of the Estate), on the basis she could buy her Housing Association property and have an option to draw down £20,000 from the Estate on top for a small nest egg.
The charities then appealed that decision to the Supreme Court and they have given the final judgment on the case today.
Today’s Landmark Decision by the Supreme Court
In today’s judgment -  UKSC 17 - the Supreme Court have allowed the charities’ appeal and reinstated the first Judge’s order for a £50,000 award. They did so because they said the Court of Appeal had made two fundamental errors when coming to their decision in 2015, namely:
- They were wrong to say that the first Judge was required to explain the extent to which he had limited his award for Mrs Ilott because of the long estrangement she had from her mother and the lack of expectation she had for any benefit from her Estate.
- They were also wrong to say that the first judge had made his award of £50,000 without knowing what the effect of it would be upon Mrs Ilott’s state benefits.
The Court of Appeal was only allowed to replace its award of £164,000 with the first Judge’s award of £50,000 if the first judge had made those two legal errors (or any others, which it was found they didn’t) and as the errors hadn’t been made at the first hearing this meant the Court of Appeal did not have the right to replace the award with one of its own calculation.
It is important to note that today’s judgment is not a landmark decision because of the level of the award made for Mrs Ilott nor is it for the fact that she has received any award at all (both decisions which the Court says were correctly made back in 2007). The judgment is a landmark one because it is the first time that we finally have some clarity from the Supreme Court on the key issues which the Courts should take into account when deciding these very difficult and discretionary cases going forward.
It is important to remember that Mrs Ilott hasn’t lost her case. Indeed the result is quite the opposite as she has succeeded on recovering an award of £50,000 from her mother’s Estate despite the estrangement and lack of expectation of provision. The purpose of this appeal was simply for the Supreme Court to provide some clarity on the law. Indeed it seems the parties have come to some form of out of court arrangement between them, regardless of the outcome of this appeal, given that it was so important for it to be used as a vehicle to provide clarity for the Courts and for future similar cases.
The parties are of course to be commended for coming to such an arrangement which now affords other Claimants and Defendants more guidance on how their own claims should be resolved going forward.
The Supreme Court made it clear that these claims are so discretionary that it will rarely be justified for them to be appealed in future (so long as Judges don’t make an error of law) because there is such a broad scope of outcomes which the Court can legitimately order for these cases. The Court expressly stated that if Mrs Ilott’s original case had been heard by a different judge it could have resulted in her getting nothing (as was the case in the first High Court hearing) and equally it could have resulted in her getting provision for her housing (as was the case in the second Court of Appeal hearing).
Neither approach was stated to be wrong when assessing the claim, the difficulty was that neither of those subsequent courts had the power to substitute their orders in the end as the original Judge had not made an error in his own judgment. His judgment was within the range of reasonable judgments which a judge could make based upon the facts of this case.
A New Clarity for Inheritance Claims
So what does this mean for Claimants and Defendants to adult child claims under the 1975 Act in future:
- The Section 3 factors are to be equally applied to both stages of the two stage test which the Court needs to determine before making an order, namely:- 1) did the Will/intestacy make reasonable financial provision for the Claimant and 2) if not, what reasonable financial provision ought now to be made. It is not necessary to separate out these questions and the Judge can simply set out the facts as he finds them and then address the answer to both questions together if appropriate. There should be no need for two separate (split) hearings on these questions. The reference to this process as a “value judgment” was endorsed by the Supreme Court.
- The time to assess the relevant factors under section 3 is at the date of the trial (as per section 3(5) of the 1975 Act) and even on the rare occasion when a case is successfully appealed in the future, so that a higher Court needs to re-exercise the value judgment as to the level of award to be made, this should be done using facts and evidence available as at the original trial. Later evidence (including evidence of changes to financial need) should only be heard if the Court allows that evidence in on specific application. Predominantly the test for this is whether that evidence could not, with all reasonable diligence, have been obtained for use at the first trial.
- “Maintenance” remains the test to be applied to determining the value of an adult child’s claim under the 1975 Act. Whilst the provision of a property can be considered to be maintenance it is more likely that this will take the form of a life interest in the property (the right to live there – or take the rent from the property – for the remainder of the lifetime of the Claimant) than an outright transfer of property or payment of a lump sum being provided to enable the purchase of the same.
- The judges confirmed that adult children do not have an additional obligation to overcome to prove a “moral claim” to their parent’s Estate, however this is one of the factors which will be weighed in the balance with other factors when making the value judgment. Equally the Court has clarified that something more than being an eligible applicant and having a relationship with the deceased needs to be proven in order for the claim to succeed. That “something more” can be a moral claim (including financial contribution to Estate assets or care for the deceased). Financial need cannot by itself be sufficient to make an award but again it is one of the factors to be weighed in the balance with the other section 3 factors.
- The state of the relationship (i.e. an estrangement or being particularly close) with the deceased can impact the level of the award to be made but as part of the wider value judgment to be exercised by the Court and not by way of the Court needing to discount or add sums of money to a notional baseline figure in order to account for those issues.
- State benefits are of significance when calculating a Claimant’s financial needs but the provision of a capital sum of £50,000 here did not automatically mean Mrs Ilott would lose her state benefits (because the sum was more than the £16,000 means-test threshold). The Court found that Mrs Ilott could have spent a large proportion of this on necessary equipment for the property (i.e. white goods, carpeting, flooring and replacement beds etc) so as to reduce her capital below the threshold and thus not impact her state benefits if she so chose. An award for payment of such items “sensibly fits” the concept of an award providing maintenance for a claimant. The Court also expressed concern that the £20,000 nest egg provided by the Court of Appeal’s judgment would not necessarily have avoided Mrs Ilott losing her benefits in any event, unless it was ordered by way of a discretionary trust (which it wasn’t).
- Courts should not give little weight to the testator’s expressed wishes to benefit the beneficiaries nor disregard an estrangement of some quarter of a century. Further, Mrs Ilott’s lack of expectation of provision from the Estate is not balanced by the Charities’ lack of expectation of provision also. Charities rely heavily on testamentary gifts for a public benefit purpose and it is wrong to say they wouldn’t be prejudiced by an (increased) award to a Claimant. Equally all beneficiaries of an Estate do not need to put forward a needs-based defence to a 1975 Act claim and can simply rely on the fact that the deceased chose them to benefit as justification for them receiving provision from the Estate. The testator’s wishes and the issues of expectation and estrangement are all issues to be considered in the round with the other section 3 factors when the Court makes the value judgment on whether to make an award or not.
- The 1975 Act and the value judgment should not be used as a mechanism for rewarding good Claimant conduct or poor Testator conduct. In Mrs Ilott’s case, although the Court found fault on both sides for the estrangement the Judge found that Mrs Jackson was more to blame than Mrs Ilott and that her reasons for excluding her from her Will, as a result, were unreasonable. That judgment was reflected in the fact that Mrs Ilott succeeded on her claim to receive an award from the Estate, however the Supreme Court clarified that the nature of their relationship (and the estrangement) shouldn’t then be irrelevant when weighing up the section 3 factors. As such, they found that the first judge had correctly tempered the award made to Mrs Ilott as a consequence of that estrangement/lack of expectation of provision to the £50,000 award. The difficulty, of course, is that the Court does not need to explain the extent to which the award has been discounted for such issues so it will be difficult to assess where that particular issue leaves Claimants in terms of valuing their claims in the future.
One thing is certain as a result of this judgment.
It is crucially important for future Claimants and Defendants to seek specialist legal advice when dealing with adult child 1975 Act claims in the future. As the months and years unfold this judgment will be applied by future judges on numerous occasions to help them make the necessary value judgments and provide further clarity for practitioners in this complex and discretionary area of the law.
In the meantime, it is all the more important that parties instruct lawyers who are specialists in the field if they wish to have the best chance of a successful outcome and of either maximising or minimising, the value of these claims.
We Can Help
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Our dedicated Estate and Trust Dispute Team are specialists in navigating the tricky waters of such claims to help ensure the best outcome for our clients. Our specialist lawyers have experience in helping both Claimants and Defendants to adult child 1975 Act claims and we are best placed to guide you through the process as quickly and painlessly as possible. If you would like to take advantage of our FREE CASE REVIEW, call us today on 020 3551 8550 or email us at email@example.com.