On Wednesday of this week the Supreme Court handed down its judgment in the case of Ilott v The Blue Cross and others. The case arose out of a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act brought against the estate of Mrs Jackson by her daughter, Mrs Ilott. Mother and daughter had been estranged for the majority of the 26 years preceding Mrs Jackson’s death in 2004 after Mrs Ilott left home at 17 to live with her now husband, with whom she has five children. Senior associate Karen Levesley explores the details.
Mrs Jackson disinherited her daughter and left the bulk of her £486,000 estate to The Blue Cross, the RSPB and the RSPCA with instructions to defend any attempt by her daughter to contest the will. In a supplementary judgment, Lady Hale recognised that the case raised “some profound questions about the nature of family obligations, the relationship between family obligations and the state, and the relationship between the freedom of property owners to dispose of their property as they see fit and their duty to fulfil their family obligations.” Unlike some other legal systems, where members of the family enjoy fixed rights of inheritance to the estate of a deceased, English law recognises the principle of testamentary freedom. Individuals are free to dispose of their assets by will after death in whatever manner they wish. However, testamentary freedom is not an absolute right. This general rule is subject to the court’s power in defined circumstances to modify the will if satisfied that it does not make reasonable financial provision for a limited class of persons.
Mrs Ilott had been aware for many years of her mother’s decision and had lived without any expectation of benefit from her mother’s estate. At first instance, the judge found that Mrs Jackson’s will did not make reasonable financial provision for her daughter and taking a broad brush approach awarded Mrs Ilott £50,000. Mrs Ilott appealed this decision and the Court of Appeal held the judge had erred in his approach. They said he should have calculated what the award for reasonable financial provision should have been and what reduction should be attributable in light of the long estrangement and lack of expectation of benefit. Secondly, they said he made his award without knowing what the effect of it would be on Mrs Ilott’s state benefits, some of which were means tested and which would not be payable if Mrs Ilott had savings in excess of £16,000. In a widely reported decision in July 2015 the Court of Appeal awarded Mrs Ilott one third of her mother’s estate – £143,000 to buy the home she lived in and an option to receive £20,000 in one or more instalments. The decision was regarded by some commentators at the time as significantly weakening a person’s right to leave their estate to who they wanted to leave it to. The charities appealed.
The Supreme Court unanimously allowed the appeal of the charities. The Supreme Court overturned the Court of Appeal’s ruling and considered that the Court of Appeal had given insufficient weight to Mrs Jackson’s very clear wishes and the long period of estrangement.
The judgment has clarified that for an applicant other than a spouse or partner, reasonable financial provision is limited to what it would be reasonable to receive for maintenance only. This is an objective standard, to be determined by the court. Maintenance cannot extend to any or everything which it would be desirable for the claimant to have. The level at which maintenance may be provided is clearly flexible and falls to be assessed on the facts of each case, as at the date of the hearing. Although maintenance is by definition the provision of income rather than capital, it may be provided by way of a lump sum. The court is not required to fix some hypothetical standard of reasonable provision and then increase or discount it with reference to variable factors. The correct approach is for the court to consider all of the relevant factors in section 3 of the Inheritance Act and in light of them a single assessment of reasonable financial provision should be made. The court is entitled to take into account the nature of the relationship between the deceased and the applicant in reaching its conclusion.
Dependence on benefits does not increase a claimant’s needs. But if benefits are means tested, receipt of them is likely to be a very relevant indicator of someone’s financial position. Of course, it is quite possible that an adverse impact on state benefits may be a reason to avoid making financial provision for someone in a will and whilst to some this may seem morally wrong, as recognised by Lady Hale “The law has not, or not yet, recognised a public interest in expecting or obliging parents to support their adult children so as to save the public money.”
The state of the current law in this area is unsatisfactory. As explained by Lady Hale in her supplementary judgment, it gives no guidance as to the weight of the factors to be taken into account by the court in deciding whether an adult child is deserving or undeserving of reasonable maintenance. The approach under the Act invariably involves a value judgment, which may be problematic as there is a wide range of opinion among the public and the judiciary about the circumstances in which adult descendants ought or ought not to be able to make a claim on an estate which would otherwise go elsewhere.
This judgment will be a welcome relief for charities who can come under criticism from some for pursuing these kinds of cases. But the court recognised that there is a public interest in charitable giving and the receipt of legacies for the funding of charitable activities is extremely important. This appeal was brought by the charities largely on principle because of the possible impact of the decision on other cases and in the event of the appeal being successful the charities had already reached an undisclosed agreement with Mrs Ilott. They said “We are pleased that the Supreme Court has given welcome reassurance that the wishes recorded in a person’s will must be respected. This judgment will allow us to continue to honour the wishes of individuals who choose to remember charities in their will.” This judgment will also be welcomed by anyone previously concerned that the court had imposed a fetter on their freedom to leave their estate to the charities of their choice by awarding legacies to disinherited children.
For more information, please contact:
Karen Levesley, senior associate, Commercial Dispute Resolution
T: 0121 234 0105