Inheritance Act Claims

Who can make an inheritance act claim?

Not everyone who thinks they have been treated unfairly is entitled to make a claim. In order to qualify you must fall into one of the following categories:

• Spouse or civil partner.
• Former spouse or civil partner, but not one who has formed a subsequent marriage or civil partnership.
• Child of the deceased (this includes someone who was treated as a child of the deceased).
• Someone who was, immediately before the deceased’s death, being maintained by the deceased.
• Someone who was, for at least the two years immediately before the deceased died, living in the same household as the deceased as if that person and the deceased were a married couple or civil partners.

However, just because someone falls into one of these categories, it does not mean they will necessarily be entitled to make a claim. They also need to prove two additional things:

• That they have not received reasonable financial provision from the estate; and
• They require reasonable provision from the estate for their ongoing maintenance (i.e. they need greater provision).

The only exception to this is the case of a spouse or civil partner. Whilst they need to show that they have not received reasonable financial provision from the estate, they do not need to show that they require such provision for their ongoing maintenance (i.e. they do not have to show that they need greater provision).

What is a reasonable financial provision?

What will constitute “reasonable provision” will depend on the circumstances; therefore, it is hard to define it. For anyone other than a spouse or civil partner, the question of reasonableness will depend in part on what provision the deceased made for them during their lifetime.

For example, if the potential claimant was a niece of the deceased, and the deceased had been paying their mortgage for the past 10 years, reasonable financial provision may be the amount it would take to pay off the mortgage.

A common example is where a couple have been living together in a property owned by the deceased. Reasonable financial provision in such circumstances may be that the partner has the right to occupy the property for the remainder of their life, or that they receive a gift of cash sufficient for them to purchase an alternative property.

What sort of provision might the Court award?

Sometimes claimants are surprised at what the court could order. People tend to assume they will receive cash/property outright, but this may not be true. An award may take the form of:

• An absolute capital sum (i.e. cash).
• Income.
• Deferred payments.
• An amount settled on trust.
• A variation of an ante-nuptial or post-nuptial settlement (and equivalent settlements relating to civil partnerships).
• An option to purchase an asset of the estate.

For example, in cases involving adult children from a previous relationship, it is not uncommon for the court to impose a trust. If the deceased has left their estate to their children at the exclusion of their new partner, the court may consider that it is unfair for the partner to receive nothing (if they are unable to meet their own needs) but may also recognise that to gift the estate to the new partner outright would mean the children of the deceased would lose out. The court may order that the estate, or a particular asset, should be held in trust for the benefit of the claimant for their lifetime but passed to the original intended beneficiaries on their death.

The 1975 Act lists certain criteria that the court should consider when determining what order it should make, as follows:

• The financial resources and financial needs which the claimant has or is likely to have in the foreseeable future.
• The financial resources and financial needs which any other claimant is likely to have in the foreseeable future.
• The financial resources and financial needs which any beneficiary has or is likely to have in the foreseeable future.
• Any obligations and responsibilities the deceased had towards any claimant or beneficiary.
• The size and nature of the net estate.
• Any physical or mental disability of any claimant or any beneficiary.
• Whether the deceased maintained the claimant and, if so, the length of time for and the basis on which the deceased did so, and the extent of the contribution made by way of maintenance.
• The manner in which the claimant was being or in which they might expect to be educated or trained.
• Whether and, if so, to what extent the deceased assumed responsibility for the maintenance of the claimant.
• Any other matter, including the conduct of the claimant or any other person, which, in the circumstances of the case, the court may consider relevant.

For claims by spouses or civil partners the court will also consider:

• The age of the claimant and the duration of the marriage or civil partnership.
• The contribution made by the claimant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family.
• What the claimant may have expected to receive had the marriage or civil partnership ended in divorce rather than death, bearing in mind that in a divorce, there are the needs of two people to consider, not just one.

Obviously, not every factor will be relevant to every case, but this shows that the court has to look at the entire picture. It cannot focus on the needs of just the claimant to the exclusion of the original beneficiaries or anyone else who may wish to make a claim. The court has to bear in mind everyone’s circumstances and distribute the estate (which is, of course, a limited pot) as fairly as possible.

What can a beneficiary do if a claim is made against an estate, but they have their own needs?

The court has to consider the circumstances of all those affected by the claim, including the original beneficiaries. Sometimes a beneficiary has been chosen by the deceased for the very reason that they feel they need to benefit from their estate. For example, if one of the deceased’s children has always lived with them, they may feel it is only fair to leave them their house for fear that otherwise they will be made homeless.

But what happens if a sibling makes their own claim on the basis that they need help paying their mortgage? The sibling living in the house could make a “needs based defence”. This means that in addition to perhaps defending the claim on the basis that the claimant does not need what they say they need, they would also defend it on the basis that if the claimant were to receive what they have claimed, this would leave the defendant unable to meet their own needs. The court then has to try and strike a balance that ensures the needs of all parties who are deemed in need of reasonable financial provision are met.

What happens if I need more than the value of the estate?

The court can only make an order regarding the net estate, which is what is left over after all debts and liabilities of the estate have been paid. The court has a finite sum to work with, so there is no point claiming more than the value of the net estate.

That said, the law recognises that a deceased person may have deliberately reduced the value of their estate to avoid a 1975 Act claim. It is rare, because most people are not aware of this Act before they die, but it is possible. For example, if someone has received advice whilst alive that someone may have a claim against their estate when they die. If there is evidence that the deceased gifted assets during their lifetime with this in mind, the court can require the recipient of any such gift to return it to the estate so that it can be included in the net estate.

What role does an executor take in a 1975 Act Claim?

Executors are automatically named as defendants to a 1975 Act claim on the basis that they are responsible for the estate. However, this does not necessarily mean that they have a personal interest in the outcome. If they are a beneficiary they will, but not all executors are also beneficiaries. Even if they are a beneficiary, they may believe that they have no personal defence to the claim and would prefer to let the other beneficiaries “fight it out”.

An executor should remain neutral in relation to a 1975 Act claim. This is on the basis that the claim itself does not affect the value of the estate. All it affects is how the estate is distributed. The executor still has a role to play, but it is limited to providing information about the value and makeup of the estate, so that the court has this to hand when making its final decision. If they remain neutral, they should receive their reasonable costs from the estate.

If an executor who is also a beneficiary wishes to defend the claim as a beneficiary, they are entitled to do so. However, they will not automatically be entitled to recover their costs from the estate.

How long do you have to make a 1975 Act claim?

There is a deadline for making a 1975 Act Claim, which is six months from the date the probate is issued. However, whilst this is an important deadline to meet where possible, it does not necessarily mean someone cannot make their claim.

A claim can only be made after the 6-month deadline if the court gives permission. The request for permission is included in the claim itself, and an explanation as to why the deadline was not met and why the court should give permission must be included. The court has relatively wide discretion when making this decision. It will consider various factors, including:

• Whether the claimant acted promptly in making their claim despite it being after the 6-month deadline.
• Whether negotiations began before the deadline.
• Whether the estate has been distributed before the claim was notified to the defendants.
• Whether not allowing the claimant to make their claim would leave them without recourse to other remedies.
• Whether the claimant has an arguable case.

In other words, the court needs to be satisfied that the claimant has not unreasonably delayed in making their claim, that no one will be overly prejudiced by them being allowed to make their claim, and that if they are to be allowed to make their claim, they stand a reasonable prospect of success.

The application for permission to claim out of time can be dealt with at different stages. Sometimes, it is dealt with at the final hearing. However, it can also be dealt with at a directions hearing. There may be tactical reasons for wanting the application to be dealt with at different stages. For example, if a defendant thinks it is unlikely that the application for permission to make a claim out of time will succeed, they may want it dealt with as early as possible.

Sometimes, claimants wonder whether they can do anything to delay probate being issued, giving them more time to consider their claim. The answer is no. Executors cannot reasonably be expected to delay applying for a grant of probate because a 1975 Act claim is threatened (especially if there is inheritance tax to pay). The only way to prevent probate from being issued is to lodge a caveat. It is not appropriate to do so where the only reason it is lodged is to delay probate so that a 1975 Act claim can be delayed. This is an abuse of process, and the court will not look kindly on such conduct.

Examples of cases we have dealt with

Defending a claim against brother

Our team assisted a client in defending a claim against their late father's estate by a brother who claimed to have significant mobility issues and that he was therefore unable to work. Their father left the brother a small cash gift, and our client received the remainder of his estate. The brother's medical evidence did not confirm what his condition was, or what his needs might be in the future. His financial disclosure showed that he ran two cars, despite living alone, which we argued was unnecessary. Our client also had her own needs, as she was elderly and unable to work. As such, we raised a needs-based defence on her behalf. As a result, the case settled for a significantly lower sum than the claimant initially requested.

Claim several years after husband's death

Our team assisted a client in making a 1975 Act claim against her late husband's estate. He had left the majority of his estate to his children from a previous relationship, giving our client a very limited entitlement to income from a small trust. Our client did not realise that she could claim until several years after her husband's death. We assisted her in issuing a claim as a matter of urgency and sought to explain to the court the reason for her delay, being that she was unaware there was anything she could do. Thankfully, her stepchildren recognised that her claim had very good prospects of success and agreement to settle her claim was reached. It was agreed that the entire estate would pass onto trust, with our client being entitled to the income for the remainder of her life. The trustees were our client and her stepchildren (who were able to work together), and they had the power to advance capital to our client should she need it. The trust would then pass on to the stepchildren upon our client's death. The fact that all parties were willing to compromise and work together to achieve a sensible outcome was key to the success of this case. It meant matters could be resolved quickly and amicably. The added bonus was that the inheritance tax position was improved for the estate, as the 1975 Act allows you to recover inheritance tax paid if the agreement reached means that the estate is distributed on more favourable tax terms. In this case, the entire estate benefited from the spouse exemption thanks to the agreement reached, meaning an inheritance tax refund of several hundred thousand pounds was achieved.