How to avoid claims under the Inheritance (Provision for Family and Dependants) Act 1975?

The Inheritance (Provision for Family and Dependants) Act 1975 (‘the Act’) provides a route for certain people who believe they have not been adequately provided for, to claim for something out of a deceased person’s estate. The court has an almost unlimited discretion to decide the ‘right’ outcome.

The Court of Appeal decision in Ilot v Mitson is an important reminder of the extent to which the court can intervene with the provisions of a Will. It concerned a mother and daughter who had been estranged for a long time. The mother left all her money to three charities. After a long legal battle, the daughter was awarded enough to enable her to purchase her council house, plus a further £20,000 in cash.

How can the Inheritance Act effect estate planning?

It is important to consider the impact of the Act when making a will or planning for the future. The categories of people who can claim are:

• A spouse or civil partner
• A former spouse or civil partner, unless they have formed a subsequent marriage or civil partnership (or unless they have given up their rights in a divorce settlement)
• A person who had lived with the deceased as spouse or civil partner for at least the two years before the death
• A child
• Any person ever treated by the deceased as their child in relation to any family group they were part of or in which they acted as parent
• Anyone being maintained, either wholly or partly, by the deceased at the time of death.

What financial claims can people make under the Inheritance Act?

Most of these people can claim for reasonable financial provision for their maintenance. This varies from person to person and is context specific, so a person who is used to a higher standard of living might demand more.

In the case of a spouse or former spouse, though, the claim is simply for reasonable financial provision. This is much broader and is often treated in a similar way to a divorce situation so a wife might claim the family home, etc.

Note that these claims are still subject to the court’s discretion and the court may choose to balance a competing claim under the Will if it thinks it is good enough.

It is not possible to avoid the effect of the Act and so it is important to think about how to manage its impact.

What impact does the Inheritance Act have?

The Act takes all factors into account so it is possible to make provision by lifetime gifts, pension rights and insurance benefits, in addition to the Will.

A death is a traumatic event and people often make poor decisions while in an emotional state. This can be exacerbated if they are surprised by the provision made under a Will. Therefore, although it can be difficult, there is often merit in discussing with family members what you intend to give them upon death so that they can air any concerns and you have time to attempt to resolve grievances.

If you wish to leave significant amounts to charities, a pattern of lifetime giving will help support the gifts made by Will; Mrs Ilot had no previous connection with the charities named in her Will and there was no pattern of lifetime giving.

It may also help to show good reason for the provisions you have decided upon. In Ilot the estrangement was simply not considered good enough. A good reason might be your stating that you have already provided for a close family member in another way.

Agreements are not binding on the court but may help to persuade it that a person claiming under the Act should not have what they are asking for. They may also enable the parties to agree what ‘reasonable’ provision is.

If you really do not want someone to benefit from your estate then you could try to give it away during your lifetime. Care should be taken with this, though, as the court has various powers to ‘claw back’ assets which have been disposed of in an attempt to avoid the Act.

If you have any questions about this topic, please get in touch.