Feature

posted 12 Jul 2001 in Volume 6 Issue 5

Will drafting and potential claims

Under the Inheritance (Provision for Family and Dependants) Act 1975

Introduction

The purpose of this article is to suggest to will draftsmen certain steps that might be taken in order to reduce the possibility of a 1975 Act claim being made for provision out of the estate of the testator (T). However it has to be borne in mind that whatever steps are taken in that regard there is nothing other than inability to fund the litigation that can prevent an eligible applicant from making a claim.

If the author's own experience is any guide the number of claims being made annually under the 1975 Act has steadily increased over the last decade as has the proportion of them which go to trial. The increase in the number of claims is not surprising given the addition of cohabitants to the classes of persons eligible to make claims and the unlimited financial jurisdiction of the County Courts in that regard. The usual result of such claims being made is a long delay in the administration of the estate and its substantial depletion not only by the costs of the personal representatives in complying with the provisions of RSC Order 99 and any directions of the Court made in the course of the claim but (depending on the nature of the order made by the Court) by the litigation costs incurred. This depletion of the estate may in due course found an action against the will draftsman for negligently failing to advise of a significant risk that the testator's dispositions were such as to give rise to a 1975 Act claim [1].

The two following brief references to cases in which the author has recently been involved illustrate the consequences referred to above. In one the deceased died in August 1998. The applicant was a cohabitant who had had a relationship with the deceased for 37 years. The net estate was about £220 000 and the parties' costs (there were nine defendants five of whom opposed the claim) amounted to about £60 000. The case was finally disposed of in the local County Court on 4^th May 2001 the claimant being awarded £100 000. In the other the deceased died in August 1999 and the case was therefore entirely conducted according to the supposedly more efficient CPR regime. The claimant was the deceased's second wife and the beneficiary defendants were the two adult children of the deceased's first marriage. The estate was in the region of £1.6M and the parties' costs were in the region of £200 000 in total. The case was disposed of in the Chancery Division in March 2001 the claimant being awarded £225 000. In both cases the costs orders were made against the beneficiaries who had actively defended the claim.

There are three aspects of the will-making process which the draftsman (W) has to consider for this purpose and they are:-

(i) Asking the necessary questions.

(ii) Advising whether in the light of the answers to those questions the dispositions made by the will might be vulnerable to a 1975 Act claim.

(iii) Drafting provisions designed to avoid or minimise the effect of litigation. These fall into three main categories which are:

(b) Provisions explaining why certain dispositions are (or are not) made;

(c) Provisions authorising the executors and trustees of the will to take steps designed to eliminate or minimise litigation of such claims.

Asking the necessary questions

Two areas have to be covered. W needs to establish whether there are any persons who are eligible to make claims (which will more often than not be the case) and to ascertain the nature and extent of the net estate as defined in the 1975 Act and of any other assets that will become available on T's death.

I Personal relationships

Section 1(1) of the 1975 Act enumerates six classes of eligible applicant:-

(a) Surviving spouses;

(b) Former spouses who have not remarried;

(ba) Cohabitants. To qualify as a cohabitant the applicant must for the two years immediately before the death of the deceased have lived with him or her in the same household and as the husband or wife of the deceased. The approach to determining whether an applicant qualifies as a cohabitant has recently been considered in some detail [2];

(d) Persons other than children of the deceased who in the case of any marriage to which the deceased was a party were treated as children of the family in relation to that marriage. In practice such persons are likely to be step-children [3];

(e) Persons not in any of the above categories who immediately before the death of the deceased were being wholly or partly maintained by him (referred to below as 'dependants'). The provision of accommodation either rent-free [4] or at a rent substantially below the market rent [5] is likely to be viewed as the provision of maintenance.

II-Financial matters

The 1975 Act requires the court to have regard to the nature and extent of the net estate. Section 25 of the Act sets out five types of property which are comprised in the net estate. The first three types are always included; the remaining two will be treated as part of the net estate if the court so orders. They are:-

Property of which the deceased can dispose by his will (other than under a special power of appointment)

Property over which the deceased had a general power of appointment (exercisable other than by will) which has not been exercised in his lifetime

Property forming part of his estate under s.8(1) (nominations under an enactment) or 8(2) (donationes mortis causa). In practice s.8(1) property will consist of death benefits under public sector pension schemes.

The deceased's severable share of any property owned by him as a beneficial joint tenant at the time of his death. This will not be treated as part of his estate unless an order is made under s.9 of the 1975 Act [6]

Property caught by the anti-avoidance provisions relating to contracts to leave property by will and dispositions made to avoid or defeat claims under the Act. Such property will not form part of the estate unless the court makes an order under ss.10 [7] or 11.

Because the Act requires the court to consider the financial needs and resources which beneficiaries have or are likely to have in the foreseeable future W must also inquire of T if there are any other assets which will be unlocked by his death and who will or may benefit from them. Examples are death benefits under private sector schemes and policies of life assurance (though these may by their terms automatically pass to the personal representatives and hence form part of the net estate) and limited interests under a settlement.

In considering the financial needs and resources of any applicant or beneficiary the court must take that person's earning capacity into account (s.3(6)). Consequently W should inquire whether there is any possible applicant who by reason of youth age or physical or mental disability is or is likely to be unable to support himself.

Advising the testator.

Once W has ascertained that there are persons who are eligible to make a claim under the 1975 Act he should advise if there are any aspects of the proposed dispositions which carry a clear risk of a claim being made under the 1975 Act. This should also be done on each subsequent occasion when the will is reviewed since changes in T's financial position or personal relationships which are highly relevant to 1975 Act claims very often impel T to decide that his will needs to be reviewed.

It is impossible to list all the circumstances in which claims might be made. However there will be some situations where there is an obvious risk of litigation; for instance where T's instructions as to the dispositions of his estate do not make provision (or make clearly inadequate provision) for a surviving spouse [8] or infant child [9] or where as is not uncommon the spouse is given the right to continue living in the matrimonial home but no resources with which to keep it up and is unable to sell it and trade down in order to release some capital or income. Claims that such provision is not reasonable will not always succeed but drafting a will in such terms is extremely likely to lead to litigation. Similar considerations arise where T is survived by a cohabitant of the same sex particularly if the relationship has subsisted for a substantial period or there are children of the relationship. Litigation is also likely to ensue where there are potential claimants of any description and T leaves his estate (or the bulk of it) to charity [10] or to relatives with whom he has had very little contact [11].

Sometimes it will be impossible to avoid the risk of litigation simply because the estate is insufficient to satisfy all the claims which might realistically be made. This is particularly likely to happen in "two-family" situations where the competition may be between the children of the two relationships or the children of the earlier relationship and the survivor of the later. Although they may not have the highest priority among competing interests potential claims by adult children may pose the most difficult problem on which to advise. The leading case is still Re Coventry [12] but this is a rapidly developing area of the law relating to the 1975 Act. Applications by adult children may succeed if:-

The applicant is disabled [13] or past the age where he or she can support him/herself [14]

The applicant has some legitimate expectation of benefiting under T's will [15]

The applicant has established some moral claim for instance by caring for T or assisting in T's business for low wages and/or in the expectation of succeeding to it. [16]

Drafting appropriate provisions

Dispositive provisions

The table below sets out some tentative guidelines as to what a court might consider to constitute reasonable provision for various classes of applicant provided that the nature and extent of the estate permits [17].

Asking the questions and giving the advice discussed above may of course have the effect of protecting the estate against claims if T takes the advice offered. However when W has made those inquiries and advised T accordingly it may still be the case that T is unwilling to accept the advice and gives instructions for a will to be drawn up which does not take it into account. T may have good reasons for adopting that attitude; that question is discussed in the final section. No doubt W will have made an attendance note which records what took place but it will be prudent to write a letter to T recapitulating the advice and requesting confirmation that T wishes him to go ahead with the preparation of the will according to those instructions nevertheless.

Explanatory provisions

It has always been the case that the court may have regard to the deceased's reasons so far as they are ascertainable for making the dispositions which he has made or for making or refraining from making any provision (or further provision) for a person who is eligible to apply for financial provision out of his estate. Statements of that nature however made were admissible by virtue of s.21 of the 1975 Act but since 31^st January 1997 when the Civil Evidence Act 1995 came into effect such statements are admissible under the provisions of that Act relating to hearsay evidence.

The testator's reasons for making (or not making) any particular disposition are not a matter which the court is specifically directed to take into account under s.3 but the court is entitled to consider them if it thinks them relevant under s.3(1)(g). The first question is whether such a statement should be contained in the will itself. The answer to this depends on the reasons which the testator gives particularly for excluding a potential applicant (A) from the will. Where the reasons are non-controversial there seems no good reason for excluding them from the will; examples of such reasons are:-

Where T has provided for A by a lifetime gift or has nominated A to receive a benefit on his death;
Where T and A are married but separated and T has provided for A under the separation agreement;
Where T has considered the relative positions of the possible beneficiaries and concluded that A should be excluded because he is in a better financial position than the others;
Where T and A are divorced and the order made in the ancillary relief proceedings contains a provision under s.15 of the Act that neither party should make a claim under the Act against the estate of the other. This is the only situation in which it is permissible to oust the jurisdiction of the courts.

Standard collections of precedents (e.g. Practical Will Precedents) contain simple provisions which are appropriate in such circumstances.

However where T's reasons for excluding A are based on A's conduct it may be more advisable for them to be set out in a separate letter to the executors. The will may be drafted so as to refer to the existence of such a letter. The reason for this is that a will is a public document and the court has the power on application to exclude from probate words of a scandalous or offensive nature; see Tristram & Coote Probate Practice (28^th edition) paragraphs. 3.264-3.271.

T should be advised if he wishes to adduce such reasons that:-

It is very rare for allegations of bad conduct to make any substantial difference to the court's decision whether reasonable provision has been made and whether to exercise the discretion. [25];
Bitter and intemperate allegations are likely to be counter-productive in any event;
Whatever reasons of this nature he gives they may be challenged by witnesses who are able to give oral evidence;
Therefore if conduct is to be relied on the relevant matters should be set out as clearly and dispassionately as possible with reference to any documents or records of court proceedings or persons with knowledge of the circumstances which may help to substantiate them.

Giving power to trustees to take steps with a view to avoiding litigation

Although as explained below T cannot provide for his trustees to make a final and binding decision in relation to any question which arises in relation to his will he can authorise them to incur expense in obtaining appropriate legal advice should a claim be made. Such advice would be given on the footing that it is made available to all the persons whose interests might be affected by the claim. The adoption of this course should reduce the exposure to costs and perhaps promote unanimity among the beneficiaries so that a settlement can be quickly arrived at when appropriate. It should be clearly understood that it is for the beneficiaries to arrive at the settlement and if they wish the personal representatives to negotiate on their behalf they should agree to indemnify them for the costs which they incur.

It is important to be clear about the position of the personal representatives as a matter of general law and practice. That position is clearly set out in the commentary at sc.99.4.2.to Order 99 in Civil Procedure 2000. It states that "The personal representatives should adopt a neutral stance in the proceedings and it is not for them to attempt to defeat the applicant's claim. That is a matter for the beneficiaries" It therefore follows that if the personal representatives in their representative capacity choose to incur costs in actively defending the proceedings (that is taking any step which they are not obliged to take in accordance with Order 99 or any order or direction of the Court made thereafter) those costs will not have been incurred for the benefit of the estate and they will not be able to recover them from the estate.

Testators sometimes in the hope of avoiding litigation include clauses in their wills which appear to give the executors or trustees power to make a final and binding decision on any question which arises in connexion with the will. Such conditions have repeatedly been held void as purporting to oust the jurisdiction of the court. In Re Wynn deceased [26] such a clause was not only held void but considered likely to mislead both trustees and beneficiaries as to their true position and rights. The only way in which the court's jurisdiction can be displaced in a family provision matter is by a s.15 agreement.

It appears from the decision of the Judicial Committee of the Privy Council in the case of Evanturel v Evanturel [27] that a clause whose effect is that a beneficiary shall forfeit the benefit gifted to him by the will if he disputes it is not void as being contrary to public policy despite earlier dicta and decisions that such clauses were in terrorem only. However regardless of whether such clauses are effective this is not an approach which W can usefully advise T to adopt since if A is not deterred by the costs risk he has nothing else to lose by contesting the will if he does not benefit under it or benefits only to a minimal extent.

Conclusion

Although claims for negligence in will drafting are on the increase the existence of circumstances in which those claims arise occur is still relatively rare. However few testators die in circumstances in which there are no eligible claimants under the 1975 Act. The will draftsman should therefore as a matter of good professional practice consider the risk of the testator's intended dispositions giving rise to a 1975 Act claim and advise as to the existence of that risk and if so instructed as to the steps which might be taken to minimise it. This will take a significant amount of time and care. It must follow from these considerations alone that will draftsmen particularly those who undertake to draft wills as loss-leaders [28] should consider carefully whether they can discharge their duty of skill and care when preparing a will in an amount of time commensurate with the fee which they are charging.

Sydney Ross Barrister

[1] See Martyn Frost With the Best Will in the World-Negligence in Will Preparation (Legalease Ltd (2000)) p.92.
[2] Re Watson[1999] 1 F.L.R.878
[3] Re Callaghan deceased[1985] Fam 1; Re Leach[1986] Ch 223 C.A.
[4] Bishop v Plumley[1991] 1 W.L.R 582 [1991] 1 All E.R.236;
[5] Rees v Newbery and the Institute of Cancer Research [1998] 1 F.L.R.1041
[6] Such orders were made in Re Crawford (1983) 4 F.L.R.273; Jessop v Jessop [1992] 1 F.L.R. 591 C.A; Powell v Osbourne [1993] 1 F.L.R.1001 C.A.; Hanbury v Hanbury [1999] 2 F.L.R.255.
[7] As in Dawkins v Judd [1986] 2 F.L.R.360; and see Hanbury (n.5) at p.273.
[8]> As in Moody v Stevenson [1992] Ch 486 C.A.
[9] There are few reported cases of this nature; see Re C (1979) 123 Sol.Jo.35 and the Northern Ireland case of Re Patton [1986] NI 45.
[10] Re Besterman [1984] Ch 458 CA; Re Bunning [1984] Ch 480. Both were claims by surviving spouses where the testator had left the bulk of his estate to charity.
[11] See the cases cited in n.2 where the claimant succeeded; but compare Harker-Thomas v Harker Thomas [1969] P.21 where the claim by a former spouse failed although there was no evidence of recent contact or contemporary affection on the part of the beneficiaries (sister niece and two nephews).
[12] [1980] Ch 461 Oliver J affirmed by the Court of Appeal.
[13] Hanbury v Hanbury [1999] 2 F.L.R.255
[14] Re Hancock [1998] 2 F.L.R.346 C.A.
[15] Re Goodchild [1996] 1 W.L.R.694 [1996] 1 All E.R. 670; affirmed [1997] 1 W.L.R.1216 [1997] 3 All E.R.63 C.A; Espinosa v Bourke [1999]1 F.L.R.747.
[16] See examples given in Re Coventry; also Re Abram [1996] 2 F.L.R 379 Re Pearce [1998] 2 F.L.R.705
[17] Fuller information on the nature and amount of awards is contained in Appendix 7 to Ross Inheritance Act Claims-Law and Practice (Sweet and Maxwell 2^nd edition 2000) where all reported cases under both the 1938 and 1975 Acts together with unreported High Court and Court of Appeal cases since 1975 are summarised.
[18] E.g. by way of a life interest in the matrimonial home.
[19] Either by way of an income or a lump sum representing commuted payments of that income. Awards under the Act tend to be lump sum awards made on the 'clean break' principle
[20] A surviving spouse is entitled to a higher standard of provision than any other class of applicant; the standard is what is reasonable for him/her to have whether or not it is required for his/her maintenance; see s.1(2)(a) of the 1975 Act
[21] An adult child who has recently attained majority would be regarded in a similar light. See s.3(3) of the 1975 Act.
[22] The level of provision will depend on the applicant's ability to support himself/herself either through earnings or his/her own financial resources
[23] Applicants other than surviving spouses receive provision on the lower standard-i.e. what is reasonable in all the circumstances for them to receive for their maintenance.
[24] For possible exceptions see Re Fullard [1982] Fam 42 C.A. at 52D-G. Other important former spouse cases are Cameron v Treasury Solicitor [1996] 2 f.l.r.716 and Barrass v Harding [2001] 1 F.L.R.380 C.A. commented on in the first article in this series.
[25] For an extreme example see Re Snoek (1983) 13 Fam.Law 18.
[26] [1952] 1 Ch 271
[27] (1874) L.R.6 P.C.1
[28] The author was recently sent an advertisement from a will writing service offering to reduce its normal fee of £55 (including VAT) to £10 on the production of the leaflet.