Ilott –v- Mitson: Back to Square One

it was not enough to demonstrate a close family connection only, but that must be ‘some sort of moral claim…beyond a blood relationship, some reason why it can be said in the circumstances, it is unreasonable why no or no greater provision was in fact made [Re Coventry].

The Supreme Court has ruled, unanimously, that the original judgement made in this case  should stand: that Mrs Ilott’s long estrangement from her mother and her financial independence mean that an award should be made, and that £50,000 (from an estate worth approximately £450,000)  had been an appropriate sum to provide funds for Mrs Ilott’s maintenance. Some of this money could be used for the provision of new household items that were in poor repair and the capital awarded might not therefore affect the family’s benefits entitlement.

Judgment was this week handed down in the Supreme Court on the Ilott v Mitson case; heard in December 2016, some 12 years after the date of Mrs Jackson, the testator at the centre of the story. Ilott v Blue Cross

Essentially, the Supreme Court overturned the order made in the Court of Appeal, stating that the original judgement had been correctly decided; on the basis of the information given to DJ Million, he had not erred in either a legal judgement or a factual one. It was therefore not correct for the Court of Appeal to amend the award at all and the award made by them was not on the basis it should have been.   Of the seven Lord Justices hearing this final appeal by the charities against the decision, all seven were in agreement with the judgment that the Court of Appeal had calculated the award made to Mrs Ilott incorrectly.

In the 48 paragraph judgment, Lord Hale quoted the criteria for the 1975 Act for the provision for family and dependants, setting out the differences in the discretion of the Court on cases of a partner or spouse and the ‘maintenance’ order that was the only compensation that could be made for a child.

The judgment also focuses on the potential misunderstanding in connection with the phrase ‘reasonable financial provision’;

“Reasonable financial provision is….what is reasonable for [the Claimant] to receive. These are words of objective standard of financial provisions, to be determined by the court. The Act does not say that the court may make an order when it judges that the deceased acted unreasonably”

This echoes an earlier judgment in Re Coventry [1980] which also stated that on this basis it was not enough to demonstrate a close family connection only, but that must be ‘some sort of moral claim…beyond a blood relationship, some reason why it can be said in the circumstances, it is unreasonable why no or no greater provision was in fact made’

“Circumstances of the relationship between the deceased and the claimant may affect what is the just order to make…the provision which it is reasonable to make will, because of the distance of the relationship, or perhaps of the conduct of one or other of the parties, be to meet only part of the needs of the claimant.” (para 22)

The principle was repeated in para 35 of the judgment, reiterating that the original judgment made no error when considering the nature of the relationship between mother and daughter: emphasising how some adult children may have contributed to the wealth of their parents, or to their health or wellbeing contrasted with the case in hand, when mother and daughter had been estranged for several decades.

“A judge ought in such circumstances to attach importance to the closeness of the relationship in aiming at his assessment of what reasonable financial provision requires. The judge considered each of the factors…  The long estrangement was the reason the testator made the will she did. It meant that Mrs Ilott was not only a non-dependant adult child but made her life entirely separately from her mother and lacked any expectation of benefit from her estate…the judge was perfectly entitled to reach the conclusion which he did, namely that there was a failure of reasonable financial provisions, but that what reasonable financial provision would be was coloured by the relationship between mother and daughter”.

The point was emphasised further in paragraphs 46 and 47: the nature of the relationship between mother and daughter being fundamental clearly making this as a deciding factor

Lady Hale made a further contribution to the judgement, not to dissent but to clarify the perspective offered to the judges by current public consultations including the most recent Law Commission Report in 2011, which might have been offered more satisfactory guidance on the factors taken into account. Given the changing social climate since the 1975 Act was passed it might have been helpful for their Lordships to have more guidance on deciding whether an adult child was deserving or undeserving of reasonable maintenance, in the absence of dependency or disability.

What does this mean for people making wills?

The Supreme Court considers testamentary freedom to be paramount: that the law as it stands (however ill-suited some might feel it is to today’s social structures, it has not been amended by the most recent Law Commission consultation) was correctly applied in the initial case: the fact that Mrs Ilott was a family member and the charities benefitted from the estate was not a reason to depart from the original judgement. The estrangement had been originally referred to in a side letter to a will made by Mrs Jackson in 1984 as well as  the later will of 2002, and this side letter also made it clear that Mrs Jackson had considered the moral obligation she had and stated that she felt no moral or financial obligation towards her daughter, given their strained relationship.

What do clients need to do to ensure their wills are followed?

It is clear that no one is above the court’s authority to adjust the estate for beneficiaries who should have received some benefit. However, for those who have adult children who are financially independent and to whom no promises have been given or assurance of expectation made, the testator is free to choose what they want to do: if the testator has been receiving monies from a child, then the testator may ‘owe’ a moral duty to that child, to be represented by a financial gift.  In case there is doubt as to whether the testator has considered the claims to which they should give effect, it is wise to record that they have been considered. The closeness of relationship between the child and the testator be a factor relevant in any claim against the estate and a testator may wish to record details of the relationship and the reasons for their dismissal of familial bonds and why they have left their estate to others, so that executors have material to show the testator’s perception of the relationship to set against those of a claimant.

What does this mean for adult children excluded from benefit under a will?

If there is little to show the closeness of relationship between child and parent, no promises of future entitlements or great expectations, no financial dependency and the child is not disabled, or in need, their prospects of a successful claim against a parent’s estate will be diminished by this ruling, particularly if they are financially self-supporting.

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Open Letter to anyone who made a Will with HSBC and appointed them as Executors

Open Letter to anyone who made a Will with HSBC and appointed them as Executors.

 

It’s a good letter:  I’m not sure whether whoever reads it realises that it is carefully written and may have taken a good few hours to check and double check, particularly when it refers to the organisation(s) to whom the wills have been sold.  Just as “concerned” means “angry”  and “precise” means”nitpicking in the extreme” in legal terminology, the swathes of what is not said about Simplify and its associated companies speak volumes.

It might seem odd that your executors can sell on the rights to deal with your assets, as the bank have done here.  But this sort of thing has happened, by and large, for professional executors over the years, albeit perhaps not so obviously.  Law firms never die, they just get taken over…  successor firms can prove the wills of the prior firm if the will was drafted that way.  Or encourage the clients to make a codicil (and in doing so, both correct any massive errors in initial drafting and/or update terms).  It is no mistake that the wills stored by a firm are called a “will bank”.  Usually, however, with a whole firm takeover, the wills and live files, the contacts and reputation are all bound up together and described as “good will” valued for a greater or lesser amount than the desks, carpets and computers.  Slightly less clear that your will can be seen as a commodity in itself, for sale to another organisation for a price, whilst still being your own property as a client.

 

Who you choose to be your executors is a personal choice – you might prefer a professional executor because your family do not get on well with each other – or you think that it is too much of a burden for friends to bear.  That’s quite alright for you to make this choice – but as this letter rightly points out – the terms on which you appoint a professional do need to be made clear to you – they will charge for their work – and how they do this should be something you feel comfortable with – these are your assets, after all.

Some professionals are bound by professional codes in their conduct towards the public – solicitors are – you can make complaints to the SRA if you feel you have not been treated in a fair way.  Accountants have a professional body too – it is fair to say that complaints to a professional body can be incredibly damaging to the firm, and so a reasonable amount of time is spent in trying to do the right thing and not get complaints in the first place.

If you are to choose a professional, then it’s a good idea to see what institution regulates them – who is the person that they have to answer to when you are no longer alive to express your concerns – who can your beneficiaries turn to when they think they are being overcharged, or waiting for ages – is there anything or anyone to protect them?

 

The Marriage (Same Sex Couples) Act 2013 (Consequential and Contrary Provisions and Scotland) and Marriage and Civil Partnership (Scotland) Act 2014 (Consequential Provisions) Order 2014

The Marriage (Same Sex Couples) Act 2013 (Consequential and Contrary Provisions and Scotland) and Marriage and Civil Partnership (Scotland) Act 2014 (Consequential Provisions) Order 2014.

 

In answer to a question today about whether a couple that are civil partners today, and planning to convert to marriage need to change their wills:  the effect of the subsequent marriage does not cause revocation (as it did before December 2014).

Budget 2015 and initial thoughts.

Budget statement in pdf from Inland Revenue

Some of the things I think this means.

Terms:

Although this refers to a “main residence nil rate band” the personal representatives can elect for any property owned and lived in by the deceased to count as the residence for this purpose.  The term is not related to the main residence or Principal Private Residence.  Potentially, each spouse could have a separate private residence, therefore.

The residence nil rate band (which if someone else has not already labelled it thus, I shall call it the “RNRB”) can be transferred to a spouse and remain intact.  This applies no matter when the first death occurs, so long as the second death occurs after the start of the tax year 2017-18.

The RNRB might end up, therefore, also being called the TRNRB when claimed on the death of the second spouse. There will be new additional forms to complete in addition to the IHT402 and the IHT217.  There will need to be new evidential burdens to show that a recipient falls within the class of acceptable beneficiaries called “descendants”.

The NRB as we know and love it applies at the current rate until the tax year 2021-2 commences.  It applies to all transfers whether intervivos or on death.

The RNRB applies only where there is a residential property in which the deceased has resided (or the spouse of the deceased???) and where the “proceeds of sale of that property” or the property itself pass to a linear descendant of the deceased (or of the deceased’s former spouse??).  The bits in brackets are where I am less certain of the detail.  One thing is clear – the definition of what is considered “linear descendants” is different from the standard definition of “issue” or “bloodline” since it includes not only the usual adopted children and children of the bloodline but also step children and foster children.

Things I am not sure about:

I don’t understand quite how you can quantify the foster children – but perhaps it is possible to prove that an individual is a foster child or has been one at any date.  Similarly, step children.  But then again, this gives an allowance for those children, rather than penalising them or giving them an entitlement.

I am not sure about the “proceeds of sale” aspect of things.  The Inland Revenue states that identifying what has been the proceeds of sale of a family home and making sure that there is a credit for this will be something that will be the subject of a consultation paper shortly.  Presumably, there is some paperwork required for Inheritance Tax purposes on the sale of a family home – so where downsizing from any home worth less than £2,400,000 is potentially eligible for this – so as to preserve the relief on this home.  This will be something that all conveyancing solicitors will need to know about as well, since otherwise it would not be something that would be mentioned to the client.  Few clients associate the sale of their home with the need to consider how it fits in with estate planning.

Does this now mean that flexible life interest trusts now need to be altered so as to take account of this potential future relief?  A “FLIT” by which I mean a discretionary trust, subject to a prior life interest.  I think it does.  Because the whole flexibility of these relies on the discretionary trust *not* being an individual or descendant.  Time to review these I think, and adjust expectations and drafting accordingly.

I think the new legislation means that (at least initially) if you are worth £2.4 million or more, then this RNRB is useless to you.

I also think this means that if you are selling up so that you can free up capital to make potentially exempt transfers, then you have to weigh up carefully whether doing so means that you will lose out on the RNRB.  The RNRB *only* applies on death, and does not apply to PETS that become chargeable.  Worst case scenario is that you free up funds, give some away to your children and do not survive the seven years.  When I say “some”, I mean if you give away more than one Nil Rate Band’s worth of gifts.  So – PETs will have to be limited to below £325,000 for each individual donor if they are within 7 years of death, or statistically likely to be so.  Or in other words, there is no such limitation, but without advice on the pros and cons, the decision should not be taken without, for example, more seriously considering term life insurance, in the very least.

 

In conclusion:

Possibilities of legal involvement in people’s affairs seem to have increased.  And in a way that doesn’t seem right – why should the taxpayer be hemmed in at every turn?  Why not just increase the whole of the NRB to £500,000 each – and not have this extra complication?  What about those childless couples who want to leave their money to nieces and nephews?  Why is this budget not making it easier for the rich to pay tax, rather than harder for the middle income people to manage the burden of it?  This extra complexity just means more work for the civil servants, more bad luck for the childless, more work for lawyers, more fees for professional advice.   And the extra complexity is not actually needed – it doesn’t close any major loopholes or planning issues where “clever lawyers/accountants” have been finding “loopholes”.

legalchap: Will Aid and the solicitor/non solicitor.

legalchap: Will Aid.

Yes, it qualifies as a rant – but perhaps justifiably.  Other reports on the Law Society Gazette and the Private Client Section 

The whole Will Aid system is built on the idea that lawyers do something good for a month (as if we do not do good  for the rest of the year by providing a good service, albeit for a fee) by waiving their fees for charities.

Actually, it is more like there is a fundraising charity out there, which does all the marketing, then says they will donate the proceeds of the campaign to 8 or 9 charities.  I have not looked too closely about the amount that actually *goes* to the end charities *after expenses*.  Certainly as solicitors, we are expected to pass on the whole of the donation to the charities and not to retain any part of the donation.  We are at liberty to charge an additional fee if the will concerned is more than a “straightforward” will – but then again, few of the people who consult during that period require very basic wills – most being middle class and well provided for.  Almost as if the message about making a will never reaches those for whom it would really be beneficial, like those on benefits, for whom the usual prices for wills would be well outside what they would consider affordable.  And once they are in front of you, charging extra when they have been led to believe that it’s £95 (and no VAT) becomes moderately difficult – some take it as an affront.

The thing is, the most recent slap in the face appears to be that after last years will aid campaign – there were still people who had not made wills and who had missed the boat for that year.  Unwilling to pay the usual prices to solicitors rather than the discounted fee that they would have donated to charity, those enquiring were told that making a will did not require a solicitor, and could be done by an unqualified person.

That is of course true – but the fact that so many solicitors (and the Law Society) have been donating time and expertise pro bono, as well as the risk associated with the work (so covered under the lawyers’ insurance not the charity’s insurance) it seems a bit of a slap in the face.

Why would anyone slap the hand that feeds like that?  Could it be that there is some incentive that is paid to the charity for so many potential clients being referred?  Could it be that the regulatory requirements of the non solicitors are far lower, or that the attention devoted to the clients is of lower quality?  Could it also be that if the non-solicitors retain up to a quarter of the “donation” that this is not in fact, setting both sets of providers on a level playing field?

You give and you give, and then someone else walks off with the prize…  Perhaps it is somewhat naive of solicitors not to expect professional fund raisers to act in this way, if they can get money for the charities thereby.  If chuggers can pursue the elderly so they are desperate enough to commit suicide then this is fairly minor in the scales of the lengths to which fundraisers will go.

Will we do Will Aid this year?  Ho hum….

Buying a house? Have you made a will?

In recent conversation with my colleague, we noted that few conveyancers [1] talk in any detail about whether a person has made a will or not. Few conveyancers actually talk about tenancy in common either. Of course it’s all there in the fine detail, somewhere in the terms of engagement, or in the closing letter that no-one really needs.

That makes sense – it’s stressful buying a house. Who needs to think about dying as well? And who can afford to make a will?

But hang on a minute – that house will be worth hundreds of thousands – the most valuable asset you own. And you either don’t know or don’t care what happens to its ownership when you die? Surely you should find out? Make a plan?

Well yes. And lets be honest, since there is no such thing as a common-law spouse, no such thing as automatically inheriting from your partner, or even automatic entitlement to all that your spouse (or civil partner) owned, it really should be looked into.

And second marriages with children on both sides? Yes! go make that will.

[1] (the sort of lawyer that deals with buying and selling houses here in the UK)