Keeping the peace

One of our team had the experience recently of a client whose instructions for a new will were motivated to severely reduce his adult son's benefit, with whom he had been estranged for some years. The son substantially benefits under the current will, but the client argued that his son, although poorly off, can provide for himself and does not need provision from him.

At first readers may not consider such instructions raise a difficulty and in a sense of course they do not: the client is free to choose who should benefit from his bounty and one simply advises the client that his estate may suffer a claim by the unhappy son for provision from the estate under the Inheritance (Provision for Family & Dependants) Act 1975 if he proceeds as intended.

My concern, however, is that the pitfall of this route is to leave the estate wide open to a claim which involves the estate in delayed administration and additional (and sometimes substantial) costs.

Furthermore, the risk of an attack by disgruntled adult beneficiaries is more acute now in light of the Court of Appeal's recent decision in Illott v Mitson & Ors [2011] EWCA Civ 346, in which the court has made it clear that claims by estranged adult children in impecunious circumstances will be entertained. So, what steps could be taken to protect the estate from a subsequent attack by the son?

Powerful tool

The advice given was to insert a forfeiture clause or 'no contest clause' in the will '“ a potentially powerful tool. As long as the clause is not inconsistent with, or repugnant to, the nature of the interest given to the son or void for uncertainty, it would be valid.

Where some provision is to be made (as in this case) they have real protective effect in those situations where the client intends to make less provision than the beneficiary expects (and where, consequently, a claim might be expected).

Considering the suitability of using a forfeiture clause, it would also be necessary to assess carefully with the client what provision might be appropriate in the particular circumstances and, in doing so, (where a claim under the Act is a risk) reference should be made to the Act to identify what the court might assess as reasonable provision. In this regard the question of what is reasonable is an elastic one and there are a number of likely outcomes. Depending upon the client's attitude towards risk, a lower level of provision might be chosen.

Of course a forfeiture condition does not prevent an applicant from making a claim under the Act; an applicant has a statutory right whether the condition operates or not and, in considering the application, the court will have regard to any benefits the applicant derives from the estate, so if the condition has a confiscatory effect that will be taken into account, but the mere deterrent effect does not make the condition void as contrary to public policy.

Accordingly, if an applicant forfeits his interest under the will by making a claim, that can be taken into account by the court when assessing whether 'reasonable financial provision' has been made. There is a risk that an applicant fails to achieve more than their defined interest and, in so doing, loses that benefit, particularly as they also risk being penalised in costs for their action.

Much would depend upon whether the applicant already has existing assets or whether they have any particular needs that warrant provision from the estate. With careful and proper planning, the applicant may not wish to take the risk of a pyrrhic victory or of losing their defined benefit under the will.

Think twice

In practice I have come across few disputed estates where there was a forfeiture clause in the will '“ it appears that many practitioners do not use them. However, when a client's instructions are to exclude, or to materially alter, a potential adult child beneficiary's expected interest in the estate, there is a clear benefit in inserting such clauses '“ they may just cause the potential claimant in any proposed action to think twice before running a claim for fear of losing their inheritance and exposing themselves to adverse costs orders.