Update: estate planning

For wills and probate practitioners, the relationship between their clients and the next generation is of key relevance to their role as advisers. Probably the majority of testators with children will wish to ensure that their property ultimately benefits the next generation. Most parents want to be 'fair', which usually means each child taking an equal share. Not infrequently, however, the client wants to give one child a greater share than his siblings, or excludes one or all of the children altogether. How can the will draftsman give effect to the testator's intentions? What should the executors do if they fear a claim may be made against the estate? This update focuses on recent cases which have explored these and similar issues.

Family provision for an adult child

The Court of Appeal judgment in the case of Ilott v Mitson and others [2011] EWCA Civ 346 has excited much comment (see solicitorsjournal.com, 4 April 2011).

When Mrs Jackson died in 2004, she had been long estranged from her daughter, Mrs Ilott, aged 50. Mrs Ilott was not mentioned in the will, which left the estate to charity. Mrs Jackson left a letter to her executors explaining why she was leaving nothing to her estranged daughter. Nevertheless, Mrs Ilott (who was living on state benefits) claimed 'reasonable provision' from the estate under the Inheritance (Provision for Family & Dependants) Act 1975.

The county court judge agreed that Mrs Jackson's will did not make reasonable provision for her daughter and awarded her £50,000 '“ a little over ten per cent of the estate. Mrs Ilott appealed, seeking a larger sum. The charities cross-appealed, seeking a reduction of her award. The High Court decided in favour of the charities, setting aside the whole of Mrs Ilott's award. She successfully appealed to the Court of Appeal. The court held that the judge at first instance had applied the correct test and that they would not interfere with his decision that this particular testatrix had failed to make reasonable provision for her unwaged, benefit-dependent adult child.

Importantly, the Court of Appeal did not rule that it will always, or normally, be reasonable for a parent to provide by will for their adult child, any more than the previous landmark case of Re Coventry deceased [1980] 1 Ch 461 ruled that it is always, or normally, reasonable for a parent to leave him or her nothing.

The Court of Appeal concerned with the process of establishing what is or is not reasonable. The first stage is a subjective decision (described by the court as a 'value judgment') for the first instance judge, based on the circumstances of each particular case and current social conditions and values, as to whether the provision in that will for that individual was reasonable. The decision of the first-instance tribunal has 'great weight' and 'any appellate court should think long and hard before coming to a contrary conclusion'. Arden LJ also noted that parliament deliberately included children over 21 among the categories of individuals entitled to claim under the 1975 Act even if not financially dependent on the deceased.

This decision undoubtedly poses problems for a testator who wants to leave his child little or nothing from his estate. In his article 'Keeping the peace' (Solicitors Journal 155/14, 12 April 2011) Lloyd Junor suggests the useful strategy of a will containing a modest legacy for the child together with a forfeiture clause. This will not prevent the child claiming under the 1975 Act but makes his risks significantly higher. If the first instance 'value judgment' goes against him, he loses everything. This does publicise the existence of a family dispute and relatively few testators, in my experience, are comfortable with that.

Objectively, is reduced (or no) provision for this child in this will reasonable? Has he or she already received significant lifetime gifts? Does he have other financial resources available? Ilott suggests that it is not helpful to record the testator's view that their child's financial problems result from their own poor lifestyle choices.

Rectification

However, if the court is asked to rectify the provisions of a will, the testator's wishes are crucial. Rectification is available only where 'a will is so expressed that it fails to carry out the testator's intentions in consequence of (a) a clerical error or (b) a failure to understand his instructions' (section 20 of the Administration of Justice Act 1982).

In Boswell and others v Lawson and others [2011] EWCA Civ 452, the Court of Appeal had to consider whether a will made in 1990 gave effect to the testator's true intentions or was based on a misunderstanding of his instructions.

For more than 20 years Mr and Mrs Appleby made their home with their son and daughter-in-law, Philip and Carol. There was no dispute that the parents had decided to leave Philip a larger share of their estate than his siblings, in recognition of his and his wife's role as carers. When Mrs Appleby died in 2004, Philip inherited her half-share of the house. When Mr Appleby died two years later, a dispute arose as to whether Philip should inherit his half of the house as well, or whether it should be divided equally between the four children. Perhaps surprisingly, Philip himself would have been content to take an equal share with his sisters. But his estranged wife sought to uphold the strict terms of the will so that Philip alone would inherit the house, which he would then have to bring into account in their divorce.

Mr and Mrs Appleby's wills were in mirror form. Each gave their half-share of the family home to Philip, and the residue to the other spouse, or, if they failed to survive, to the four children equally. The will was drafted by a local solicitor and signed at his office.

The solicitor's letter to Mr and Mrs Appleby after the meeting, enclosing copies of the signed wills, advised that: 'On the death of the first of you that person's share in the house and land goes to Philip. If Philip has died before you (and the way he drinks there is no telling what might happen) then it will go to any children of his'¦ on the death of the second of you the other half of the house and land and all the rest of your estate is divided equally between all of your children including Philip.'

Presumably the writer overlooked the classic warning that any solicitor's letter may be quoted in court, or he would probably have avoided criticising his clients' son's drinking habits. The letter was inconsistent with the terms of the wills as signed, so clearly there was a misunderstanding somewhere. The court had to decide whether the solicitor had misunderstood his clients' intentions (in which case the will was rectifiable) or simply made a mistake when he came to write the letter.

The Court of Appeal upheld the county court judge's refusal to rectify the will. The solicitor's mistake was in the letter, not the will. The court accepted evidence that when the property-sharing arrangements began in the 1980s, the parents told Philip they intended that he would eventually inherit. The parents' new wills in 1990 were motivated by inheritance tax considerations rather than by any wish to change Philip's previously discussed inheritance. Furthermore, after Mrs Appleby's death, Mr Appleby had explained to all four children that Philip inherited her half-share of the house under her will and that his own will was in the same terms.

International estates

Estates with an international dimension often raise issues as to whether the children of the deceased have a legal right to inherit notwithstanding the terms of the will and the intentions of the deceased. One such estate came before the High Court in May 2011: Morris v Davies and others [2011] EWHC 1272 (Ch).

The claimant was the executor of a British citizen who lived in Belgium and France from 2001 until his death in 2008. He sought probate of the deceased's will; various family members opposed this, claiming that the deceased was domiciled in Belgium, that Belgian compulsory inheritance rules applied, that the will was invalid, and that Belgian intestacy rules operated. At a case management conference the master directed that the question of the deceased's domicile be tried as a preliminary issue. A trial in the Belgian court was scheduled before the hearing on domicile.

The executor sought and obtained an anti-suit injunction precluding the defendants from proceeding in either Belgium or France before the preliminary issue had been heard in England. He relied on the Court of Appeal's decision in Bassam v Bassam [2004] EWCA Civ 857 that an injunction would be granted if:

• the foreign court's findings would be relevant only after the English court had determined the issue of domicile, and there would still need to be a trial of that issue in England;
• it would not deprive the defendants of any legitimate advantages in the foreign proceedings; and
• it would protect the process of the English court from misuse.

The judge, Sarah Asplin QC, concluded that 'the wide-ranging nature of the Belgian proceedings at present seem to me to be designed at the very least to enable'¦ the second defendant to reduce to her own possession and for her own benefit some of the deceased's assets in advance of the hearing of the preliminary issue in England'¦ Given that the present defendants had submitted to the hearing of that issue and had allowed costs to be incurred, in my judgment such conduct is vexations and oppressive.'

Liability for premature distribution

Finally, the Court of Appeal decision in Lane v Cullens Solicitors and Bowling & Co LLP [2011] EWCA Civ 547 concerned the time limit for a personal representative's negligence claim against solicitors who failed to advise him against distributing the estate when it was still vulnerable to third-party claims.

The deceased left a will in favour of a niece but it was invalid. The niece also claimed to be entitled to the estate under constructive trusts or proprietary estoppel and subsequently succeeded. By that time, the personal representative had distributed part of the estate and hence was personally liable to meet the niece's claim. He sued the solicitors who, he said, had failed to warn him not to make distributions.

The Court of Appeal rejected his claim because it was out of time. The limitation period started to run when the distributions were made, since it was known that there might be a claim against the estate, even though nobody knew whether the claim would succeed. Executors who fear a future claim from a disinherited child (or any other third party) should bear in mind the risk of personal liability if they distribute the estate regardless and their advisers should warn them of the danger!