Head of Wills & Probate | Private Wealth | UK Succession and Tax
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The Inheritance (Provision for Family & Dependants) Act 1975 ("the 1975 Act") is a piece of legislation which allows certain categories of people to challenge what they deem as insufficient financial provision made for them from a deceased person's estate, where a person has died domiciled in England and Wales. It can apply both when there is a Will and if there is no Will (where the intestacy rules govern what happens to an estate).
The Court will need to agree that there was no reasonable financial provision made for the person claiming, and a Judge has discretion to amend how the assets in the estate should be distributed. Each case will depend on its own particular facts.
The 1975 Act sets out who is able to make a claim:
Provided that an applicant is eligible, they have six months to bring their claim from the date that a Grant of Representation is first taken out, although this six month period can be extended by the Court.
The applicant will have to prove that the deceased failed to make reasonable financial provision for them.
Spouses and civil partners are treated differently to the other classes of applicants. A spouse or civil partner will succeed if they can show that the deceased did not make reasonable financial provision for them in the circumstances, whether or not the spouse/civil partner actually needs the assets for their own maintenance.
Other applicants need to show that they require such financial provision as would be reasonable for their maintenance.
The only way that it is possible to exclude a claim under the 1975 Act is as part of a financial settlement on divorce.
Should you decide to exclude from your Will anyone who falls within the categories of eligible claimants, it is sensible to provide a separate letter, to be stored with your Will, explaining your relationship with the person in question and your reasons for taking this course of action. Whilst this would not be binding on the Court in the event of a claim, it is helpful to have as much information as possible so that the Court can review all of the facts and reach its decision.
Should a spouse or civil partner make a successful claim, the Court has the power to make a wide range of financial awards, and these are broadly similar to awards which can be made on divorce. This can include lump sum or periodic payments, the transfer of property, the use of trusts or the variation of existing settlements, or even directing the use of some of the estate funds towards the purchase of other property.
Other applicants can only be awarded funds for their maintenance, and this can be as ongoing payments or a calculated capital lump sum.
In England and Wales, a person can make a Will to leave their estate to whomever they choose. This is known as testamentary freedom.
The ability for a person to make a claim against your estate can be considered as incompatible with this freedom, and whilst you cannot exclude a claim under the 1975 Act in your Will, there are some steps you can take to mitigate the risk.
Instead of leaving them nothing, you may instead wish to leave the person in question a modest gift under the Will. This can be combined with a separate letter explaining why you have chosen to do this, and it means that they are not completely excluded from benefit.
If you decide to leave a small bequest to the person in question, it is possible to specify that the gift is only to be made if the beneficiary does not bring a claim against the estate. This means that the beneficiary can still bring a claim if they wish, but they will have to weigh up the risks of making such a claim against the certainty of inheriting a specific sum under the Will itself.
Another option is to consider the use of a discretionary trust in your Will. This means that the potential claimant is only one of a number of potential beneficiaries, and allows for negotiations to take place, which may result in a formal claim being avoided all together.
If the 1975 Act is one that could potentially affect your estate, you should seek legal advice at the time of making your Will, to ensure that the matter is dealt with in the best possible way to try and ensure that your estate is ultimately given to those you wish to benefit.