Inheritance Act claims – good news for cohabitees

English law has always placed great value on the principle of testamentary freedom. That is, an individual’s right to leave their estate to whomever they like, with no obligation to provide for family members under a Will. However, under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”), the Court does have power to vary the terms of the Will where “reasonable financial provision” has not been made for limited categories of persons. Broadly, these categories of potential claimant include:

1. registered legal partners and former registered legal partners (spouses or civil partners of the deceased);
2. qualifying cohabitees (i.e. living with the deceased as a couple for at least two years immediately before death); and
3. children and those who immediately before the death of the deceased were being maintained by the deceased.

Whilst there is a separate threshold for registered legal partners, the Act states that reasonable financial provision for all other claimants bringing a claim under the Act is defined as what “would be reasonable in all the circumstances of the case for the applicant to receive for his/her maintenance”. The circumstances that a court must consider include:

• the claimant’s financial resources;
• the financial resources and needs of any other applicant;
• the financial resources and needs of the beneficiaries named under the Will;
• the obligations and responsibilities the deceased owed the Claimant;
• the size and nature of the estate; and
• any disabilities.

The breadth of the factors demonstrate that the Court’s discretion in this area is very wide. Such discretion, in addition to a lack of consistent guidance as to what weight should be given to each factor, means the outcome of a claim under the Act for these applicants is far from predictable. This nebulous state of affairs was highlighted in the 2017 Supreme Court judgement of llott v The Blue Cross, where Lady Hale observed that the present law was in an “unsatisfactory state”.

In llott, the applicant daughter had been estranged from her deceased mother for over 15 years. Her financial situation was not comfortable and she was in receipt of state benefits, but whilst the Court upheld the first instance decision to award her £50,000, her claim for provision of housing was denied. The Supreme Court emphasised that it must ensure the balance is maintained between the principle of testamentary freedom and the financial needs of a claimant.

The Supreme Court posited in Ilott that where “housing is to be provided by way of maintenance it is likely more often to be provided by… a life interest rather than by a capital sum” thus restricting the erosion of testamentary freedom. The High Court’s recent ruling in Thompson v Raggett was notable in its departure from the Supreme Court’s guidance. The facts in Thompson can be distinguished from those in Ilott, not least because the claimant in Ilott was an adult child of the deceased, whereas the claimant in Thompson, Mrs Thompson was a cohabitee. Mrs Thompson, had also been financially dependent on her partner, Mr Hodge throughout their 42 year relationship, during which she had cared for his mother and worked for free in his business.

The High Court considered Mr Hodge’s letter of wishes in which he stated that he did not wish Mrs Thompson’s children to benefit from his estate. He also stated in the same letter that Mrs Thompson had her own resources and was able to pay the costs of living in a care home after his death, which would be necessary, since she would be unable to look after herself without him.

The Court found that Mrs Thompson was clearly not financially comfortable, and determined that it was Mr Hodge’s mistrust of Mrs Thompson’s sons which resulted in him leaving his entire estate to two friends and farming tenants. As Mrs Thompson was a cohabitee, the Court also took into account:

• her age;
• the period of cohabitation; and
• her contribution to the welfare of the deceased’s family.

Mrs Thompson was awarded financial provision in excess of £413,000 out of Mr Hodge’s £1.5m estate. Whilst, the distinct nature of the relationships means that in many ways Mrs Thompson was more deserving of a greater reward than that given to the claimant in llott, the High Court considered but did not follow the Supreme Court in respect of the nature of the award.

The award included an outright transfer of a property Mrs Thompson had lived in with Mr Hodge. The Court did consider granting a life interest in the property, namely limiting her entitlement to the ability to live in the property and earn income from it during her lifetime. However, since there was evidence that the beneficiaries had inherited Mr Hodge’s suspicion of Mrs Thompson’s sons, the Court felt that this may have caused difficulties when Mrs Thompson’s son moved in to help care for her. It used this as creative justification for diverting from the Supreme Court’s recommendation in llott and opting instead for a clean break between the parties.

Thompson therefore somewhat muddies the waters, since the Supreme Court ruled very recently that the Courts must be wary of impinging on the principle of testamentary freedom by providing such capital payments to claimants.

Therefore, whilst the judgment is good news for cohabitees in many respects, the contrast with the judgment in Ilott means that the decision is open to being challenged in the future and the ambiguity for both estates and potential claimants prevails.

For now, if an individual wishes to leave a child or a dependant out of a Will or to make only minimal provision for them, it is important that they realise there is the possibility that their executors/beneficiaries could face costly litigation with uncertain results. Such individuals should carefully consider their position and take appropriate advice when preparing or reviewing their Wills. Conversely, in light of the recent uncertainty surrounding the Court’s interpretation of the Act, if an individual feels that they have been wrongfully omitted from a Will, there could be value in seeking advice on the merits of requesting “reasonable financial provision” from the estate.