As the country falls further and further into crisis over the rapidly rising costs of living, the effect it will have on claims made against the estates of deceased persons for reasonable financial provision will need to be considered carefully by practitioners in this area of law.
Under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act) certain categories of family and dependants can apply for reasonable financial provision from the estate of a deceased person. These are the deceased’s spouse, civil partner, former spouses or civil partners (unless they have subsequently married again), cohabitees for the last 2 years (provided they lived together as if they were married), children or people treated as children of the family, and those that were maintained by the deceased at the time of death.
In claims by applicants other than claims by spouses and civil partners the provision that can be claimed however is limited to reasonable financial provision for the applicant’s “maintenance”.
The question the Courts will likely have to grapple with in the coming months is the fact that people’s household bills are set to skyrocket, often to unmanageable levels for many people.
To summarise the law when deciding what is a reasonable provision the Court will consider a number of factors listed in the Act, including notably the financial resources and financial needs which the applicant and any beneficiary of the estate has or is likely to have in the foreseeable future;
The Supreme Court has also given very useful guidance for claims under the Act in the case of Ilott v Blue Cross [2017] UKSC 17.
Case background
Of particular relevance are the following points:
“The concept of maintenance is no doubt broad,…it cannot extend to any or everything which it would be desirable for the claimant to have. It must import provision to meet the everyday expenses of living.
The level at which maintenance may be provided is clearly flexible and falls to be assessed on the facts of each case. It is not limited to subsistence level.
…all cases which are limited to maintenance, and many others also, will turn largely upon the asserted needs of the claimant.
For current spouses and civil partners … need is not the measure of reasonable provision, but if it exists will clearly be very relevant. For all other claimants, need (for maintenance rather than for anything else, and judged not by subsistence levels but by the standard appropriate to the circumstances) is a necessary but not a sufficient condition for an order.
It is obvious that the competing claims of others may inhibit the practicability of wholly meeting the needs of the claimant, however reasonable.
Sometimes the relationship will have been such that the only reasonable provision is the maximum which the estate can afford; in other situations, the provision which it is reasonable to make will, because of the distance of the relationship, or perhaps because of the conduct of one or other of the parties, be to meet only part of the needs of the claimant.
Where a Court has to assess whether reasonable financial provision has been made, and/or what it should be, the relevant date is the date of hearing.”
The case also made clear that there is a wide discretion for judges in deciding what they consider the appropriate order to be, and that is a discretion that ought to not easily be interfered with by the higher Courts on appeal. As such predicting the outcomes of these claims can be very difficult.
Nevertheless, issues raised by the cost of living crisis in claims being argued now will be:
1. That party’s income and expenditure schedules showing their financial resources and needs (and any shortfalls they show that arguably should be met from an estate) may look drastically different from the time of a letter of claim to the date of the hearing, with outgoings likely to be increased substantially, and many claimants that were doing fine before likely to be in substantial debt;
2. This is an area of law in which no-win no-fee agreements are already prevalent given claimants often need to be in financial difficulty to have a “good case”, but they will no doubt increase further, as therefore will success fees to be claimed from estates following Hirachand v Hirachand.
3. Actuary tables often used to calculate lump sums to be paid to claimants to help maintain claimants for the rest of their life may become out of date quickly unless they can be updated sooner than usual to take into account the dramatic economics of the time; and
4. To what extent will a judge consider a provision to be reasonable where many people will be struggling to make ends meet. It is clear from the comments in Ilott that it is not certain an award should always meet a claimant’s reasonable needs, but where will judges draw the line now, and what factors will they look to help make that decision?
Comment
I can foresee the claims becoming for larger and larger sums as the cost of living crisis deepens, as will however the competing needs of many defendants and the costs of the dispute, all of which, when combined with the increased uncertainty of what a judge is likely to do will make reaching swift agreements to settle the claims even more important than before, but potentially also even more difficult given the increase in the financial stakes.
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Lewis Addison is a Partner in our expert Dispute Resolution team, specialising in Will, Trust, and Probate disputes.
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