For whom the bell tolls

By 13 November 2013financial, marriage

Usually we write about family law as it affects those of us who are still hale and hearty, but there is an area of family law which crosses over with probate law, i.e. the law concerned with the financial estates of the deceased. In certain circumstances, when a family member dies, it is possible for those who remain to make a claim for financial provision from the deceased’s estate. This can happen whether they have made a Will or not.

This area of law is governed by the Inheritance (Provision for Family and Dependants) Act 1975. This Act enables the court to change how the deceased’s estate is distributed from the wishes set out in their Will, or if there was no Will to decide how to distribute the assets, if certain family members or dependants convince the court that it should step in.

Only a limited class of people can ask the court to intervene. These are the spouse or civil partner of the deceased, the former spouse or civil partner of the deceased (so long as they have not remarried or entered a new civil partnership), a cohabitant who had been living with the deceased for over two years, the deceased’s child or someone treated as their child (this includes adult children), or someone otherwise being financially maintained by the deceased.

With the exception of a surviving spouse or civil partner (who is entitled to more), anyone else making a claim is only entitled to such reasonable financial provision as is necessary for their maintenance, so far as the estate can provide it. Naturally the concept of what is reasonable financial provision has been argued about for a long time, but in essence, a claimant will need to show that they were being financially supported by the deceased and need that support to carry on as they rely on it.

The position is different for a surviving spouse, and this is where the overlap with divorce and dissolution law comes in. A spouse or civil partner is entitled to such financial provision as is reasonable in all the circumstances, whether or not they actually require that financial assistance for their own maintenance.

When deciding what would be reasonable provision, the courts have a list of factors they have to take into account, and one of these is what sort of provision a spouse or civil partner would have received in a divorce settlement if the couple had divorced rather than one of them dying. So on an Inheritance Act claim by a spouse, the court will take into account case law developed by the divorce courts. Concepts such as needs, sharing and the yardstick of equality are considered. Of course, the approach must be flexible because the circumstances of divorce and death are obviously different: sorting out the finances of a separating couple involves considering the needs of two living parties whereas under the Inheritance Act, only one remains. Nevertheless, the court also needs to consider the other beneficiaries of the estate, so the balancing exercise still exists, but it relates to different people.

The court can make a range of orders including transferring property to the claimant, ordering a cash lump to be paid, or even that the estate should pay maintenance to the claimant. It can also vary a pre-nuptial agreement between the deceased and his or her spouse if required to meet the survivor’s reasonable financial needs.

There is a strict time limit for bringing claims under the Inheritance Act: they must be commenced within 6 months of the grant of probate in relation to the estate. In some circumstances claims can be started after this 6 month period has elapsed, but special permission from the court is needed.

A recently reported court case shows what can happen when time limits are overlooked. Here, the couple had been married for 36 years before the husband passed away. The couple were wealthy, with property here and abroad and a company which itself owned a property portfolio. In the deceased’s Will, the wife was awarded the income from the deceased’s company shareholdings, but the company was run by the husband’s two adult sons from a previous marriage, and decisions were taken that tied up a lot of the income by reinvesting it in properties so the wife’s income was less than perhaps she, and the deceased, had expected.

The court looked at what the wife would have received if the couple had divorced instead of death parting them, and decided that she would have received half the assets, which was considerably more than she received under the will. Despite this disparity, she was not allowed to bring her Inheritance Act claim, because she had delayed for too long: over six years in this case. Her reluctance to litigate against her step-sons was not a good enough reason for the court to intervene to change a Will after this amount of time had passed. Only in special circumstances will the court waive the strict six month time limit.

So the moral of this case seems to be, however distasteful litigation might seem shortly after the death of a loved one, you do need to get on with it if you want the court to be able to listen to your case.

If you would like more information on issues we’ve raised in this blog, please call us on 01223 443333 to make an appointment.

 

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