Your assets, your Will, your choice – or is it?

Your assets, your Will, your choice – or is it?

The judgement in the recent case of Jackson, which was reported in the news yesterday, may have come as a surprise to many. It is, however, consistent with the law. Whilst you may think that you are free to leave your assets as you wish in your Will, the reality is there are restrictions and have been for some time.

This article provides a brief guide to the Inheritance (Provisions for Family and Dependants) Act 1975 (‘the Act’) and how to deal with potential claimants.

Background

Under the Act, certain people are entitled to apply to Court to become a beneficiary of a ‘reasonable financial provision’. The people who can apply are:

• a spouse;
• a former spouse who has not remarried;
• any child;
• anyone you treat as a child (e.g. someone adopted by you);
• someone financially dependent upon you;
• a co-habitee of two or more years; and
• a civil partner

Simply because someone is entitled to apply it does not follow that they will or if they do that they will be successful. The Court in making their decision will take into account all the surrounding circumstances including the financial provision of the chosen beneficiaries.

This is why the daughter in the case was able to make an application. So, what should you do if you are in a similar position to Mrs Jackson?

Identify

When writing your Will it is essential to investigate potential claimants because the whole point of preparing a Will is to ensure your wishes are followed. Advice can only be based on the information provided so be open and honest with your adviser.

Record

We advise clients in these circumstances to write a letter covering off their reasons for not including or for making minimal provision for someone who is entitled to apply. The letter is kept with the Will and is only opened if an application is made. This way, your reasons can be put to the Court and taken into account.

It is worth going further and setting out fully your reasons for making the provisions in your Will. The letter should cover off, for both your chosen beneficiaries and the potential claimant(s):

  • The nature of your relationship – connection, or lack of it, is clearly key – the fact that Mrs Jackson had little to do with the charities she chose to benefit counted against them.
  • Their financial position
  • Why you have made provision for them in the way you have (or why not)

This does not prevent an application being made. It merely ensures your reasoning is taken into account and avoids people second guessing what your reasons were.

Deterrent

You could include a deterrent in your Will.

This involves leaving a specified sum to the potential claimant. But if they make an application the legacy is lost. The aim is to encourage them to accept the legacy. Court applications take time and money and their outcome is not certain so this can work.

Lifetime Giving

Arguably the only way to ensure those you want to benefit actually benefit is to give away assets to them in your lifetime.

The difficulty with this balancing out such gifts with your own needs. You should only make gifts that you can afford as once given you may not get them back if you need them.

In reality this only works minimally unless you know when you are going to die and can plan accordingly – even then life has a habit of throwing spanners in the works.

Trusts

Another option is to use trusts in your Will.

In particular, Discretionary Trusts can be useful in this situation. The trust has a number of beneficiaries but it is up to the Trustees as to who benefits, when, and to what extent. You could therefore include potential claimants as beneficiaries thereby treating them equally with your preferred beneficiaries.

When using trusts in Wills, you should always include a side letter to act as guidance to your trustees. You cannot direct or instruct your trustees as to who to benefit but, unless there are good reasons not to, they will follow your guidance.

Advice

Do not rely on your expectations, however reasonable, take advice from professional advisers and review regularly.

Each case is considered on the facts and circumstances involved. Individual advice is essential to ensure, as far as possible, your chosen beneficiaries will inherit.

The information contained in this document provides background information only and should not be relied upon as an exhaustive list of the legal issues involved. 

Contact us for advice, support and guidance – it’s what we do:

T: 01227 700 702

E: info@argolifeandlegacy.co.uk

W: www.argolifeandlegacy.co.uk

Published by Simon Crooks 29 July 2015