Assessing the value of Inheritance Act Claims by adult children

Inheritance Act Lawyer, Naomi Ireson, who regularly represents claimants and defendants in claims by adult children under the Inheritance Act, looks at an important High Court decision.

A common problem in dealing adult children’s claims under section 1(1)(c) of the Inheritance (Provision For Family And Dependents) Act 1975 is assessing the value (or as lawyers say, the quantum) of the claim.

The leading case on 1975 Act adult child claims, Ilott v Mitson & Others [2014] EWCH 542 (Fam), recently proceeded to the High Court in order to determine the applicant’s appeal against quantum of the award made at first instance. The appeal was dismissed.

Background

The claim was pursued by the daughter of the deceased, Heather Ilott. Mrs Ilott had been estranged from her mother (the deceased) since the age of 17. Mrs Ilott resided with her husband, with whom she had five children. They lived modestly in a Housing Association property, with limited income and largely dependent upon state benefits for an income. The deceased disagreed with Mrs Ilott’s lifestyle which led to their long-term estrangement. Consequently, the deceased left her estate, valued at £486,000, to three charities and specifically excluded Mrs Ilott on the basis that she felt she had no moral obligation to provide for her daughter.

The case proceeded to trial in 2007. The charities defended the claim on the basis that Mrs Ilott failed to establish that the deceased’s Will did not make reasonable financial provision for her. However, the judge at first instance found that the primary responsibility for the estrangement between Mrs Ilott and deceased laid firmly with the deceased. Crucially, the judge found that the fact that Mrs Ilott was an adult child did not to bar her from pursuing a claim against the estate and the fact that she had limited financial means was a relevant consideration.

At the date of trial, Mrs Ilott's family income was declared as £20,386. Mrs Ilott and her husband had capital of between £2,000 and £3,000 but Mrs Ilott had no pension provision. Generally their standard of living was low which was evidenced by the fact that Mrs Ilott had never had a holiday.

Mrs Ilott prepared a schedule of her needs and resources claiming the following from the estate:

  • £186,000 to permit her to purchase her own home
  • £53,000 to pay for a single-storey extension to home
  • A capitalised sum equivalent to an income of £10,000 per year for the remainder of her life which calculated on the Duxbury tables provided a capital sum of £173,000
  • A further capital sum to furnish and equip the house following purchase totalling £40,950
  • An annual budget for the family totalling £34,600 which after discounting the child benefit and Mrs Ilott’s husbands part-time earnings totalled an annual income of 27,776 which capitalised for life would require a sum of about £562,000

Interestingly, the judge commented that Mrs Ilott’s claim far exceeded the size of the estate and commented that her case was presented in "an ill thought out and unhelpful way."

The charities argued that if the court was minded to make any award to Mrs Ilott it should be a small sum to fund the cost of driving lessons and to enable her to return to work in order that she could gain greater financial independence. The defendants suggested a figure of no more than £3,000 - £5,000.

The judge at first instance agreed with Mrs Ilott that the will failed to make reasonable financial provision for her. In determining quantum, the judge felt that a sum of around £69,200 would be required to provide a maintenance figure of £4,000 per annum. The judge commented that Mrs Ilott ought to find some form of modest part-time work but would require the state to continue to subsidise her basic living expenses and as such reduced her financial dependency and the capitalised maintenance figure at a lower sum of £50,000. It was determined that appropriate provision would be a lump sum of £50,000.

It’s worth noting that the judge thought the fact that Mrs Ilott did not have any expectancy of provision from the deceased estate was a relevant consideration in assessing quantum.

The Appeal

Mrs Ilott appealed quantum. The charities also appealed on:

  1. the determination that the will did not make reasonable financial provision and
  2. the decision on quantum.

Mrs Ilott argued that it was wrong for the judge to have considered her lack of expectancy of provision as a reason to limit the quantum of her award. However, the judge on appeal disagreed and said that the expectancy of the claimant could be considered under section 3(1)(g) of the 1975 Act as "any other matter".

The bulk of Mrs Ilott’s appeal was that the provision made at first instance, a lump sum of £50,000, did not confer any real benefit because any capital sum over and above £16,000 would reduce her benefits pound for pound, unless used for the purchase of a home. However, the judge on appeal found against Mrs Ilott on this point. The judge said that it would be inappropriate to meet her housing need by providing a lump sum to purchase a property. He took into account the fact that Mrs Ilott lived in straitened circumstances for many years and upon carrying out the relevant balancing exercise, did not conclude that an award to improve her circumstances was justified. The judge concluded that it would be incorrect to approach the case on the basis that there would be no benefit to Mrs Ilott unless her housing need was met by an award. Crucial to the appeal was the fact that Mrs Ilott and her husband had managed for many years without any assistance from the deceased.

An essential part to this adult child claim was the fact that the defendants were charities and had no claim, moral or otherwise, on the deceased. Nonetheless, the judge commented on appeal that it was relevant to pay regard to the fact that the charities had been chosen by the deceased as the recipients of her assets upon death.

Summary

The following important points can be taken from the appeal in this case:

  1. There is a risk that a claimant will be criticised for overstating and/or exaggerating their financial needs;
  2. Whether the claimant had an expectancy for provision upon death is relevant when considering quantum;
  3. If a claimant manages without assistance from the deceased during their lifetime this will be relevant to quantum;
  4. The impact which any award has on the claimant's eligibility for state benefits will not necessarily be taken into account;
  5. Whilst commonly claimed, housing need will not necessarily be taken into account by the court when assessing quantum, specifically where the claimant is seeking to increase their standard of living to that endured during the lifetime of the deceased.

If you are faced with a similar situation or wish to discuss an Inheritance Act claim, you are invited to contact one of our contentious probate specialists on 0808 1391599 or email Naomi direct at naomi.ireson@sleeblackwell.co.uk