Monika Byrska, Senior Associate at Anthony Gold will attend the inaugural Conference of Polish International Experts in Warsaw.

The conference will be a meeting of Polish experts working in International Organisations, as well as analytical centres from leading global universities. Participants from a carefully chosen list can attend by invitation only. The meeting will act as a way for the experts to get to know each other and discuss the best use and consolidation of Polish professional abroad, supporting the Polish position and impact of soft power. The Congress will be held on June 8-9 in Warsaw.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

One question which we are often asked when acting for beneficiaries of an estate (or those who believe they should have been beneficiaries) is ‘do I have a right to see the will?’ I am frequently contacted by people who have been prompted to call because they are disappointed that they have not heard about when a will is going to be read – and they are even more disappointed when I explain that a formal reading, by a solicitor, with the accompanying gasps and fallouts, is really the preserve of soap operas!

Prior to a Grant being issued, the will is the property of the executors from the date of death of the testator.  The executors are the ones who can decide whether or not a copy should be provided to other people.   Most executors will take a reasonable view on this – once I explain that it will become public property on the issue of the Grant, and that it would be disclosable in either contentious probate or Inheritance Act proceedings, they normally realise that there is little advantage to be had in withholding it.

Of course, this is not always the case, and I have had beneficiary clients who have had to fight to see a will.  If you know who has a will, then you can issue a subpoena to have it delivered into Court.  There is no defence to the subpoena once issued, and it contains a penal notice so you can normally be sure that it will be complied with.

Once a Grant is issued, then a will is a matter of public record.  Grants and wills can be searched for here – a great website which will indicate immediately if there is a Grant and whether or not there is a will, and will deliver the documents within 10 working days for £10.

One practical issue is that it may be difficult in the early days after a death to know where the executors are.  I have recently dealt with a case where the children of the deceased were not named as executors, but wanted to know who was so that they could make practical arrangements (such as freezing bank accounts).  My firm made and stored the will so we were able to quickly contact the executors and inform them of the position.  This may be more difficult where the testator has a homemade will which does not contain the addresses or contact details of the executors, or the executors have moved and not kept in touch.  Testators should probably be advised to give as many contact details as possible for their executors (and these days, that should include email addresses), to inform their executors of the contents of the will if at all possible, and to periodically keep in touch so that the will can be updated if the testator moves.

If you are someone who is faced with an Inheritance Act claim or needs some advice, we can help.  Contact David Wedgwood on 020 7940 4000 or by email at dwx@anthonygold.co.uk

The higher courts have had a busy time recently dealing with claims under the Inheritance (Provision for Family and Dependants) Act 1975.  First, Ilott v Blue Cross made it to the Supreme Court, and then, in December 2017 Warner v Lewis was heard in the Court of Appeal.  The judgment opens with the sentence “This is the first time that an application by an unmarried partner under the amended subsections 1(1)(ba) and 1(1)(A) of the [Inheritance Act] has reached this Court.’

The reason that Warner v Lewis came to be considered by the Court was because of an argument over the meaning of ‘maintenance’ in the Act – whether the lower courts were right to order the transfer of a property from a deceased’s estate to a cohabitant for full (or possibly more than full) value.

Mr Warner had been cohabiting with the deceased, Mrs Audrey Blackwell, for 19 years before her death on 6 May 2014.  The evidence was that both parties had anticipated that he would predecease her, and he openly admitted that he was the wealthier of the parties.  As a result, Mr Warner had made a will leaving a substantial amount to Mrs Blackwell but she had not done the same.  Sadly, Mrs Blackwell died first, and Mr Warner faced losing his home.  By the time of the hearings, Mr Warner was in his 90s.

Mrs Blackwell left her estate to her daughter, Mrs Lewis, who made it clear from before her mother’s death that she expected Mr Warner to leave the house – she asked him to sign a declaration prior to her mother’s death confirming that he had no claim on the house (which he signed).  Following Mrs Blackwell’s death she suggested he could buy the house for £425,000 which was rejected as an overvaluation.  Mr Warner, who originally agreed that he did not want to stay in the property, then said that he would like to as he had been very happy in the property, he had contributed to the running costs, he was close to his neighbours (one of whom was a doctor) and he did not want the upheaval of leaving at a time when he was in his mid-90s.

Mrs Lewis made a claim for possession of the property, which Mr Warner defended.  He issued proceedings under the Inheritance Act for reasonable financial provision from the estate.  He claimed the right to purchase the property from the estate at market value, as ‘maintenance’.  He claimed that he didn’t just want to stay in the property – he needed to do so due to his age, various physical disabilities, the length of time he had been there, the contributions to the property and his supportive neighbours.

At first instance, the Recorder agreed and ordered that he be entitled to purchase the property for £385,000 (the property had been valued at £340,000 by a joint valuer, but Mrs Lewis had then obtained a higher value).  Mrs Lewis appealed to the High Court.

Newey J upheld the decision, on the grounds that the term ‘maintenance’ could ‘encompass an arrangement for full consideration, and a person can be in need of it without being short of money, where money cannot secure them what they require.’  That was the case here – Mr Warner could afford to buy a property, but did not want to have to move from his home.  Mrs Lewis appealed to the Court of Appeal.

The questions for the Court of Appeal to consider were:

• Was the Recorder’s original conclusion that Mrs Blackwell’s will did not make reasonable financial provision for Mr Warner’s maintenance correct?
• Was the Recorder entitled to make the order that he did, under the 1975 Act?

In respect of the first question, s1(2)(b) of the Inheritance Act provides that reasonable financial provision (for any applicant other than a spouse or civil partner) means “such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance”.  Sir Geoffrey Vos, giving the leading judgment, noted that the concept of maintenance is broad, but that it cannot extend to anything which might be desirable for the Claimant to have.  Instead, it “must import provision to meet the everyday expenses of living”.  Maintenance is flexible and must be assessed on a case by case basis.  It is not limited to subsistence.  The purpose of a maintenance award is not to confer capital on the Claimant (and so it may be more appropriate to award a life interest rather than a property outright, if housing is being awarded), but it does not follow that maintenance has to be paid by periodical payments.

There was some discussion of the concept of a moral claim, and whether that is required in order to make a successful claim under the Inheritance Act.  Sir Geoffrey Vos stated that “Need, plus the relevant relationship to qualify the claimant, is not always enough”.  Whilst there was no moral claim here, Mr Warner having accepted that he did not have any expectation of being able to stay in the house after Mrs Blackwell’s death, the judges hearing the matter were obviously concerned to assist him if at all possible.

The Recorder had found that Mr Warner was being maintained by Mrs Blackwell, in that the property they lived in was hers and so she was providing a roof over his head.  Balancing the needs of Mr Warner against those of Mrs Lewis led to the conclusion that Mr Warner’s needs were to take precedence.  Sir Geoffrey Vos agreed, noting as he did that he had taken into account the Supreme Court’s views (as expressed in Ilott) on freedom of testamentary disposition.

As the will of Mrs Blackwell did not make reasonable financial provision, the question was what would do so? Again, the Court of Appeal agreed with the Recorder that he was entitled to find that Mr Warner needed to stay in the house.

In respect of the second question, the Court of Appeal examined whether the transfer of property for full consideration could really be regarded as maintenance or as reasonable financial provision.  It is clear under the Inheritance Act that provision can be made by transfer of property.  Sir Geoffrey Vos found that it is not necessary for consideration to move from the estate – there are occasional cases, such as this one, where the precise financial value of the property is less important than the fact of the property itself.  Whilst an order of this kind is unusual, he was not prepared to rule it out on the grounds of jurisdiction. The Recorder had been entitled to make the decision that he did.

There is no doubt that this is an unusual case.  It may, however, be useful for Claimants who have no obvious financial need but do wish other requirements to be taken into account.  The Court of Appeal judgment also contained a very helpful discussion of maintenance and the authorities on that point.  It confirmed that maintenance is a very broad concept – whether the decision actually broadens the concept any further is a moot point.

If you are a cohabitant who needs advice after the death of your partner, or someone who is faced with an Inheritance Act claim, we can help.  We advise on bringing and defending claims under the Act.  Contact David Wedgwood on 020 7940 4000 or by email at dwx@anthonygold.co.uk

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Perhaps the principle reason behind the development of trusts in common law was not tax savings, but the delivery of family money to those who could not manage it effectively. Many trusts in the past were small family trusts set up to look after a particular individual after the death of their parents. The Inheritance Tax Act 1984 resulted in the fairly abrupt end of such onshore trusts and accelerated the move offshore. However, whilst maintaining trust assets is obviously essential, the perceived distance between trustees and beneficiaries can lead to problems. Recent changes in taxation legislation have sought to encourage the use of onshore trusts, where vulnerable beneficiaries need active support. It is therefore, appropriate to consider whether there is a growing role for onshore trusts.

Some trusts can also have the benefit of supplying funds without depriving vulnerable persons of the means tested benefits on which they are reliant. This was the problem that so troubled the Court Appeal in Ilott v Mitson [2015] EWCA Civ 797. In that case Lady Justice Arden said the District Judge at first instance was wrong to make a lump sum award that took no real consideration of the applicant’s means tested benefits. The Court of Appeal went on make a judgment that did do that, although at a significantly higher price. The proposed purchase of Mrs Ilott’s council house and the £20,000 additional sum, amounted to an award of over three times the need of £50,000 that the District Judge found (in a somewhat opaque manner) was reasonable.

When the Supreme Court in Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17 reverted back to the District Judge’s award, they somewhat skirted around the means testing issue. At paragraph 44 they did point out the Court of Appeal’s solution itself disentitled Mrs Ilott to Housing Benefit :-

“It also seems likely that in the absence of a discretionary trust the additional “option” to draw down £20,000 at will would fall foul of exactly the same capital disqualification rules as to benefits, because those rules treat capital which is available to the claimant, but of which he has deprived himself, as being in his possession: see Housing Benefit Regulations 2006, SI 213/2006, regulations 49 & 50, (consolidated with the Council Tax Benefit Regulations SI 215/2006), together with the Guidance Manual issued to officers by the Department of Work and Pensions BW1 (13 September 2013), to which it does not seem the Court of Appeal was referred.”

However, that point seems difficult as Lady Justice Arden’s proposal was that she buy her property and hence not require Housing Benefit. As her Tax Credits where not capital means tested, it was in that way a creative, albeit expensive, solution to the problem.

The Supreme Court nevertheless restored the District Judge’s award of £50,000 and at paragraph 41 commented that in relation to benefits:

“The Court of Appeal rightly said that the 1975 Act is not designed to provide for a claimant to be gifted a “spending spree”. But this kind of necessary replacement of essential household items is not such an indulgence; rather it is the maintenance of daily living. Moreover, how the claimant might use the award of £50,000 was of course up to her, but if a substantial part of it were spent in this way, the impact on the family’s benefits would be minimised, because she could put the household onto a much sounder footing without for long retaining capital beyond the £16,000 ceiling at which entitlement to Housing and Council Tax Benefits is lost.”

Leaving aside that on applying for Leave to Appeal to the Supreme Court the charities agreed to the purchase of the house in any event – this case had long since ceased to be about Mrs Ilott – many benefits lawyers would be puzzled by this. The benefits regulations have specific provisions to prevent a spending spree, so as to drop down below the capital threshold. For example, the Housing Benefit Regulations 2006 (HBR), at regulations 49 and 50, sets out how capital – other than that in personal injury or discretionary trusts – are treated as notional capital and that capital is only to diminish by the weekly rate that benefits would have been awarded. Whilst there is some discretion by the assessor to ignore some expenditures for essential items, it is doubtful that the holidays the Supreme Court suggested be taken would be exempt.

This does suggest that the Supreme Court decision did not turn on issues of what actually was provided by the award, but – partly due to the publicity it attracted – was a reinstatement of orthodoxy. It stressed the principle of testamentary freedom and the importance of charities, whilst reinstating the District Judge’s rather unclear award against them.

What the Supreme Court did in obiter touch upon, was the possibility of the use of discretionary trusts to effect the desired result in an economic manner. Many of us have been achieving this in settlements, which courts have readily approved. However, this was not really an option to the court after the contested hearing. This was partly owing to a prerequisite for an agreed trust deed and willing and qualified trustees.

So what in practice would a discretionary trust have offered in the Ilott case? Firstly, the Inheritance (Provision for Family and Dependants) Act 1975 provides that any legacy award is in effect backdated to the date of death. As such Mrs Ilott would not have ever received the money for means testing purposes. It would be as if her mother had set up a Will Trust. Such Will Trusts can be exempt from means testing if they do not give the beneficiary an absolute interest.

The regulations dealing with means testing, such as regulation 49 HBR and The Care and Support (Charging and Assessment of Resources) Regulations 2014 (CSCAR) do exclude discretionary trusts. For example regulation 22 of the CSCAR at sub-paragraph 2 states:

“The adult may be treated as possessing any payment of capital which would be treated as capital possessed by a claimant of income support under regulation 51 of the Income Support Regulations (Notional Capital).” This is a reference to the Income Support (General) Regulations 1987. At regulation 51(2) of those Regulations, again under the heading “Notional Capital”, set out a series of exceptions to nominal capital are set out. Those include, as well as a personal injury trust, a discretionary trust.

As such it would be possible to put a legacy into a discretionary trust, which would allow for benefit to be given to the client, and still have that money ring-fenced for means testing.

This does return us to the issue raised at the outset, which is tax. The tax treatment for such trust would not be as onerous as one might think. Firstly, there would be no immediate inheritance tax charge or periodic charges as the trust would be under the nil rate band of £325,000. Will trusts are in any event not subject to an immediate charge.

The HMRC would of course have to be notified of the trust and income tax returns filed. However, it is unlikely that this trust’s income would exceed the £1,000 at basic rate band. Furthermore, for a trust such as this it is unlikely that there would be any substantial capital gains – certainly not beyond the trust allowance.

Importantly, if the trust were drafted so as to allow full capital advancement, then such a trust might be short lived. The capital items needed might be acquired within the first tax year. Monies up to the capital allowances could be paid direct to the beneficiary. As such the trust might only last one year. Whilst there would be some costs in this process, if the trustees knew what they were doing, it would not be to the extent of the value lost by means testing.

If Mrs Ilott had been severely disabled then the tax position might be mitigated further by an election under s89 of the Inheritance Tax Act 1984 for Vulnerable Persons Trust status. The rules in relation to this tax status was made more attractive in the Finance Act 2014. However, they are still not without their issues, not least that entitlement might lapse as one qualification is entitlement to various disability benefits. Furthermore, as specific trust deed is required. Such trusts are certainly advisable for larger trust funds.

For such very disabled beneficiaries, applying the trust monies so as to set up an effective care plan is challenging and specialist work. In those cases a trustee must have knowledge of the statutory services and work with a Court appointed Deputy or the Local Authority. The powers and obligations of a trustee are in many ways substantially different and a trustee should be wary of overstepping his role. An example of the pitfalls in doing so is illustrated by the recent case of Staffordshire County Council v SRK [2016] EWCOP 27, where a Deputy was held liable to having deprived the client of their liberty through putting in place a comprehensive care plan.

Nevertheless, if a good working relationship is established between the two bodies, a real improvement in the quality of life can be delivered to the beneficiary. Indeed, most Social Workers and Deputies are happy to work constructively with Trustees, although it is fair to say that they are not all consistent.

The complexities of setting up and administering the trusts can lead to expense, which has to be balanced against the benefit delivered. Whilst costs are a major concern to all beneficiaries, in smaller trusts proportionality comes more into play. However, if the alternative is that trust funds are only used as a substitute means tested benefits, then trusts are attractive to beneficiaries, if there is a clear plan agreed from the outset.

As to the reasons why trustees and executors should and indeed often do consider such arrangements when dealing with disappointed beneficiaries, one only has to look the Ilott case. Whilst most cases do not have so many parties and do not involve two trips to the Court of Appeal and then the Supreme Court, beneficiaries with little to lose will litigate. In this case it is hard to see how the charities could have received anything after the £50,000 award.

In conclusion, trusts do offer real benefits for some vulnerable persons. The use of such trusts are not however without problems. Trustees’ personal liability for tax understandably makes many nervous to take on the tax issues. The complexities above do limit the number of lawyers who can deliver cost effective benefit. Nevertheless, the complexity of using trusts does lead the client to lawyers and as such it is something that we should embrace.