Last week, in the case of Ilott v Mitson, the Court of Appeal caused consternation in the charity sector by ruling that an estranged daughter should receive one third of her mother's estate, to the detriment of the charities named in her mother's will; she had previously been awarded a far smaller sum. Will this decision lead to increased litigation for charity beneficiaries?
The initial reaction may be to conclude that testamentary freedom in England and Wales has been further eroded and the result will be an increase in claims by adult children under the 1975 Inheritance Act. However, one needs to step back, consider the facts and wait to see whether an appeal is made to the Supreme Court.
Heather Ilott, from Hertfordshire brought a claim against her mother's estate on the basis that she did not receive reasonable financial provision under the will of her mother, Melita Jackson. Ilott lived with her mother until, at the age of 17, she eloped with her boyfriend, whom she later married. Her actions caused a complete break in her relationship with her mother.
Jackson executed a will in 2002 excluding Ilott from benefiting from her estate and left the residue of her estate to the RSPCA, the RSPB and Blue Cross, with which she had little connection. Jackson also signed a letter of wishes directing her executors to fight any challenge to the terms of her will. Jackson died in 2004, aged 70, leaving an estate worth approximately £486,000.
Ilott first brought a claim against Jackson's estate in 2007 and was awarded £50,000.This ruling was then reversed, but in a subsequent appeal the Court ruled Ilott was indeed entitled to a share of the estate, but did not review the amount of the original award. Ilott again appealed because the effect of the original award was that she would lose her means-tested benefits, meaning that in real terms she was no better off.
In the latest hearing in the Court of Appeal, it was ruled that the district judge had made a fundamental error by failing to consider the effect of the original award on Ilott's financial position. The Court therefore awarded a sum of £143,000, plus costs and expenses, to buy her housing association home, together with an option to receive up to an additional £20,000 which could be requested in instalments so that her benefits would not be affected.
What does this mean for charities who are residuary beneficiaries? One might conclude that the decision opens the way for more litigation by adult children to challenge the terms of their parents’ wills and seek greater sums. But the right to bring a claim in this manner has always been there under the 1975 Act, and this case does not open the floodgates.
The facts of this case are unusual and the decision turned on those facts. It was found that the charities benefiting under the will had no connection to the deceased and therefore, like Ilott, had not expected to inherit anything: what they were getting was a windfall.
On the question of the award, the judges determined that it was necessary to exercise the court's discretion in a way that would not ultimately make Mrs Ilott's financial position worse. Thus the court awarded her a sum to purchase a property, and a sum which could be drip-fed in order to keep within the disregards and capital thresholds for means-tested benefits.
Individuals seeking to disinherit their children in favour of charities are now being advised to provide a detailed explanation in a side letter to their will of why they are excluding their children, and to build their connection to those to whom they intend to leave their estate, particularly if they wish to benefit charities rather than their children.
Charities should consider reviewing the ways they engage with benefactors and whether there is a need to keep in regular contact with them for reasons other than increasing fundraising. Charities should also ensure that their internal records of engagement with testators are up to date in case such evidence is called upon, particularly if they are aware that the testator has children.
Charities continue to walk the tightrope of reputation and commerciality in seeking settlement. The reality after the Jackson case is that when a charity is faced with a litigant in person, a commercial approach may never be enough and a trial may become inevitable.
Gaynor Jackson is a partner in the private client department of Ward Hadaway in Newcastle