What You Can Do to Minimise The Risk Of Inheritance Act Claims Against Your Estate

The increase in blended families and evolving family structures has seen a corresponding rise in disputes relating to the distribution of estates. One of the principal legal mechanisms by which such disputes arise is through claims under the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”).

This legislation permits certain categories of individuals to apply to the court for reasonable financial provision from a deceased person’s estate if they believe the Will (or intestacy rules) fail to make adequate provision for them.

While no estate planning strategy can guarantee immunity from potential claims, there are several well-established legal tools that can help mitigate the risk of such disputes arising.

Below, we outline some of the most effective approaches.

Legal Strategies for Reducing the Risk of 1975 Act Claims

1. Use of a Letter of Wishes

A Letter of Wishes, while not legally binding, can be an important supporting document to accompany a Will. It allows a testator to explain the rationale behind the decisions made in the Will, particularly where provision for certain family members or dependants is limited or omitted.

Such letters can assist a Court in understanding the testator’s reasoning and intentions, which may weigh against the likelihood of a successful claim. It is important that the letter is reviewed periodically to reflect any changes in family or financial circumstances.

2. Life Interest Trust

Another effective strategy involves the creation of a Life Interest Trust within a Will. This typically grants a surviving spouse or partner the right to benefit from income (or sometimes occupation of a property) during their lifetime, with the capital passing to other beneficiaries on their death.

Although Courts often consider outright provision for a spouse appropriate, a properly drafted life interest can still constitute reasonable financial provision under the 1975 Act, particularly where other beneficiaries’ interests also require protection.

3. Discretionary Trust

Discretionary Trusts afford greater flexibility. Under such a Trust, trustees have discretion as to who, within a defined class of beneficiaries, should receive income or capital and when. This structure allows potential claimants to be included within the class, ensuring provision can be made if appropriate, whilst retaining control over the estate’s distribution.

A Letter of Wishes can accompany the Will to guide the trustees’ decisions and record the testator’s preferences regarding potential beneficiaries.

4. Mutual Wills

Though comparatively uncommon, Mutual Wills involve two individuals (typically spouses) agreeing to make wills on agreed terms, which are then irrevocable after the first death. The surviving party is bound by the original arrangement, and the estate of the first to die is effectively held on trust in accordance with the agreed terms.

This arrangement can prevent a surviving spouse from altering their Will and potentially excluding intended beneficiaries. However, due to their inflexibility and potential to conflict with changing circumstances, mutual Wills are generally considered only in particular cases and with caution.

5. No Contest Clauses

No Contest Clauses (also known as “Forfeiture Clauses”) are provisions included in a Will that seek to deter beneficiaries from challenging the estate. They typically state that if a beneficiary brings a Claim against the estate – such as under the 1975 Act, they risk forfeiting all or part of their inheritance.0

While these clauses cannot entirely prevent a Claim, they may act as a powerful disincentive, particularly for beneficiaries who stand to lose a substantial gift if they contest the Will. It is important to note, however, that the Courts retain discretion under the 1975 Act and may choose to uphold a claim despite the presence of such a clause.

How We Can Help

If you are concerned about the risk of an Inheritance Act Claim against your estate, or if you wish to review your current Will in light of changing family or financial circumstances, our Will experts would be pleased to assist.