Study Notes · 79 sections
After estate administration is complete, various issues may arise including family provision claims under the Inheritance (Provision for Family and Dependants) Act 1975, ongoing trusts created by wills, and beneficiary rights. This topic covers these post-administration matters that practitioners must understand.
Understanding claims and trusts is essential for estate practitioners. Even after distribution, trustees and personal representatives may have ongoing duties. Proper advice can prevent disputes and protect all parties' interests.
The Inheritance (Provision for Family and Dependants) Act 1975 allows certain persons to claim against an estate if the deceased's will or the intestacy rules do not make reasonable financial provision for them. The Act recognises that testamentary freedom is not absolute and must be balanced against family responsibilities.
Reasonable financial provision means such financial provision as it would be reasonable in all the circumstances for the applicant to receive. The standard differs for spouses/civil partners compared to other applicants. For spouses, provision is assessed based on what they would reasonably expect, while for others, it is limited to maintenance only.
The court has broad discretion to make orders under the Act. There is no formula for calculating provision; each case is decided on its facts. The court can order provision from the estate even where the will clearly excluded the applicant, testamentary freedom being subject to family responsibilities.
Claims can be made whether the deceased died testate or intestate. The Act operates alongside, not instead of, the will or intestacy rules. A successful claim varies (changes) the will or intestacy provisions to make provision for the applicant.
Claims are made against the estate, not individual beneficiaries. However, the order effectively reduces the entitlement of those who would have received under the will or intestacy. Beneficiaries who have already received assets may be required to contribute back.
1975 Act claims can overturn will provisions and redistribute assets according to the court's decision. This emphasises the importance of proper will drafting and considering potential family claims when preparing wills.
A spouse or civil partner of the deceased can claim. This includes those who were married or in a civil partnership at the date of death. Separated but not divorced spouses may also claim. Cohabitants do NOT have standing under the Act unless they can claim as financial dependants.
A former spouse or civil partner can claim if they have not remarried or formed a subsequent civil partnership, and the claim arises from the terminated marriage/civil partnership. This might apply where financial arrangements were inadequate or the deceased promised ongoing support.
Children of the deceased include biological children and adopted children. Adult children can claim, though their needs are assessed differently from minor children. The Act treats all children equally regardless of whether they were born within or outside marriage.
A person treated as a child of the family includes step-children and some foster children who were treated as a child of the family by the deceased. This requires evidence of a genuine family relationship, not merely financial support.
Any person who was being maintained, either wholly or partly, by the deceased immediately before death can claim. This can include cohabitants, other relatives, or even unrelated individuals. The maintenance must have been regular and more than mere occasional gifts.
The core ground for a claim is that the deceased's will or the intestacy rules do not make reasonable financial provision for the applicant. This is a flexible concept that depends on all circumstances. The test is objective, not subjective - it is what the court thinks is reasonable, not what the applicant thinks they should receive.
For spouses and civil partners, reasonable financial provision is not limited to maintenance - it includes provision for their standard of living. For other applicants (children, dependants), provision is limited to such financial provision as would be reasonable for their maintenance, education or training.
Reasonableness depends on all circumstances including the applicant's financial position, the size of the estate, the applicant's needs, and the relationship with the deceased. The court also considers the deceased's reasons for any disinheritance, though these are not conclusive.
Claims commonly arise where the deceased left everything to a new spouse and nothing to children from a previous relationship, where there was a long-term cohabiting partner who was not provided for, where a child was born after the will was made, or where the deceased promised provision but did not include it in the will.
Not every disappointment justifies a claim. The applicant must show that the provision made (or lack thereof) is not reasonable. The court respects testamentary freedom where it is exercised fairly and with proper consideration of family responsibilities.
The court considers the applicant's current and expected financial resources, including income, earning capacity, property and other assets. The applicant's needs are assessed based on their standard of living and financial circumstances.
The financial position of other beneficiaries who would be affected by the claim is also relevant. However, their needs are not considered - only their resources. The court balances the applicant's needs against the impact on beneficiaries' entitlements.
The court considers any obligations and responsibilities the deceased had towards the applicant and any obligations the applicant had towards the deceased. This includes moral obligations arising from family relationships, not just legal obligations.
The size and nature of the estate is a key factor. The court cannot make provision that exceeds what is available in the estate. The nature of the assets (e.g., whether they are income-producing or need to be sold) is also relevant.
The physical and mental health of both the applicant and the deceased at the time of death may be relevant. Disabilities or health issues affecting the applicant's needs or earning capacity will be taken into account.
The conduct of the applicant towards the deceased may be considered. This includes whether the applicant cared for the deceased, contributed to the estate, or behaved in a way that might affect the reasonableness of their claim.
Claims must be issued within six months from the date of the grant of representation. This is a strict time limit that the court cannot extend. Failure to issue proceedings within this period bars the claim, except in very limited circumstances involving minors.
The court has discretion to allow a claim outside the six-month period only if the applicant is a minor or the court considers that there are special circumstances. Extension applications are made by court summons and require compelling reasons.
Once a claim is issued, distributions from the estate should generally cease. Personal representatives who distribute after being notified of a potential claim may be personally liable. The estate's assets must be preserved pending resolution of the claim.
A pre-action protocol applies to 1975 Act claims. This requires the claimant to set out their claim in a letter before proceedings, giving the estate an opportunity to consider and respond. The protocol encourages early settlement and reduces litigation costs.
Proceedings are issued by claim form. The particulars must specify the grounds for the claim, the applicant's relationship to the deceased, the provision made (if any), and the orders sought. The claim is issued in the Family Court, though larger or more complex cases may be heard in the High Court.
Missing the six-month time limit is usually fatal to a claim. The court has very limited discretion to extend time. Practitioners must act promptly when a potential claim is identified to avoid missing the deadline.
Most 1975 Act claims settle before trial. The court encourages alternative dispute resolution, and mediation is often used. Settlement allows parties to control the outcome and saves legal costs. Early settlement is particularly important where the estate's assets are limited.
If the claim proceeds to trial, the court will hear evidence about the circumstances, the needs of the applicant, the resources of the estate, and any relevant factors under s.3. The court then decides what, if any, provision should be made. Judgment may be reserved for written reasons.
The court may order periodical payments (usually monthly or annually) rather than a lump sum. This is particularly suitable for spouses and civil partners, and may be ordered where a lump sum is not appropriate or would deplete the estate.
Lump sum orders are the most common remedy under the Act. The court specifies an amount to be paid from the estate to the claimant. Once paid, the claimant has no further claim against the estate. The amount may be paid in instalments if the court directs.
| Type of Order | Description | When Used |
|---|---|---|
| Lump sum | One-off payment from estate | Most common, finalises claim |
| Periodical payments | Regular ongoing payments | Spouses, long-term needs |
| Property transfer | Transfer of specific property | Family home, business assets |
| Settlement variation | Varying trusts in the will | Complex family situations |
A deed of variation (or family arrangement) can be made within two years of death to vary the will or intestacy provisions. This must be done with the agreement of all affected beneficiaries. If properly executed, the variation is treated for IHT purposes as if the deceased had made the new provisions.
The key IHT advantage of deeds of variation is that they are read back for IHT purposes. This means the varied provisions are treated as if they were in the will, potentially saving IHT. However, this treatment only applies if the variation is made within two years and meets statutory requirements.
A beneficiary may disclaim (refuse) their inheritance under the Law of Property Act 1925 or the Taxation of Chargeable Gains Act 1992. A properly executed disclaimer means the beneficiary is treated as never having received the gift, which may redirect the gift to others or alter the IHT position.
Variations are appropriate where family circumstances differ from what the will anticipated, where tax planning opportunities exist, where family harmony requires adjustment, or where a 1975 Act claim is threatened. They offer a flexible alternative to contentious court proceedings.
Variations can resolve family disputes without court proceedings. They preserve family relationships and offer flexibility in addressing individual circumstances. However, all affected beneficiaries must agree for a variation to be effective.
Many wills create trusts on death, whether expressly or implied from the language used. Common examples include trusts for minors until they reach a specified age, life interests with remainder to others, and discretionary trusts giving trustees flexibility in distributing assets.
A life interest (or life tenant) gives a beneficiary the right to income from trust assets for their lifetime, with the capital passing to others (remaindermen) on their death. The life tenant may have a right to occupy property or receive investment income. Trustees have ongoing duties to both life tenant and remaindermen.
Gifts to minors cannot be paid directly. Instead, trustees hold the assets on trust until the minor reaches 18 or another specified age. Trustees must invest the funds prudently, consider the minor's needs for education and maintenance, and transfer the assets when the beneficiary reaches the specified age.
Special trusts exist for disabled beneficiaries that preserve means-tested benefits while providing for the beneficiary's needs. These trusts have favourable tax treatment but must meet specific conditions about the beneficiary's disability and the trust's terms.
Trusts created by wills impose ongoing trustee duties that continue long after probate is granted. Personal representatives often become trustees and must understand their continuing obligations to life tenants, remaindermen, and minor beneficiaries.
The Trustee Act 1925 gives trustees statutory powers including the power to purchase land, sell property, insure assets, borrow money, and compromise claims. These powers can be extended or restricted by the will. They supplement trustees' inherent fiduciary powers.
The Trustee Act 2000 sets out trustees' statutory duties including the duty to exercise care and skill, to act prudently, and to keep proper accounts. Trustees must act in the best interests of all beneficiaries, balancing competing interests where necessary.
Trustees have wide powers of investment under the Trustee Act 2000. They must invest as a prudent investor would, considering the need for diversification, the suitability of investments, and the differing needs of various classes of beneficiary.
Trustees can delegate certain functions to agents or nominees, including investment management and property management. However, they retain overall responsibility for the trust and must supervise delegates properly. Delegation does not absolve trustees of liability for poor decisions.
Trustees must balance competing interests. Life tenants want maximum income, while remaindermen want capital growth. Trustees must exercise judgment and may need to seek court directions where conflicts cannot be resolved.
Beneficiaries have the right to information about the trust, including the trust assets, their entitlement, and trustee decisions. Fixed beneficiaries (those with a specific entitlement) have greater rights than discretionary beneficiaries. Trustees must provide information on reasonable request.
Beneficiaries are entitled to see trust accounts showing receipts, payments, and investments. Accounts must be provided at reasonable intervals. This right enables beneficiaries to monitor trustee performance and ensure their interests are being properly protected.
Beneficiaries can apply to court to remove trustees where there is good cause, such as trustee misconduct, incapacity, or unfitness to act. The court may appoint replacement trustees. The power of removal is a check on trustee authority.
Under the Variation of Trusts Act 1958, the court may vary or terminate trusts where circumstances have changed since the trust was created. This can apply where all beneficiaries consent and the variation would benefit them, or where a minor or unborn person would benefit.
Beneficiaries may challenge trustee decisions that are outside the trustees' powers or made improperly. This includes investments that are too risky, excessive fees, or breaches of trust. Remedies include court orders, compensation, and removal of trustees.
Beneficiaries can enforce their rights through court proceedings if necessary. Trustees who ignore beneficiary rights or fail to provide information may face court intervention and personal liability for any resulting losses.
Tracing is the process of following trust assets that have been wrongly transferred or used. Beneficiaries can trace assets into the hands of recipients and claim them back, provided they can identify the original trust property and follow its movements.
A constructive trust may be imposed where someone has been unjustly enriched at the expense of trust assets. The court treats the holder of the wrongly transferred assets as a constructive trustee for the benefit of the true beneficiaries.
Equitable remedies for breach of trust include account of profits (requiring the trustee to account for gains made from breach), equitable compensation for losses, and injunctions to prevent further dissipation of assets. These remedies are in addition to any legal claims.
Tracing can recover misappropriated assets even if they have been mixed with other assets or transferred through multiple hands. Seek specialist advice promptly where misapplication is suspected, as delays can make recovery more difficult.
Personal representatives may be removed for misconduct, incapacity, conflict of interest, or failure to administer the estate properly. Beneficiaries may apply to court for removal where the representative's continued involvement threatens the estate or their interests.
Applications for removal are made to the court, usually in the Chancery Division. The applicant must show grounds for removal and identify a suitable replacement. The court has discretion and will consider whether removal is necessary to protect the estate and beneficiaries.
When removing personal representatives, the court appoints replacements. The court may appoint the person named as substitute in the will, or may appoint a professional trustee such as a solicitor or trust corporation. The replacement has the same powers and duties as the original representative.
Removing personal representatives is a serious step but sometimes necessary to protect the estate. Grounds must be substantial - mere disagreement or delay in administration is usually insufficient. Evidence of misconduct or incompetence is typically required.