In the latest edition of our Inside the Inheritance Act series of articles marking the 50th anniversary of the Inheritance Act, Hayley Bundey’s specialist Consultancy Team looks at Inheritance Act claims by financial dependants.
What is the Inheritance Act?
The Inheritance Act allows certain categories of individuals to seek (increased) financial provision from the estate of a deceased person where their Will or the intestacy rules have failed to make reasonable provision for them.
Among the categories of applicants who can make a claim are those classed as a financial dependant of the deceased.
Who qualifies as a financial dependant of the deceased?
Financial dependants are defined under the Act as:
‘any person (not being a person included in the foregoing paragraphs of this subsection) who immediately before the death of the deceased was being maintained, either wholly or partly, by the deceased.’
Section 1(3) goes on to clarify:
‘a person is to be treated as being maintained by the deceased (either wholly or partly, as the case may be) only if the deceased was making a substantial contribution in money or money’s worth towards the reasonable needs of that person, other than a contribution made for full valuable consideration pursuant to an arrangement of a commercial nature.’
This category of applicant is therefore the only category which requires proof of financial dependency upon the deceased to be eligible to bring the claim (contrary to a common misunderstanding of the Inheritance Act that it is a requirement for all applicants to evidence financial dependency, which is not the case).
However, like a child of the family or cohabiting partner, this category of applicant must evidence their eligibility to bring the claim before they can move on to the Court considering whether reasonable financial provision has been made for them. They are not simply able to produce a certificate to evidence that eligibility, as with the remaining categories of applicant, and instead must evidence the nature of their relationship with the deceased to satisfy the Court that they are eligible first.
Evidence of financial dependency
Evidence of financial dependency will often be in the form of bank statements and other forms of financial evidence showing regular financial support by the deceased of the applicant over a sustained period of time and, crucially, which must have been in place immediately before the death. Ad hoc financial provision may still enable an applicant to qualify but it becomes more problematic the more irregular it was and the further away from the death the last payment was made.
Partial maintenance
The definition allows for the deceased to have only partly maintained the applicant – i.e. they did not need to be their sole source of maintenance – but if any form of commercial arrangement was in place which provided for the applicant to receive the remuneration the deceased was making to the applicant in exchange for services (such as a carer’s arrangement) this would disqualify them from eligibility to bring the claim, albeit only so long as the applicant was receiving market rate payment for those services. If an applicant was providing more in the way of services than they were being paid (i.e. not at market rate payment or not being paid at all) then this would lend the circumstances of that case more towards a potential estoppel claim against the estate (if suitable promises and financial detriment were present) rather than an Inheritance Act claim. If an applicant was receiving payment from the deceased without providing services in exchange this would lend the circumstances of that case more towards the applicant potentially being an eligible financial dependant under the Inheritance Act.
Was the provision substantial?
A final consideration the court will make when determining if a person is eligible as a financial dependant or not is whether the provision the deceased was providing for the applicant was of a ‘substantial’ nature (i.e. minor financial payments – however regular – may be insufficient to qualify) and the court will consider both provision made in monetary terms as well as ‘money’s worth’. The latter refers to a financial benefit the applicant receives from the deceased without actual money exchanging between the parties. This covers the often common example of eligible financial dependant applicant (which can sometimes be overlooked) which is someone who was living with the deceased or for whom the deceased was providing a roof over their head (either for free or at a reduced rent). Even if no other provision was being made for the applicant by the deceased save for the roof over their head this will likely be sufficient for that applicant to be eligible to pursue an Inheritance Act claim.
Claims made in conjunction with a cohabiting partner claim
It is often the case that a cohabitee applicant will plead in the alternative that they were a financial dependant of the deceased so that if they fail to satisfy the criteria for eligibility via the former gateway they will in any event qualify under the latter gateway. For further details of the criteria for that gateway see our cohabiting couples article in this series.
The financial dependancy gateway for cohabiting couples does not of course require any fixed period of time during which maintenance was provided to the applicant up to the death – so long as it was in place immediately prior to the death – so will also enable cohabitees who were not cohabiting for a 2 year period pre-death to make a claim as a financial dependant instead.
How does the court decide if a financial dependant should receive (increased) financial provision from the estate?
That will be decided by the judge weighing in the balance various factors under section 3 of the Inheritance Act. These are:
(a) the financial needs and resources of the applicant
(b) the financial needs and resources of any other applicant
(c) the financial needs and resources of any beneficiary of the estate
(d) any obligations or responsibilities the deceased had to make provision for the applicant
(e) the size and nature of the estate
(f) any physical or mental disability of the applicant or any beneficiary and
(g) any other relevant matter such as conduct of the applicant, the deceased or another person.
In addition to those factors, when deciding a claim specifically for a financial dependant, the court will also take into consideration under section 3(4): the length of time for which, and the basis on which, the deceased maintained the applicant and the extent of the contribution made by way of maintenance for their needs together with the extent to which the deceased assumed responsibility for the maintenance of the applicant.
What does ‘reasonable financial provision’ mean?
The definition of reasonable financial provision for a financial dependant is that which is required in all the circumstances of the case for their maintenance (section 1(2)(b)).
The definition of “maintenance” has been determined by various cases as not requiring an individual to live on the breadline but also not providing for them to live in luxury. It often lies somewhere in the middle and is decided on a case by case basis.
The Court has broad powers to award appropriate remedies, including orders for periodical payments, lump sums, and the transfer of specific property to the applicant. In theory the Court has the power to redistribute the entirety of the estate in favour of the applicant if it deemed that to be reasonable financial provision for their maintenance, though this would be an unlikely outcome with successful awards normally being made for a lump sum payment to be made from the estate for the applicant and the remainder of the estate to be distributed in accordance with the terms of the Will or intestacy rules to the existing beneficiaries.
When should you start an Inheritance Act claim?
The Inheritance Act imposes a time-limit (also called a limitation date) on starting these claims with the Court, which is six months from the date of the Grant of Probate / Grant of Letters of Administration. Whilst section 4 of the Inheritance Act permits the bringing of a claim after this time there are various factors which the court must take into account when deciding whether to allow applicants to do so and it can make the claim more difficult to succeed upon. For this reason it is important that you seek specialist legal advice upon your rights to bring a claim as soon as possible following the deceased’s death.
SBMB – Specialist Inheritance Act Consultancy Firm
If you have not received adequate provision from the estate of someone you were dependant upon, contact us for a free initial consultation to discuss your options and the funding arrangements that we offer (such as no win no fee).
Read more in the series: ‘Inside the Inheritance Act’.
For more from Hayley’s specialist Consultancy Team go to ACTAPS Consultancy Firm.
