Focus on disinheritance

Written by: David Craik Posted: 30/07/2018

Bl57_disinheritanceNot everyone decides to leave their estate to their spouse and children – indeed, inheritance can often be a messy business. So just why do people decide to disinherit family members, and what can be done about it?

Dramatic endings are no stranger to the Lucan family. The moustachioed Lord Lucan famously vanished after allegedly murdering his children’s nanny at his London home in 1974. His fate has been the stuff of legend for over 40 years, with all sorts of stories having done the rounds, including that he drowned himself, was fed to a tiger, or is still in hiding protected by rich friends.

His wife, Veronica, the Dowager Countess of Lucan, died last September after a drink and drugs binge sparked by a mistaken self-diagnosis of Parkinson’s disease. However, this wasn’t Lady Lucan’s final gesture. That came earlier this year when it was revealed she’d cut her three estranged children out of her will because they “lacked good manners”. Instead, she gave her estate – worth £576,626 – to homelessness charity Shelter.

According to Anna Gaston, Associate at private wealth law firm Maurice Turnor Gardner, under English and Welsh law people are entitled in their wills to leave their property and possessions to whomever or whatever they choose after they die. There’s no requirement to make any testamentary provision to a surviving wife or child. 

“The majority of people want to leave their assets to their family after death, but it’s not so uncommon for individuals to leave them out completely from their wills or give them a reduced portion,” she says. “Instead, they give their estate to other people or, like Lady Lucan, to charity.”

Gaston explains that people disinherit for a variety of reasons. “There may have been a family dispute, a parent might disapprove of one of their children’s choice of wife or husband or their lifestyle. Maybe they want to provide for children of a second marriage who need money more.

"We’re also seeing high-net-worth individuals more frequently wanting their children to make their own way in life and not being reliant on their parents’ wealth.”

Legal matters

Under the Inheritance (Provision for Family and Dependants) Act of 1975 in England and Wales, individuals being disinherited can challenge a will after death. Current and former spouses and civil partners, children, step-children and co-habitees can make a claim on the grounds that the deceased failed to make reasonable financial provision for them.

They can change the will to make it more generous to them, receive financial provision as is necessary for their maintenance, or have the will made invalid.

The Court will weigh up a number of factors such as the needs of the disinherited, their own financial position and the size and nature of the estate. They will also look at whether there was ‘undue influence’ made on the testator when writing their will or if they didn’t understand the effect of their will because of incapacity.

A testator can’t put a clause in his or her will that excludes the 1975 Act, but can state that if a claim is made, any financial provision made to the beneficiary will be forfeited. Or, as Gaston explains, if, like Lady Lucan, they want to bequeath their money to charity or to someone else, they should leave a detailed note or letter “explaining why they’ve made their decision and what links they have to that person or charity. Your views will be taken into account”.

Gaston urges people to make their views known to their family before death to lessen any shock. “If they aren’t happy, they can’t change the will. If they think you don’t have the mental capacity to write the will then they can go to the Court of Protection or ask the power of attorney to step in.

"But these are big steps to make,” she says. “Most challenges are made for emotive rather than financial reasons. If you challenge, you might see any money you have, or are claiming for, eaten up by large legal fees.”

The Channel Island position

Guernsey has a similar law to England and Wales in that testamentary disposition applies. It’s only a recent right, however, with a 2011 Act replacing the existing forced heirship system.

That system, also known as legitimé, still exists in Jersey. It splits a deceased person’s assets into estates. The first is immovable, which includes property; the second is movable, which incorporates cash, shares, bonds and other assets such as paintings or cars. 

A spouse or child is entitled to claim up to two-thirds of the moveable assets even if they haven’t been declared in the deceased’s will. The remaining third can be left to whomever the deceased chooses. 

If the deceased has no spouse or children, they again have the freedom to give their assets to whomever or whatever they wish. Immovable assets don’t come under legitimé rules.

“If she was domiciled in Jersey, Lady Lucan wouldn’t have been able to disinherit her children,” explains Alexa Saunders, Partner at Carey Olsen. “She would have been able to draw up a will declaring that she wanted to leave all her money to charity, but if her children made a claim within a year and a day of the probate application, they would by law be entitled to their share. Often kids or spouses don’t choose to challenge and just accept their parents’ wishes.”

Victoria Grogan, Counsel and Probate Manager at Ogier, adds: “Individuals can put a side note in their will stating that although they realise it isn’t in accordance with legitimé, they hope beneficiaries recognise their decision.” 

Disposing of assets into trusts during their lifetime, or by gifting, could, in theory, help an individual avoid forced heirship rules as they won’t form part of the estate after death. However, courts will look at the motivation behind setting up the trust or gift, and if their sole purpose is to defeat forced heirship then they could be set aside. 

Grogan explains: “If set up for the sole purpose of defeating legitimé, it may be possible for beneficiaries to make a claim for the money that’s been moved out of the estate. However, it’s a grey area.”

Another potential way around legitimé is to change domicile or, says Sarah Hope, Chartered Legal Executive at Voisin Law, to put money into foreign trusts or more of an individual’s assets into property. Jersey is contemplating reforming the legitimé system and even embracing England and Wales law. A consultation was sent out to legal professionals on the subject last December.

“It’s not the first time it’s been reviewed and it’s a slow-moving process. Some people want more freedom of choice, but others believe it’s important that kids and spouses are looked after,” Alexa Saunders explains.

Hope believes such a move could be part of Jersey’s attempts to “make itself more attractive to high-net-worth individuals to invest in and live here. Some people, however, want to retain our roots and believe there’s some certainty to legitimé. 

“In England, a range of dependents – even mistresses – can claim, and it’s up to the court to decide on the sum they are given”. 

As with much in family life, making your will a stress-free affair after death comes down to communication. Letting your spouse or children know of your wishes before disinheriting them in your will can help to mollify the impact after your death. A discussion can then follow, which could help soothe or repair broken relationships or misunderstandings.

This could lead to a change in the will or an acceptance on the beneficiaries’ side that the decision has been reached with sound intentions.

Disputes over wills are more often driven by emotions than finances. Understanding that aspect of your decision-making can help your death be remembered for good times past rather than bitter recriminations into the future.

Strange and unusual disinheritances

Jessica Mitford
One of your daughters, Diana, marries British fascist leader Oswald Mosley. Another, Unity, becomes a close friend of Adolf Hitler. But you decide to disinherit another daughter, Jessica, who, against your own Nazi political leanings, decides to become a communist and fight in the Spanish Civil War. Even worse, she marries a member of the Churchill family. This was the decision of Baron Redesdale, who in his will – he died in 1958 – instructed his solicitor to insert ‘except Jessica’ after each bequest.

Joan Crawford
When the Hollywood actress died in 1977, she disinherited two of her children, Christina and Christopher. “It is my intention to make no provision herein for my son Christopher or my daughter Christina for reasons which are well known to them,” she wrote.

Leona Helmsley
The hotel heiress, who died in 2007, made her dog, a Maltese called Trouble, her biggest beneficiary, with a $12 million trust fund. Two of her grandchildren were disinherited. Trouble flew by private jet and lived in luxury in a Florida hotel until its own death.

 


Add a Comment

  • *
  • *
  • *
  • *
  • Submit

Want to know when we publish new content?

All you need to do is sign up for our newsletter.You'll receive a daily summary email of new items which have been published.

Please be advised that the volume of Business News articles which we publish is fairly high and you should expect to receive an email most days.

You can update your preferences at any time by registering for a blglobal.co.uk account and visiting the 'Your Profile' page.



Subscribe

It's easy to stay current with blglobal.co.uk.

Just sign up for our email updates!

Yes please! No thanks!