This blog receives many queries from people who are left stranded after the death of a family member, particularly a partner or spouse. People generally try to brush off thinking about what would happen if they were to die and their affairs have not been left in order. However problems arising from just such a scenario could mean that survivors are left with taxes to pay and debts to meet. The people they would have provided for are left with less than they would otherwise have received, or nothing at all.
Laura Guillon a trainee at SFL whom I first met as a tiny tot at the kindergarten she attended with my son Ben, and is now almost a qualified solicitor and I have been considering the latest case law on this topic. The Inheritance (Provision for Family and Dependants) Act 1975 gives the court power to override a will or override the effect of the intestacy laws, if it deems it necessary. The recent case of Lilleyman v Lilleyman  EWHC 1056 provides a working example of what can happen when a claim is made, and we will look at it in more detail over the next two posts. In that case, the deceased husband had bequeathed almost the entirety of his estate to his sons from a previous marriage. His widow had been left chattels, gifts, conditional rights of occupation of the former matrimonial home and a holiday home, and an annuity of £378 per month. She made an application to the Chancery Court for financial provision, claiming her reasonable needs had not been met in his will.
There are many and varied circumstances by which an application can be made to the court. Sometimes a person making maintenance payments to a divorced spouse and children omits to take out life insurance. On death, without a lump sum to cover future payments, there can be costly legal arguments about how the estate should be distributed. Other beneficiaries, such as a second partner or spouse and children of a second family, can lose out. Arguments ensue and, as in the case of Lilleyman v Lilleyman, the parties turn to law.
Where there’s a will…
When a person dies testate, having left a will, there are usually two named executors who will deal with the deceased’s affairs. They must apply to the local probate registry with a statement of the deceased’s financial affairs, in order to obtain a grant of probate. This is a legal document, which confirms that the executors have the power to deal with the deceased’s estate and distribute it in accordance with the will.
If a person dies intestate, there is no will. In such cases a close relative will usually apply to the probate registry for a grant of letters of administration. This is similar to the grant of probate in that it gives the administrator authority to deal with the deceased’s estate.
It is not always a straightforward matter to administer and distribute someone’s estate, even if there is a will. There may be inheritance tax to pay and a grant will not be issued before some or all of the tax has been paid. For this reason, it is always advisable to contact a solicitor when dealing with an estate.
The Inheritance Act is the relevant legislation in such cases is. It allows the following people to make a claim to the executors or administrators of a deceased’s estate if they have not been reasonably provided for by a will or under intestacy laws:
- The wife or husband of the deceased.
- A former wife or former husband of the deceased who has not remarried.
- A child of the deceased.
- Any person (not being a person included in either of the two points above) whom was living a) in the same household as the deceased, and b) as the husband or wife of the deceased, during the whole of the period of two years ending immediately after the deceased died. This only applies to a person if the deceased died on or after 1st January 1996.
- Any person (not being a child of the deceased) who, in the case of any marriage to which the deceased was at any time a party, was treated by the deceased as a child of the family in relation to that marriage.
- 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.
A claim under the Inheritance Act should be brought within six months of the grant of probate being obtained. If it is left any longer, it is still possible to make a claim but permission of the court will be needed and will only be given with good reason.
Under the Inheritance Act the court has the power to make the following orders:
- That the applicant receive periodical payments from the net estate.
- That the applicant receive a lump sum from the net estate.
- That property be transferred to the applicant.
- That the applicant benefit from the settlement of property from the net estate.
- That the applicant benefit from both the acquisition and transfer of property from the net estate.
- To vary an ante-nuptial or post-nuptial settlement if the deceased was a party to the marriage, provided that the variation is for the benefit of the surviving party to the marriage, any children of the marriage or any person who was treated by the deceased as a child of the family in relation to that marriage.
As a result of its power to make the above orders, the court is able to adequately provide for a family member or dependent that it finds has not been reasonably provided for upon the death of the deceased.
“The Divorce Cross-Check”
Section 3(2) of the Inheritance Act states that the following factors should be considered by the court when a spouse is making a claim:
(a) the age of the applicant and the duration of the marriage;
(b) the contribution made by the applicant to the welfare of the family of the deceased, including any contribution made by looking after the home or caring for the family;
and in the case of an application by the wife or husband of the deceased, the court shall also, unless at the date of death a decree of judicial separation was in force and the separation was continuing, have regard to the provision which the applicant might reasonably have expected to receive if on the day on which the deceased died the marriage, instead of being terminated by death, had been terminated by a degree of divorce.
This last factor is known as the divorce cross-check, and was referred to in Lilleyman v Lilleyman. It can cause difficulties: the court must consider the needs of two living parties in divorce proceedings, but only one in inheritance cases. In reaching his decision in the case, Mr Justice Briggs recognised the difficulty faced by chancery judges in dealing with this process:
To a chancery judge, for whom the jurisprudence about financial relief on divorce is not the bread and butter of his daily fare, the divorce cross-check introduces a range of additional legal complications, arising from the still developing principles originating in the epoch-making decision in the House of Lords of White v White  1AC 596.
Along with the divorce cross-check, the court must also consider the following factors listed in section 3(1) of the Inheritance Act:
(a) the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future;
(b) the financial resources and financial needs which any other applicant for an order under section 2 of this Act has or is likely to have in the foreseeable future;
(c) the financial resources and financial needs which any beneficiary of the estate of the deceased has or is likely to have in the foreseeable future;
(d) any obligations and responsibilities which the deceased had towards any applicant for an order under the said section 2 or towards any beneficiary of the estate of the deceased;
(e) the size and nature of the net estate of the deceased;
(f) any physical or mental disability of any applicant for an order under the said section 2 or any beneficiary of the estate of the deceased;
(g) any other matter, including the conduct of the applicant or any other person, which in the circumstances of the case the court may consider relevant.
There is no hierarchy imposed with these factors and each one can be given as much or as little weight as is deemed necessary depending on the facts of the case.
In Lilleyman v Lilleyman, the relationship of the wife and the deceased husband totalled four years: they had been married for more than two years and had cohabited prior to their marriage. However, since the net estate of the deceased husband was worth approximately £6 million, this was deemed a big money – short marriage case.
It was the second marriage for both the husband and the wife and each had children from previous marriages. The husband’s two sons from his first marriage were both executors and principal beneficiaries of their father’s will. The wife was therefore the claimant and the two sons from the husband’s previous marriage were the defendants.
When making a decision in inheritance claims, a judge must consider two separate questions: was the provision unreasonable and if so, what provision would be reasonable?
In Lilleyman v Lilleyman, the husband’s sons argued that reasonable provision for the wife should be determined in relation to her reasonable needs. The wife, on the other hand, stated that reasonable provision was not limited to her needs, but meant a substantial share of the matrimonial property.
With this in mind, let’s consider Section 1(2)(a) of the Inheritance Act, which states that:
In this Act, “reasonable financial provision”…means…such financial provision as it would be reasonable in all circumstances of the case for a husband or wife to receive, whether or not that provision is required for his or her maintenance.
When taking his decision in the case, Mr Justice Briggs recognised that equality is the starting point in financial matrimonial proceedings. But he went on to state that there is reason to depart from equality in short marriage cases, especially if needs can be met and there is a mixture of matrimonial and non-matrimonial assets. He referred to the cases of both White v White and Miller v Miller in his judgment. The latter is the leading case on big money – short marriage cases within matrimonial proceedings, in which the judgment states:
In the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other’s non-matrimonial property. The source of the asset may be a good reason for departing from equality.
In Lilleyman v Lilleyman, there was a mixture of both matrimonial and non-matrimonial assets. Assets of note in the non-matrimonial pot included the husband’s three companies, which were worth in excess of £5 million. His sons worked in these companies, which provided their source of income. Mr Justice Briggs highlighted that the distinction between matrimonial and non-matrimonial assets was of undoubted importance in this case, and summarised the legal principles that have emerged from and after Miller v Miller as follows:
First, the onus lies upon a person asserting that the property of one or other of the spouses is non-matrimonial to prove it.
Secondly, a matrimonial home is usually to be regarded as matrimonial and family property, even if contributed solely by one of the spouses.
Thirdly, property acquired during the marriage, otherwise than by inheritance or gift, is usually matrimonial property, but part of it may not be family property if it has not been acquired for family use.
Fourthly, property pre-owned by one of the spouses is, usually, not so regarded, unless it is then committed to long-term family use.
Fifthly, where one spouse brings to the marriage an existing business, and develops it during the marriage, then its value at the beginning of the marriage may usefully be regarded as non-matrimonial, whereas its increase in value thereafter may be part of the fruits of the partnership, even if wholly derived from the activities of one of the spouses.
Sixthly, where one spouse brings a pre-existing family business to the marriage, it may be positively unfair to have recourse to it for the purposes of equal sharing, in particular if to do so might cripple the business or deprive it of much of its value.
Therefore, emphasis is placed on the divorce cross-check in such cases. However, as Mr Justice Briggs pointed out:
The divorce cross-check is just that, a cross-check, no more and no less. It is, like all the other matters to be taken into account under Section 3, of infinitely variable weight on the facts of each particular case.
Cunliffe v Fielden
The leading authority on big money – short marriage cases in Inheritance Act claims is Fielden & Graham v Cunliffe  EWCA Civ 1508.This case centred upon a marriage that lasted for little more than one year at the time of the husband’s death. Mr Cunliffe’s will divided the estate between discretionary trusts for a number of beneficiaries including Mrs Cunliffe. She launched proceedings under the Inheritance (Provision for Family and Dependants) Act 1975, claiming that his will had not made reasonable financial provision for her. She won an award of £800,000, later reduced to £600,000 on appeal.
The award, which was calculated using the Duxbury Tables, suggests that the courts will be more generous to a spouse when the reason for the short duration of the marriage is due to the death of one of the spouses rather than divorce. As Lord Justice Wall noted:
The first point to make is that although this is a short marriage, Mrs Cunliffe entered into it on the basis that her obligations to her husband were of indefinite duration, and could take all manner of forms. He was considerably older than she was. She might well have been expected to spend a number of years nursing an invalid. In short, I think it right to approach the case on the basis that in marrying the deceased, Mrs Cunliffe, like Mrs Miller was entitled to have what Sir Peter Singer described in the latter case as “a reasonable expectation that her life as once again a single woman need not revert to what it was before her marriage” and that she could look forward to financial security for the rest of her life.
Outcome of Lilleyman v Lilleyman
The late Mr Lilleyman’s estate was worth approximately £6 million. There were three companies and a number of properties. The first, Water Meadows, was the matrimonial home and was worth £330,000. The husband also owned Dunhome Manor (again worth £330,000), which he had bought as a second home for the couple.
The matrimonial home was owned in joint names, therefore only 50% of the property was included in the estate, with a value of £165,000. A third property, Lea Court, had been purchased for the wife’s son to live in and pay rent on, which he did. Mr Justice Briggs decided that Lea Court did not form part of the estate, as the wife had repaid the husband during his lifetime as per an agreement between them. This property was therefore deemed to be owned solely by the wife, even though it had never been transferred from the husband’s name.
There were also a number of bank accounts totalling a sum of £316,348, along with £296,000 in investments in quoted shares and unit trusts. Chattels including the husband’s Dinky Toys, which were worth £17,000, were also taken into account. All told, these gave a total just short of £1 million. Despite this, the husband’s will had left the wife with only certain belongings including the Dinky Toys and limited occupation rights in the properties. This led to her application for financial provision as she felt that her husband’s will failed to reasonably provide for her.
Mr Justice Briggs decided to transfer a value in the region of £500,000 from the estate to the wife, stating that this would “both provide reasonable financial security (including as to the accommodation) for the rest of Mrs Lilleyman’s life and substantially reflect a fair application of the divorce cross-check, in which the relative shortness of the marriage is appropriately recognised in this particular case by excluding from sharing almost the whole of the family business”.
The judge also came down in favour of a transfer of the estate’s share in the matrimonial home, Water Meadows, along with an outright transfer of Dunhome Manor – or an equivalent lump sum of £330,000 – to the wife. She was to retain the chattels. The estate’s apparent interest in the third property, Lea Court, was to be transferred to her. This resulted in the wife receiving little more than 8% of the husband’s net estate and roughly 50% of what could be considered matrimonial property.
This wasn’t the end of the case, however. In the next post, we’ll look at the issue of costs in the case. Financial proceedings arising from divorce generally have a presumption that there will be no order as to costs, unless one party is guilty of litigation misconduct – but even then it is not a guarantee. But this wasn’t a divorce case.
So what happened when lawyers representing the sons from Mr Lilleyman’s first marriage returned to court, to argue that their costs should be met by the wife?
Laura Guillon is the principal trainee solicitor at Stowe Family Law assisting the Senior Partner. Laura is half French and speaks French fluently. Her interest is in ancillary relief, particularly cases that have an international element.