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No need to wait until death to claim an inheritance

"One day son, this will all be yours"

There has been an increase in recent years in disputes about the distribution of the estate of a deceased person following their death. Those disputes usually take the form of a claim to challenge the validity of a Will or a claim for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975.

Less common is a claim based upon proprietary estoppel. A claim of this kind can arise when a person has acted to their detriment in reliance upon a promise that they will have an interest in property. The claim is often made after the death of the person who made the promise because it is often only then that the person who has relied on the promise finds out that the deceased has not made good on their promise.

To succeed it is necessary to persuade a court that:

• An assurance was made to the Claimant relating to an interest in property.
• The claimant reasonably relied on that assurance.
• The claimant suffered detriment in reliance on that promise.

Several cases in recent years have been brought during the lifetime of the person who made the promise and have involved next generation farmers claiming an interest in farms owned by family members. In those cases, the courts have approved the concept of accelerating an inheritance and not waiting until the death of the promissor if they are taking steps which are inconsistent with them giving effect to their promise.

The most recent of these came before the Supreme Court in December 2021, but it did not deliver its judgment until October this year. The essential facts were as follows:

• David and Josephine Guest had three sons, Andrew, Ross and Jan. David owned Trump Farm in Monmouthshire (a diary farm) and he lived there with Josephine.
• David, Andrew and Josephine were in partnership together called Ladysmith Farming Partnership.
• Andrew worked on the farm for 33 years for a basic wage and lived rent free in one of the farm cottages. He undertook a significant amount of training which contributed towards the success of the farm.
• Andrew held the expectation that he would inherit a significant proportion of the farm after the death of his parents, with his siblings inheriting the rest. However, after a breakdown in his relationship with his parents, David and Josephine changed their Will to disinherit Andrew.
• Andrew brought a claim against his parents seeking a declaration of entitlement, on the basis of proprietary estoppel, to an interest in the family farm and his entitlement to reside at the cottage.

The case was heard first in the High Court which decided to award Andrew a lump sum payment equating to 50% of the market value of the dairy farming business and 40% of the market value of the farmland and buildings (which was owned by Andrew's dad).

Lifetime remedies raise the problem of how to achieve a clean break and the court had to wrestle with the consequences of making a lifetime award. Whilst it accepted that the farm would inevitably have to be sold, it sought to soften the impact on Andrew's parents in two ways:

1. The negative tax consequences of making the lump sum payment were shared between Andrew and his parents because the court decided that those payments were to be made after tax.
2. Andrew's parents were given a life interest in the farmhouse which was their home.

Andrew's parents appealed to the Court of Appeal, but the appeal was rejected. In a further appeal to the Supreme Court at the end of last year Andrew's parents argued that the amount of the award had not been quantified properly, was disproportionate because it went beyond what was necessary to do justice in the case and relief should not be granted whilst Andrew's parents were still alive. It was argued that the award did not balance the interests of Andrew and his parents or those of others who would have a claim on their estate such as Andrew's siblings because it would necessitate the sale of the farm.

The appeal succeeded to a limited extent because whilst the court ordered that the lump sum equating to 50% of the farm business had to be paid now, the further lump sum equating to 40% of the farmland could either be paid now or, alternatively, could effectively be deferred if Andrew's parents set up a trust holding Andrew's share in the land thereby preventing the need for it to be sold now. The court has directed that Andrew and his parents agree the terms of the trust. The court felt that this struck a better balance between meeting Andrew's expectations and the burden placed on his parents by accelerating Andrew's inheritance. Andrew had expected to receive an inheritance of the farmland when his parents died. Forcing the sale of the farmland now to fund the payment of a lump sum during his parent's lifetime would award Andrew more than what he was promised.

Several points arise out of this case and others involving those seeking a lifetime remedy:

1. The claimant must identify property but are permitted some uncertainty as to the precise scope of the interest they have been promised.
2. No need to wait for the death of the promissor. The court will give the claimant a remedy now to protect their position if it is clear that the promise made to them will be broken.
3. The basis upon which an award is to be calculated is the value of what the claimant expected to receive in satisfaction of the promise unless it is disproportionate to do so in terms of (a) the benefit to be received by the claimant; and (b) the burden placed on the promissor. The general approach will be to accelerate the position of the claimant but subject to securing the position of the promissor. The court will not award so much to the claimant that the promissor is left destitute or seriously prejudiced. For example, it would be disproportionate to give Y a house in satisfaction of a promise by X that he will give Y the house if Y cleans the property for the remainder of X's life, but X then dies just two months later.
4. Guest v Guest is an example of a case in which it was decided that the burden placed on the promissor of being forced to sell the farmland was disproportionate to fulfil the promise made to Andrew by his parents. His parents were still alive and reliant upon the farm.
5. If the core of what the claimant expected to receive cannot be pinned down with sufficient certainty, the court can choose the value the claim by reference to the detriment that was suffered by the claimant in reliance on the promise.
6. What the claimant expected to receive in satisfaction of the promise sets a ceiling on any award, even if the detriment suffered by the claimant (eg. poor wages, loss of other opportunities etc) in reliance on the promise exceeds the value of what they expected to receive.
7. The courts prefer to achieve a clean break if practicably possible. However, lifetime awards are difficult because considerations of practicality, justice between the parties and fairness to third parties are all relevant considerations. The court therefore has a wide discretion when making an award that permits acceleration of the claimant's inheritance. In the Guest case, the court gave Andrew's parents a choice between alternative remedies i.e., pay now or set up a trust.

For more information contact John Lambe in our Contesting a Will department via email or phone on 01772 220 235. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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