Under S3(1) of the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act) there are seven guidelines that the courts must consider when dealing with an application under the 1975 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.
These guidelines apply regardless of who the applicant is. The courts must consider all of the above but noting that some may not be relevant in the particular case (for example (b) will not be relevant if there are no other applicants). There are however also particular guidelines that apply to each type of applicant that will be considered in a later article.
Financial Resources and Needs
The first three matters (a-c) cover the financial resources and needs of the applicant, any other applicant and any beneficiary either currently or in the foreseeable future. When considering resources, the courts consider a person’s income which can include both current earnings and earning capacity, any pensions (either state or private pensions) and any state aid received, although it should be noted that just because a person receives aid from the state it does not mean that reasonable financial provision is being provided for them.
Resources also includes any capital assets owned (or likely to be owned in the future). A person’s home (or lack of) can be considered however it is not generally seen as correct by the courts to treat a share owned in a person’s home as expendable capital which can be used to maintain themselves.
When considering needs, the court will look at that person’s financial obligations and responsibilities, for example whether they have a mortgage or rent to pay.
Obligations and Responsibilities of the Deceased
The forth matter (d) covers any obligations and responsibilities that the deceased had towards any applicant or beneficiary. As a general rule the courts will only consider obligations and responsibilities of the deceased immediately before death and would not revive defunct obligations as the basis for a claim.
Whilst the courts do see a blood relationship between parent and child as a continuing moral obligation, they do not give much weight to it and if that is the basis for an adult child’s application it would most likely fail.
It is often the case where the estate is not large enough to satisfy all the deceased’s obligations. In such a case the court has to weigh and balance all and take into consideration all the factors of the case.
Size and Nature of the Estate
The size is often an important factor when considering if an order should be made. If the estate is large, what the courts consider to be reasonable financial provision is likely to be much more than what they would consider reasonable from a smaller estate. Furthermore where the estate is large, the courts may be able to fully satisfy the needs of multiple applicants and beneficiaries.
It should be noted that just because an estate is small it does not exclude an application, however the smallness of an estate is significant in a three different ways:
- It may be reasonable to make no provision out of a small estate where the only effect would be to relieve the state from having to give state aid to the applicant as in such in a case it would likely put the applicant in a worse off position.
- The courts may consider that the estate is so small that it is not possible to make an effective contribution to the applicant’s maintenance. It is not the purpose of the act to make a small windfall for an applicant.
- The cost of bringing and establishing a claim may leave little or nothing for the applicant or the beneficiaries. The courts actively discourage such claims and they may make an order for the costs to be paid by the applicant rather than out of the estate.
The origin of an estate may also be relevant when considering the nature of the estate, for example a surviving spouse may have helped to build up the deceased’s assets.
Physical or Mental Disability
Some disabilities may raise a person’s financial needs, lower their earning capacity (linking with the a-c guidelines) or strengthen any obligations the deceased had to them, especially if the deceased was supporting them (linking with guideline d).
The availability of state aid is taken into account, however if a person is being assisted by the state that will not negate a claim. No provision would likely be unreasonable as it would prevent the applicant from being able to purchase extra comforts not provided for by the state. Provision by means of a disabled persons trust or discretionary trust could be considered.
Any Other Matter Including Conduct
This final guideline is essentially a catch all category so the courts can consider any matters not covered by the previous guidelines that they consider to be relevant in the circumstances of the case.
Conduct can include that of the deceased as well as any applicant or beneficiary. This guideline covers a wide variety of different things such as how a surviving spouse behaved during the marriage. A surviving husband for example who had left the deceased to live with another woman may be cause for the courts reduce financial provision but that is not a guarantee.
The 1975 Act does not require the court to have regard to the deceased’s reasons for excluding a person, although it is wise to record them as the court can consider them relevant under this guideline if the reasons are good and based on truth. It may also be advisable to include the reasons why other beneficiaries are inheriting in their place.