Inheritance Act – reasonable financial provision

We look at what constitutes reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975  following the case of Wooldridge v Wooldridge

The Inheritance (Provision for Family and Dependants) Act 1975 (the Inheritance Act) gives dependants a mechanism to claim ‘maintenance’ – beyond what they may already have been left under the will concerned – from the estate of the deceased. But what amounts to reasonable financial provision will differ depending on the circumstances of the person making the claim.

The Facts

Thandi Wooldridge’s husband was a successful business man who died in a helicopter crash in 2010. His home was worth £4.25 million, and he left life insurance policies worth in the region of £1.6 million, plus his business interests. Mrs Wooldridge also received compensation in the region of £1.9 million following the death of her husband. Mr Wooldridge’s homemade will left the home and the benefit of life insurance policies to his wife, but the will divided his business interests and the benefit of another life insurance policy between his sons. In 2012, Mrs Wooldridge began a claim under the Inheritance Act for an additional £375,000 a year because the assets she had been left in the will were not sufficient to maintain the standard of living she had become accustomed to.

Mr Wooldridge’s older son defended the claim, arguing the budget his stepmother set for herself was unrealistic and did not match what she was spending. He also argued that to allow Mrs Wooldridge’s claim would undermine the business interests that his father had built up and left to his sons. The judge agreed with Mr Wooldridge’s son. She found that Mrs Wooldridge had not established that the will “failed to provide her with sufficient financial provision to meet her needs”. She found:

• Mrs Wooldridge’s ‘budget’ was more like a wish list rather than an accurate assessment of her needs
• The assets which had been left for Mrs Wooldridge were not being invested properly to provide an income for the future
• To increase the provision for Mrs Wooldridge would reduce the profitability of Mr Wooldridge’s company would be significantly reduced and have a direct impact on Mr Wooldridge’s sons.

An objective test

What constitutes a reasonable financial provision will be looked at objectively by the courts, but often causes a great deal of difficulty. It’s also interesting to note that despite the difficulty in establishing what this might be, in most cases, the court will grant a spouses claim for maintenance under the Inheritance Act. It’s common practice for the courts to look at what a spouse might have received had the testator survived and the couple had divorced. The ‘divorce cross check’ has led to a convention that a person may expect to receive around 50% of the spouse’s estate

Of course, many people considering a claim for reasonable financial provision (or ‘maintenance’) under the Inheritance Act will be living in far more modest circumstances than Mrs Wooldridge. The ‘budget’ that she presented to the court in making her claim, included £65,000 for holidays, £21,500 for “going out (meals, theatre, polo events etc.)”, £79,000 for social events, clothes, jewellery, personal care and general entertainment and £58,000 to cover transport costs, including the upkeep of a Bentley and Range Rover. She also listed £155,000 which she anticipated needing to purchase a Bentley. For most of us, this will seem like a huge list of expenditure, particularly given the assets she had already been left under the will.  However, that of itself would not mean that Mrs Wooldridge’s claim was bound to fail.

There are limits to reasonable financial provision

It is thought that this is the first case in which the courts have refused a spouse’s claim for maintenance, and serves as a reminder that despite past cases, the courts will not simply ‘sign off’ a spouses claim for maintenance. Each case will be decided on its own circumstances focussing particularly on the financial needs and resources of the person making the claim, the other relevant beneficiaries, and the size and nature of the estate.

There are strict time limits that apply to bringing a claim under the Inheritance Act, so if you are thinking of bringing a claim it is vital to take early legal advice about the strength of your claim and what you may expect to receive if your claim is successful. We offer a free claim assessment, and if you decide to proceed, we can usually act on a no win no fee basis.