OGR comments on Court of Appeal decision in contested probate case
OGR Stock Denton Partner, Ian Pearl, has commented on the recent Court of Appeal decision in Cowan v Foreman & Ors , where the widow of Michael Cowan – credited as the inventor of the bin liner – has challenged the use of trusts to pass on his wealth.
What is your reaction to this decision?
“Two particular issues to be drawn from this case, surrounding the court’s interpretation of the Inheritance (Provision for Family and Dependants 1975) act:
“First – The Court of Appeal has shown that even with an estate of over 16 million and the claimant being made a beneficiary of two trusts, the court will adopt a traditional approach, which ensures that the surviving spouse is left in control of her own livelihood.
“Second – The Court of Appeal overruling the decision to strike out the claim for being issued out of time. It undertook a useful analysis, and said that delay in issuing proceedings to try and reach a negotiated settlement is not to be penalised.”
Is there anything that people putting their estate into trusts can do to reduce the chances of circumstances such as these arising?
“They should ensure they set out their reasons clearly in a letter of wishes which would not preclude a claim but would give the courts an insight into their wishes and the reasons for them.”
Might the will have been structured differently to enable ‘reasonable financial provision’ to have been made while still achieving tax savings (assuming that is why it was structured in this way)?
“It seems from the analysis that unless the surviving spouse is given control i.e. made a trustee, it is difficult to see how, a Court could not find that the deceased failed to make reasonable financial provision. It also protects the spouse otherwise the trustees could make decisions without her consent or approval. A lump sum could have been given to the spouse outright with only the balance of the estate being put in trust. This could make it easier to argue that ‘reasonable financial provision’ has been made.”
Why is it necessary to make ‘reasonable financial provision’?
“If you fail to make reasonable financial provision, a Court may well overturn your last wishes set out in your will if your surviving spouse, partner or child makes a claim.”
How is ‘reasonable financial provision’ usually interpreted?
“When calculating reasonable financial provisions for the surviving spouse, the benchmark is what they would have received on a divorce, however where the parties are merely cohabiting the statutory provision is what is necessary to ‘maintain’ the claimant. Whilst case law shows that there is judicial flexibility to address this difference, for anyone arguing that there is no distinction between being married and cohabiting, this is further evidence that there is!”