Making Your Inheritance Intentions Clear

Any specialist Wills and probate solicitor will tell you that – when dealing with your post-death intentions – if it’s not written down, it might not happen. This is one of the best reasons for making a Will. It shows the people dealing with your property and assets what you want to happen. Not only does this mean your intentions take effect, it helps avoid family or friends arguing over what your intentions might have been.

That said, as crucial as Wills are, some situations can mean assets you own (or part-own) pass outside the terms of your Will. The most common circumstances where this can happen include:

• Owning an asset jointly with someone else as ‘joint tenants’. For more information on this, read our blog post on Joint Ownership and Wills.
• Certain investments or pension funds, which allow you to nominate someone to receive them after your death.
• Certain life insurance policies, which involve trust arrangements for the benefit of named beneficiaries.
• Partnership interests. Where you own an asset through a partnership, you may only be able to pass on a share of the asset to your heirs. A lot will depend on the terms of the partnership agreement. However, where there is no formal partnership agreement, partnership assets will usually be shared amongst the partners. This can cause problems, as will be seen below.

If you own any assets or property in these ways, it is important to factor these into your inheritance plans. Contradictory, or completely undocumented intentions cause confusion to the people dealing with your estate after you’ve gone. Worse still, it could lead to legal disputes arising.

To illustrate, let’s look at a recent case: Wild v Wild [2018] EWHC 2197 (Ch). This involved a farming family bitterly divided over how a home was to pass – either through a Will or as a partnership asset.

The case background

In 1978, Ben Wild, a dairy farmer, went into partnership with his eldest son, Malcolm. Ben’s younger son Gregory joined the partnership in 1994, along with Ben’s wife, Jean (although she went on to leave the partnership again 5 years later). When Ben died in 2003, Malcolm and Gregory were the remaining partners. They continued the partnership for several years until relations between them deteriorated. Each viewed the other with mistrust. There were allegations of concealing livestock and milk sales from the other and sabotaging milk rounds with spoiled milk. Malcolm was even convicted of assaulting his brother in 2013 – he unsuccessfully argued it was self-defence.

In 2016, Gregory began proceedings to dissolve the partnership and for the partnership assets to be shared out. This gave rise to many points of contention over what was owned by the partnership and what wasn’t. The partnership accounts were ambiguous and at no time during the partnership’s near-40-year history had any kind of partnership agreement been drawn up.

At the centre of the dispute was a bungalow on the farm. Malcolm and his wife, Abigail had been living in the bungalow since 1988, but if this was ruled to be a partnership asset, Gregory could be entitled to a share of it as one of the partners.

The judge’s decision

The judge found that Ben Wild had given several assurances to Malcolm over the years that the bungalow would be his. Unfortunately, Malcolm and his family were left in this precarious position regarding their home for several reasons:

• It was not clear from partnership accounts whether the bungalow was a partnership asset or not.
• There was no partnership agreement to clear up the matter or confirm what the terms of the partnership were.
• Ben’s Will made no mention of the bungalow and simply left his entire estate to Jean. Whether Ben saw the bungalow as being an asset of the partnership or not could not then be inferred from his Will.

Fortunately for Malcolm and his family, the judge ruled that the bungalow was not a partnership asset on the facts. Much of the judge’s reasoning involved piecing together Ben’s intentions. The judge believed Ben intended for his sons to inherit the farm one day but that there was no intention on Ben’s part to give up control of it to be held in the partnership during his lifetime.

As such, the bungalow passed to Jean with the rest of the farm through Ben’s Will.

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Proprietary estoppel

Although Jean may have received the bungalow through Ben’s Will, the case also included an interesting additional question of whether Malcolm and Abigail owned the bungalow through a legal principle called ‘proprietary estoppel’.

Estoppel isn’t a word you come across every day. Generally, the principle intervenes in certain situations to enforce promises or assurances which someone has made. We looked at the concept of proprietary estoppel previously on the blog – again involving a dispute with a farming family.

In Malcolm and Abigail’s circumstances, the judge had to determine whether:

• Ben and Jean had made assurances to Malcolm and Abigail that they would inherit the bungalow;
• Malcolm and Abigail relied on these assurances and;
• In doing so, Malcolm and Abigail suffered a detriment as a result. Essentially, this would include any significant negative effect which would make it ‘unconscionable’ for Ben or Jean to deny Malcolm and Abigail’s interests in the property.

The judge found that all these elements were present, and as such proprietary estoppel meant they should have rights over the property. Interestingly, even if the bungalow had been ruled to be a partnership asset, the finding of proprietary estoppel meant the partnership would have held it on trust for Malcolm and Abigail.

The price of uncertainty

Whilst the outcome of the case was positive for Malcolm and Abigail, it could easily have been decided differently, not to mention the substantial legal costs involved in having to sort the whole sorry mess out.

The court had to decide Ben’s intentions without the help of any partnership agreement or mention of the bungalow in his Will. Instead, it had to do so largely by relying on witness statements from people recounting events which happened between 15 and 40 years ago, with many of those witnesses having a substantial interest in the outcome of the case.

Furthermore, with a clearer statement of his intentions, Ben could have avoided the lengthy and costly litigation involved in deciding these issues. A formal partnership agreement (and clear records) or even a Letter of Wishes accompanying his Will could have clarified matters. It would have been a clear indication that he did not consider the property to be owned through the partnership, and it would therefore have been left to the people he wanted to receive it.

None of this accounts for the potentially irreparable damage done to the family relationships at the heart of the case. Whilst it is clear from the judgment that relations had broken down between Gregory and Malcolm, and between Gregory and Jean, before the proceedings, the legal dispute is likely to have deepened the divides.

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At Roche Legal, we are reassuring experts specialising in:

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