Any individual fortunate enough to have generated wealth, or to have been a custodian of family wealth, during their lifetime should plan for how it will be dealt with after their death.
In this paper, we consider nine key steps individuals can take to help ensure that their estates pass to the next generation without disputes or litigation.
A smooth generational transfer of wealth is taken for granted by most, but statistics from the Ministry of Justice show that this might not be the case. Over the past ten years, more than 2,300 will disputes have been heard by the High Court. Many thousands more didn't end up in court but did destroy numerous family relationships and incur a great deal of costs before being settled.
BEFORE YOU MAKE YOUR WILL
Undertake a capacity assessment to avoid disputes
A capacity assessment is undertaken and a report prepared by a medical practitioner, either a GP or a psychiatrist. The report can be used to show that the testator had mental capacity when instructions were given for the will to be prepared/the will was executed.
If the testator is particularly elderly, vulnerable, unwell, or is making significant changes to their will it is possible that the will could be challenged post death on the grounds of lack of capacity. A capacity assessment and report should make it more difficult for the will to be challenged on these grounds.
It is important to note that the instructions to the GP/psychiatrist must explain why the assessment/report is required and set out the rule in the case of Banks v Goodfellow.
Prepare your family members in advance if you have unusual plans for your wealth
Most family members expect wealth to be primarily kept within the family. If this is not how you intend to structure your estate, it is advisable to inform your family of your intentions, however difficult this might seem.
Avoid accidentally 'creating' dependants – this can lead to litigation
Another key argument individuals may use to challenge a will is that they were financially dependent on the deceased, and that they have not been properly provided for by your will/under the intestacy rules. It may be surprising to learn that you can 'create' a relationship of dependency accidentally, by establishing a regular and long-term pattern of making gifts. If you wish to give money to someone – a child or a grandchild perhaps – it is better to do so in a single lump sum, as this cannot create a relationship of dependency, making it far more difficult for them to challenge your will.
If your family is international, plan for this aspect in detail
It is critical for specialist advice to be taken on the international aspects of a will if the testator and their heirs are living in multiple jurisdictions. Different countries handle inheritance differently, and that can easily end up with your wishes not being followed. For example, some countries do not view a child as a legitimate heir to an estate if their parents were not married when they were born. It is very important for the solicitor preparing the will to have a complete understanding of the family circumstances, this should ensure that the testators wishes can be adhered to irrespective of where the testator or heirs live.
WHEN YOU MAKE YOUR WILL
Record all wishes in your will or leave a very detailed letter of wishes if the will creates a discretionary trust
Recording everything appropriately and/or preparing a letter of wishes if a discretionary trust is created will go some way to preventing challenges to a will. However, it might not prevent a claim being brought under the Inheritance (Provision for Family and Dependant's) Act 1975 or a claim for undue influence or promissory estoppel.
Choose your executors carefully to avoid disputes
If you are leaving real estate as part of your will, it is advisable to name at least two executors. Choose these two individuals carefully, as executors with a poor relationship can easily lead to disputes, as happened in the estate of the renowned architect Zaha Hadid . A dispute between the executors of her estate led to more than four years of litigation following her death, depleting the value of the estate significantly.
Make sure you execute your will properly with witnesses in person
The Covid-19 pandemic led to difficulties for some families in executing a will correctly. Social distancing and lockdown restrictions during 2020 and 2021 meant that some found it challenging to get two witnesses to sign the will in person at the same time. Failure to follow this requirement, set out in section 9 of the Wills Act 1837 can render the will invalid. If you are concerned that your will was not executed properly during lockdown, we recommend you seek legal advice on whether it should be corrected.
'Competing' wills in different jurisdictions can lead to litigation
There have been cases where an individual has significant assets in two different countries, and a different will in each jurisdiction that covers all assets globally. This kind of 'competing will' situation can end in costly cross-border litigation. If it is necessary to have different wills in different jurisdictions, it's important to make sure that they complement each other.
AFTER YOU MAKE YOUR WILL
Consider a postnuptial agreement for further protection
Some individuals may feel it suitable for their wishes to have even more protection from future disputes. This may be achieved by having their spouse's acceptance of their will confirmed by a postnuptial agreement. If your spouse has read your will, accepted it in full and contracted separately to respect it following your passing, it is much more difficult for them to challenge it.
CONCLUSION
An estate dispute between loved ones is difficult for many to contemplate. But, as disputes like these become more common, and the stakes involved in them continue to rise, anyone with significant assets to pass on must consider the steps they should take to minimise the risk of it happening in their own family.
The Forsters team is very well-placed to guide high net worth individuals through the process of estate planning to try to ensure the risk of disputes is minimised when their estates are administered. Their expertise includes some of the highest-value and most complex cross-border estates.
Originally published by 21 June 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
