When considering claims made under the Inheritance (Provision for Family and Dependants) Act 1975 (‘the 1975 Act’) the courts apply a two-stage test. Firstly, they consider whether the will or intestacy of the deceased fail to make reasonable financial provision for the applicant. Secondly, they ask themselves to what extent they should exercise their powers to make provision for the applicant, provided the answer to that first question was ‘no’. It is this first part of the test that we are concerned with when answering the question of whether a life interest granted in a will is ever reasonable financial provision.
What is reasonable financial provision? This could easily be an article of its own, but to provide a basic overview there are two standards of reasonable provision which are applied depending on who the applicant is. There is the surviving spouse standard and the maintenance standard.
The surviving spouse standard is always applied where the applicant is the spouse or civil partner of the deceased. This standard may also be applied where the applicant is the former spouse or civil partner and they have not remarried, but it is up to the court’s discretion. The surviving spouse standard is the higher standard of provision and expects provision of more than what would be required for just maintenance (section 1(2)(a) 1975 Act).
The maintenance standard is applied to all other types of applicant; cohabitants, children/those treated as children of the deceased, and those being maintained. This is a lower standard and only requires that the will or intestacy made provision that it would be reasonable for the applicant to receive for their own maintenance (section 1(2)(b) 1975 Act).
When considering whether reasonable provision has been made the courts must also consider a range of factors set out in section 3 of the 1975 Act. There are a total of 18 factors to consider, though not all of them will apply to every case. All factors that are relevant to a claim must be considered equally. The below are examples of some of the factors that are considered. Note also that these are considered based on the facts at the time of the claim, not at the date of the will or the deceased’s death:
- The financial resources and needs of the applicant now or in the foreseeable future,
- The financial resources and needs of any other applicant,
- The financial resources and needs of any beneficiary under the will,
- The size and nature of the estate,
- The age of the applicant and duration of the marriage (if a spouse),
- Physical or mental disability of the applicant or any beneficiary.
This then brings us to the question of whether a life interest is reasonable provision. Now with a basic understanding of how these claims are assessed hopefully we can see how this is an impossible question to give a definitive answer on. To assess whether a life interest is likely to be sufficient we need to consider what the life interest covers, what other provision has been made for that person if any, and what other financial resources that person has available to them. We also need to consider their relationship to the testator as this will affect what standard of maintenance would be applied if they did bring a claim.
A life interest in an asset that produces no or very limited income may not be reasonable provision if the will does not also make further capital available to the life tenant, or if they lack any sufficient means of their own. On the other hand, a life interest over assets that produce sufficient income for the life tenant to maintain themselves according to the standard that applies to them may be perfectly reasonable.
The courts have been known to award life interests to applicants in 1975 Act cases, which should give some indication that of course these types of interest can be more than sufficient. A recent example of this was seen in Banfield v Campbell [2018] EWHC 1943 (Ch). In this case the court awarded a life interest over half of the proceeds of the deceased’s home to her surviving partner rather than a lump sum. It was decided that this was more appropriate as it would avoid assets passing to the claimant’s family instead of the deceased’s child.
I’m afraid I must have disappointed anyone who was hoping for a simple yes or no answer on whether life interests are reasonable financial provision, however, hopefully you now have a deeper understanding of what things would be considered if a person was awarded a life interest and did wish to bring a 1975 Act claim later on.
