Defending spousal claims under the Inheritance (Provision for Family and Dependants) Act 1975

England and Wales are not a forced heirship jurisdiction and most people, if asked, would probably say that testators in this jurisdiction enjoy complete testamentary freedom and can leave their assets to whomever they wish. That is not quite correct. The IPFDA provides a mechanism for certain categories of eligible claimants to make an application for "reasonable financial provision" from the deceased's persons estate if the provision made for them by the deceased was not sufficient for them. The surviving spouse of the Deceased is one person who can bring a claim under the Act against the estate of the Deceased.

Reasonable Provision

In every case, the court is going to be focussed on answering two questions:

1. Has reasonable provision been made for the Claimant?

2. If not, what provision should now be made?

Section 1(2)(a) of the Act reasonable financial provision for a spouse is defined as:

"…provision as it would reasonable in all the circumstances of the case for a husband or wife to receive, whether or not that provision is required for his or her maintenance."

Sections 3(1) and (2) of the Act provide a list of criteria that the court must have regard to when answering the two questions above focussing on the current and future financial needs and resources of the applicant, any other applicant and the beneficiaries of the estate, the length of the applicant's marriage to the deceased and the provision that the applicant might have expected to receive if the marriage had ended in divorce instead of death (known as the divorce cross check).

Several key points arise:

1. The Act provides for a higher standard of provision to be made, namely such financial provision as it would be reasonable in all the circumstances of the case for the spouse to receive. The court can make an award which is not limited to what is needed to meet the spouse's maintenance needs.

2. What are the reasonable needs of the surviving spouse is a flexible concept. When assessing this the court may consider the standard of living enjoyed by the applicant during the marriage and the extent to which the deceased contributed to that standard. The lifestyle enjoyed by the applicant during the marriage can be material consideration.

3. The divorce cross check does not set a minimum or a maximum award the spouse can expect to receive. However, there is often a strong argument in cases under the IPFDA to make greater provision for a surviving spouse than they would have received on a divorce because there is only a need to make provision for one spouse unlike in divorce where the matrimonial assets must be shared between two people.

That position is reflected in the observations of Black J in P v G and P [2006] 1 FLR 431(at para 242) in which the Court held that it was entitled to assess the reasonable needs of one person rather than two:

"I am struck by the force of the repeated observations in the decided authorities by the difference between divorce where there are two surviving spouses for whom to make provision and death where there is only one. It seems to be probable that this difference will not infrequently be reflected in greater provision being made under the 1975 Act than would have been made on divorce."

4. The decisions of the courts in respect of claims by spouses under the IPFDA 1975 are heavily influenced by the decisions of the family courts in matrimonial proceedings. Marriage is now regarded by the courts as an equal partnership and the division on breakdown must be conducted based on fairness and non-discrimination. The emphasis is upon equality of division. Three principles are relevant to the court's determination:

• Financial need - this is the first call upon the available property and often exhausts it with no surplus available about which arguments can ensue.

• Compensation - this will be the first call on any estate surplus after financial needs has been met. This is aimed at redressing any economic disparity between the parties arising from the way they have conducted the marriage e.g. the surviving spouse may not have been allowed to work or worked on a part-time basis to meet family responsibilities. As a result, their financial resources are less than those accumulated by the deceased. They are entitled to be compensated for this.

• Sharing - the fruits of the marriage. This is only applied if there is still property available after the first two have been satisfied.

5. In GW v RW [2003] EWHC 611 (Fam), Nicholas Mostyn QC sitting as a Deputy High Court Judge stated that:

"where a relationship moves seamlessly from cohabitation to marriage without any major alteration in the way the couple live, it is unreal and artificial to treat the periods differently",

commenting that public opinion now recognised fully committed relationships outside of marriage. This has become the standard approach. The distinction between committed relationships/cohabitation and marriage has all but disappeared.

Quantification of a claim

The above is too often misunderstood as likely to result in the equal division of the deceased's assets in respect of any spousal claim brought under the Act. The true approach is far more nuanced a fact sensitive:

1. The applicant's needs must be balanced against the extent to which those needs can be met by the estate and the competing claims/countervailing financial needs of other applicants and/or the beneficiaries of the estate. The estate will only be asked to make such provision as it is reasonable for it to be asked to bear even if that falls short of the applicant's reasonable financial needs.

2. Provision in the first instance is normally made from the matrimonial assets. These are assets that were built up during the marriage. These assets automatically go into the pot of assets which can be utilised by the court to make provision for the spousal claimant and the court will apply the sharing principle in the first instance.

3. However, non-matrimonial assets do not automatically go into this pot. These are typically pre-martial assets that have been acquired by the deceased before the marriage or assets inherited or gifted to the deceased during the marriage. The court will not automatically apply the sharing principle to these assets to make provision for the claimant.

The status of an asset will very much depend on (i) the length of the marriage; and (ii) the extent to which that asset has been integrated (for example being held in a joint account or used to meet the parties' living costs during the marriage). Equally, the longer a marriage the more likely that assets which would otherwise be designated as non-matrimonial assets will be treated as matrimonial assets capable of being utilised to make provision for the surviving spouse. It is well established that the relevance of the origin of assets diminishes over time. As the duration of a marriage increases, the courts consider that the non-financial contribution of the poorer spouse will have increased, so the scales of the contribution by each partner to the marriage will be better balanced.

4. This is especially the case in respect of the matrimonial home which is an asset with special status and generally the court will apply the sharing principle to it so that each spouse will be deemed to have shared ownership of the matrimonial home even if it is registered in the name of the deceased alone.

5. Crucially, equality of division does not refer to the estate of the deceased alone. It refers to all assets of the marriage. Any calculation of the matrimonial pot will include the capital assets of the claimant also including those that have been released to the claimant as a result of the death of the deceased such as entitlement to pension benefits.

A small balancing payment from the estate might be enough to achieve equality of division of the matrimonial pot and the court will not likely look beyond this if it judges that is sufficient to meet the claimant's needs and/or it is not reasonable to do more when considering the competing claims of other applicants and/or the needs of the beneficiaries under the Will.

ADR

It is very important to advise clients strongly that should be attempted. This very often takes the form of a mediation. The courts are becoming increasingly insistent that mediations should be canvassed and attempted and are increasingly prepared to sanction non-cooperative parties in costs. The Court of Appeal has recently decided in the case of Churchill v Merthyr Tydfil Borough Council decided that the courts can stay proceedings or order the parties to engage in non-court based dispute resolution processes including mediation.

On a more practical level, IPFDA claims are well suited to mediation. Most mediations do result in a settlement and very often parties that are not able to achieve a resolution on the day will have often made real progress in bridging the gap between them so as to lay the foundations for reaching a settlement following the mediation.