Introduction
There are more inheritance disputes reaching court than in former years. Moneyweek has identified a 30% increase in claims in the last 5 years, with over 10,000 individuals contesting wills annually in England and Wales. We have a senior generation that has done well, particularly from real property, as well as generous earning and pension provision, successful entrepreneurship and/or their own inherited wealth. The successor generation may not have had it so good, and within the family, there may be those who have and those who have not. Blended second or third families add potential complications, as do longevity, mental or physical decline and dependency, and later life relationships with the possibility of real or perceived predatory marriages.
Balancing wealth and family relationships
All these situations, and more, throw up challenging considerations for anyone thinking about how they wish to provide for their families in an ever-changing financial environment. Often, it is not just about money, but as much about relationships, good or bad.
The passing of a parent can bring out strong recollections of injustices going back to childhood. Deeply felt impressions of favouritism, being passed over or personal slights can come disproportionately to the fore.
The adage that those who gain most in these circumstances are the lawyers can sadly become a reality, even for the wealthiest families. However well-intentioned their attempts to avoid that position, it is almost unavoidable. These cases are highly fact-sensitive, with multiple parties, often spanning several different legal jurisdictions and asset classes, as well as complex facts going back over many years, competing needs and perceived realities.
Most testators would, of course, prefer their heirs to benefit, not subject them to years of bitter and costly disputes that alienate them (yet further) from their siblings or wider family.
What is really behind the dispute?
These disputes, ostensibly over money, can often mask fundamental psychological issues and family dynamics which lurk behind the lawyers’ letters. They may centre around what money means within the family setting. Is it a sign of love and affection? A method of control that comes with strings attached, to toe the line or to maintain contact. Or is it a way of marking recognition and a specific role within the family? Can money and inheritances being withheld or divided unequally be perceived as a punishment? Is there an expectation of gratitude, which, if unfulfilled leads to resentment? Money can reflect status within a family or community. Childhood patterns of behaviour can be replayed in adult form, the perceived favoured child resentments exacerbated perhaps by the additions of second or third families with their mix of half and step siblings and the complexity of providing for those at very different stages of life, from those needing provision for schooling or further education to those older siblings buying their first home, or wishing to provide for their own children or causes close to their heart.
And what of appointments made in a Will, such as the choice of Executor? If one child is named along with a professional adviser, what message does this send to the others? Does it play to the roles adopted from childhood as the “capable child”, very often the first born, and ‘the baby’ who must always be given special treatment and afforded special allowances? Our family script and the roles we adopt/are given have longevity. Consider also the competing claims of first family against a second spouse, particularly if the family home is involved. How can the interests of that second spouse be protected without further exacerbating tensions between the protagonists by the choice of Executors/Trustees for a life interest, if included?
Financial beliefs
Also consider the underlying attitude and belief system of the family as handed down from generation to generation. Is the family able and willing to discuss financial matters openly, or are such matters brushed under the heirloom rug? Also consider the attitude to money spenders versus savers, those who feel the money will never be enough (even when objectively it would be) and those who adopt a more pragmatic or sharing approach. Some parents believe the next generation should be self-sufficient and, therefore, leave their children a limited or no inheritance, fearing it may interfere with their work ethic or entrepreneurial drive.
Navigating the complexities
It is a long-established principle of English Law that a testator may leave their estate as they wish, subject to statutory intervention by the Inheritance (Provision for Family and Dependents) Act 1975. However, whether a will truly represents the intentions of the deceased is open to challenge on various grounds, the details of which are beyond the scope of this article, but which include lack of mental capacity, lack of knowledge and approval of the effect of the will, undue influence by specific persons, and fraudulent calumny. Most testators do not wish to create or exacerbate family divisions. That is not a legacy to be desired.
Professional advisers will have long experience of how matters may play out, but they may not have significant knowledge of the characters concerned. It helps to talk things through.
Consider the following:
All families are different. Consider carefully how proposals might play out from the perspective of those who will inherit. Listen to them individually and try to understand their lives from their perspective. Relationships matter. Consult your better self.
Communicate directly and personally where you can, to explain your thinking. This may not be appropriate in all cases, but anecdotally, its absence is a significant factor in the inability of beneficiaries to accept unequal distributions. Inequality is not necessarily seen as unfair if a thoughtful explanation is given. Or you may change your mind.
Plan ahead where possible. Lifetime giving may not only be tax effective and timely but also smooth the way to family co-operation and harmony and strengthen rather than damage future relationships.
Whether or not you have been able to discuss directly, explain in writing – by setting out letters of wishes or explanation of your decisions, again bearing in mind how these communications will be received by the different individuals affected.
Think about the flow down to the generations beyond and how the assets may devolve further down the line, and the impact of your decisions on the individuals concerned.
Particular considerations of succession in a family business are too large a topic for this article. They are, however of fundamental importance and should be contemplated well in advance across the spectrum of those who will inherit, in the interests of the business and all beneficiaries, whether active in the business or not.
Philanthropy: Some wealthy individuals have deliberately limited or even completely excluded family members from inheriting, with or without separate lifetime provision. This has been both on grounds of a desired legacy of philanthropic giving and in recognition of the value of self-development and motivation for the well-being of their descendants or other potential beneficiaries.
To avoid or minimise problems, think ahead, communicate and take good advice.
If things don't go as planned, it is best for those who need to pick up the pieces to avoid litigation where possible. It is costly, divisive and time-consuming. Consider exploring alternatives first. Early mediation, for example, can be particularly effective for family disputes, because it fosters an environment where both emotional concerns and legal arguments can be addressed and acknowledged, along with the broader context and wider benefits for future family relationships.
