5 Apr 2024
5 Apr 2024
Whether it be a parent making provision for a child with whom they have a strained relationship, or someone wanting to provide for a difficult spouse, there are several reasons why a testator (the person making a Will) may wish to include a no-contest clause in their Will. Designed to act as a deterrent for beneficiaries who could raise a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”), no-contest clauses have proved increasingly popular in recent years.
The Inheritance (Provision for Family and Dependants) Act 1975 gives spouses, former spouses, children and others the right to claim either capital or income from the estate of a deceased person. It relates to situations where the deceased was maintaining the applicant at the date of death.
A no-contest clause commonly states that a beneficiary will lose their entitlement to any provision made for them if they choose to pursue a claim under the 1975 Act. In other words, it acts as an offer from beyond the grave, to accept the gift or (potentially) lose it entirely. The concern with such clauses stemmed from their “all or nothing” nature, and whether they served to strengthen a claimant’s argument that inadequate provision had been made for them. This is because when the clause “kicks in”, they effectively receive nothing.
The recent judgement in Sim v Pimlott [2023] has publicised the ability to successfully enforce such clauses. In Sim v Pimlott a widow attempted to utilise the 1975 Act and claim her deceased husband had not made adequate or reasonable financial provision for her in his Will. The judge held that it would be wrong in principle for a claimant to pursue a claim under the 1975 Act with full knowledge that in doing so they will forego a certain benefit and then to claim that, as they have foregone the benefit, the Will does not make reasonable financial provision for the claimant. In other words the Judge upheld the validity of the no-contest clause.
The married couple in Sim v Pimlott [2023] had a difficult relationship. At the time of the deceased’s death, divorce proceedings were imminent. There are a number of factors that would need to be assessed to determine whether the provision made in the deceased’s Will were objectively reasonable. Some of the key points would include the longevity of the relationship, how amicable it was, and the conduct of the claimant.
The judge found that it was entirely reasonable to include in the Will that the widow should have an option to take a capital sum and, in default of complying with the no-contest clause, the capital sum should not be available. The Will included two cash gifts totalling £375,000 and a life interest in the deceased’s residuary estate. The judge ruled that:
“In circumstances where the actual provision made by the will is objectively reasonable…it was also reasonable to include a provision intended to discourage the relevant beneficiary from embarking upon what is…a [potentially] unwarranted claim under the 1975 Act”.
This judgement should invite potential claimants to pause and reflect more seriously on the merits of any future claims. Provided the clause has been used rationally and the gifts made to the claimant are objectively reasonable and fair, Sim v Pimlott suggests that beneficiaries may need to consider whether it is worth the risk of bringing a claim under the 1975 Act in the knowledge that they could lose out on the amounts offered in the Will. Alongside this, those making a Will and wishing to make use of a no-contest clause should take some comfort in the ruling as the inclusion of a no-contest clause may assist them to achieve their objectives and may avoid the risk of their estate being subject to expensive litigation.
It is important to take legal advice regarding including a no-contest clause in your Will and the merits of a claim under the 1975 Act which may be made by a party who is the subject of the no-contest clause. A person’s circumstances are particular to them and there is no “one cap fits all” approach which should be taken.
It should be noted that even in the case of Sim v Pimlott the Judge held that the Will failed to make reasonable financial provision for the widow because, whilst leaving her with income, it would effectively leave her homeless. The benefits of taking appropriate legal advice should therefore not be underestimated. Your legal adviser can talk you through your options and advise on strategies that can be used to help avoid disputes over your estate. An experienced legal adviser can also ensure that the clause is drafted clearly to safeguard against misinterpretation or confusion and also accurately reflects your intentions.
