Keep your will under review – a cautionary tale

Whilst it is important to make a will, it is just as important to make sure it remains appropriate and up-to-date in light of changing circumstances

A recent Inheritance Provision decision highlights this point. Mr Banfield and Mrs Campbell had lived together for some years before Mrs Campbell died on 7 October 2015. Mrs Campbell had been widowed and had one son, James, from her first marriage. The main asset of her estate was her property. By her will made in 2001, Mrs Campbell left Mr Banfield £5,000 and the residue to James, who was 25 at the time.

Mr Banfield and Mrs Campbell never married, and although there was an argument as to the status of their relationship, the Court found that they had been cohabiting from about 2002. By the time of Mrs Campbell’s death, Mr Banfield had not only sold his own property but was also disabled, and Mrs Campbell was to some extent his carer, due to his mobility issues.

Mr Banfield brought a claim under the Inheritance (Provision for Family and Dependants) Act, primarily seeking accommodation. Mr Banfield put the cost of these needs at £450,000, whilst James submitted that they were £220,000. The Court refused to make an outright award to Mr Banfield but did grant a life interest in one-half of the net sale proceeds of the Deceased’s property, together with a further £20,000 to enable special adaptations as necessary.

The Court had regard to comments made by Lord Hughes JSC in Ilott v Blue Cross [2017] UKSC17 that the purpose of the provision is to provide maintenance during a lifetime – also noting that Mrs Campbell had inherited the property from her late husband, James’s father. As such, a life interest was the appropriate provision for Mr Banfield.

From an Inheritance Tax (IHT) perspective, this means that tax will be payable on Mrs Campbell’s death, as her estate exceeded the relevant thresholds and the surviving spouse exemption was not applicable to the provision for Mr Banfield. However, it will also be payable on the Trust Fund on Mr Banfield’s death, assuming his estate exceeds the nil-rate threshold. There will be no transferrable nil-rate allowance nor any residence nil-rate allowance, as James is not his step-son.

Had Mrs Campbell reviewed her will, other options could have been considered – including the possibility of marriage, lifetime gifts, or settlements. Whilst the relief was not available when Mrs Campbell died, there is now the Residence Nil-Rate Band Relief to which Mrs Campbell would have been entitled in principle, together with the transferrable relief from her late husband’s estate. If nothing else, updating the will in light of advice from a solicitor with an accompanying note of explanation for the benefit of James and Mr Banfield might have avoided considerable expense to the estate, and no doubt a difficult relationship between James and Mr Banfield.

For more information

If you would like more information on this briefing, or for any enquiries related to wills, please contact Alex Elphinston.