Written by Jenny Ray, Partner at DMH Stallard
Financial advisors should be mindful of the growing risk to financial planning strategies involving wills. There has been a remarkable rise in wills being contested in the UK in recent years. Last year, it was estimated that some 10,000 wills were disputed, which was a record number. This trend may have several causes, ranging from the increase in blended families, to the use of cheap online will writing services. Yet, whatever the cause, this trend means that financial planning involving wills risks being upended, unless approached with meticulous care.
The idea of freedom of testation has long been respected in English law. In the 1990 case of Re Coventry, Mr Justice Oliver said, “an Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases”. There are, however, certain defined circumstances when a will can be overturned by the courts. These include a lack of testamentary capacity, the lack of valid execution, undue influence over the testator and fraud. It is also possible to make rectification and construction claims if there was a clerical error, or if the testator’s wishes were not properly understood.
The Inheritance (Provision for Family and Dependants) Act 1975 also enables a spouse, cohabitee, former spouse, civil partner, child or dependent of the deceased to challenge a will on the basis that they have not received reasonable provision in it. These are known as financial provision claims.
The initial challenge of a will involves issuing a caveat to prevent a Grant of Probate being obtained. This is not a costly process, but if a negotiated settlement cannot be reached, the claimant must then issue Court proceedings. This will involve significant legal costs and court fees. Not only that, but if they are unsuccessful, costs may also be awarded against a claimant. However, the financial costs are just one issue. Such claims can also be extremely destructive to relationships within a family.
Financial provision claims must be made within 6 months of the grant of probate being issued. Financial provision claims often arise at an emotionally charged time, when those involved are suffering from grief and trauma. If they are surprised or shocked by the content of a will, they can react emotionally, which can lead to entrenched positions and costly litigation. One way to avoid this is by communicating the provisions of their will clearly to their family and ensuring that everyone understands and accepts its provisions. However, if someone does raise concerns, at least this means that the testator can take on board these concerns and hopefully prevent any dispute arising in the future. It is generally not possible to legally challenge a will while the testator is still alive, except in particular cases where there is a loss of capacity.
Another powerful tool to help avoid challenges is the use of non-contest clauses. These clauses mean that a beneficiary will lose their bequest if they challenge the will, clearly providing a strong disincentive to any challenge!
It is best to ensure that there is no doubt about the testator’s mental capacity to make a will, by obtaining an independent assessment, as this can help avoid wills being challenged on the basis of testamentary capacity. It is wise to make a will when you are still in good health as once issues such as dementia arise, questions can be raised regarding mental capacity. The legal test for mental capacity to make a will was set out in the case of Banks v Goodfellow and is known as the Banks test. It requires that a testator must understand the effect of making a will, the extent of their property, and the claims of those who might expect to benefit from the will. They must not be suffering from a mental disorder that would impact their ability to make a rational decision in that regard. In some cases, contemporaneous medical evidence may help prevent such claims arising later.
Unfortunately, instances of poorly drafted or wrongly executed wills have become all too common in recent years and give rise to avoidable disputes. A will can be rendered invalid by a simple failure to ensure that is witnessed correctly, and we have seen such cases in recent years. A litany of complaints relating to the UK’s unregulated will drafting sector saw the Competition and Markets Authority (CMA) publish a significant report into providers of unregulated legal services last year. The CMA’s final guidance, published in October 2024, noted that, “In the context of unregulated will writing, online divorce, and pre-paid probate services, failures to comply with consumer protection law are particularly likely to give rise to significant consumer harm.” It is in my view penny wise and pound foolish to use anyone but a well-qualified lawyer to advise on and draft a will and to ensure that it is executed correctly.
For financial advisers, the key tip is to know your client, try to understand their family as well as financial circumstances.
The government’s controversial proposed changes to the £1 million capital gains tax allowance, for farms and other business property, is seeing many engage with their financial and legal advisors to restructure their arrangements. This will mean that many wills are likely to be rewritten to better manage the new regime in the coming months. Advisors should take all reasonable steps to ensure that new succession arrangements are well managed and carefully drafted, so as to avoid future challenges. After all, the most brilliantly structured arrangement will be of little value if it is later overturned in court.
