A controversial Court of Appeal decision to overturn a will boosts the case for using trusts in estate planning, tax advisers say.
This week the Court of Appeal awarded £163,000 to Heather Ilott, the daughter of Melita Jackson who left her £486,000 net estate to three charities.
The daughter was estranged from her mother but judges ruled the mother-of-five’s income was “not reasonable” because she was on benefits and had no pension.
Despite a letter written by the deceased explaining the decision on beneficiaries, the court overruled the will.
The legislation cited in the case – the Inheritance (Provision for family and dependent) Act 1975 – only applies to the estate of a deceased and not to a trust.
Old Mutual Wealth financial planning expert Rachael Griffin says the case should be a “concern to all those who have made provision in their wills, favouring a beneficiary over another”.
She adds: “It highlights the benefits of making provision for handing down your estate during your lifetime through the use of trusts.”
Tax advice firm T&G director Mark Green says: “Clearly lifetime planning and use of trusts is a good starting point – they are much more difficult to overturn. The best thing to do with a will is leave detailed explanation but in this case it clearly wasn’t enough.
“There are no hard and fast rules but the more rationale you give the better. Interestingly, if you give a small provision in the will, it makes it harder for people to argue they should have a bigger share.”