Why good advice matters – and cooperation is key

14 August, 2019

Why good advice matters – and cooperation is key

Estate planning when you have two families can often be

complicated.  The importance of good advice, and the sad consequences when things go wrong, were demonstrated in the recent case of Clarke v Allen ([2019] EWHC 1193 and 1194 (Ch)). 

Background

Mr Clarke, the deceased, had two adult daughters from a previous relationship (the defendants) when he married the claimant, Mrs Clarke.  His main asset was the family home, a house in London worth £1.38 million. It was well known that he wanted to make sure that if he died first, his widow could stay in the family home for the rest of her life; and that on her death, the property would pass to his daughters. 

Unfortunately, Mr and Mrs Clarke were both poorly advised.  As a result, he transferred ownership of the family home to the daughters while he was still alive, leaving Mrs Clarke no right to occupy the family home after his death.  Even before his death, while he was in a nursing home, the daughters repeatedly tried to interfere with her occupation of the property.  After his death they commenced possession proceedings to evict her, despite the clear intention expressed in his Will that she should have a home for life.

Eventually, homeless and destitute, Mrs Clarke, brought a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act) for reasonable financial provision for herself out of the estate.  She also asked the Court to set aside the lifetime transfer of the family home to the daughters as a result of mistake.

Decision on lifetime gift

There was clear contemporaneous evidence that the deceased intended his widow to have the right to remain in the property for her lifetime.  The incorrect advice given to the deceased and the widow resulted in a serious and avoidable mistake.  The deceased could have created a life interest trust for the widow, enabling her to live in the property and pass it to his children on her death.  Had he been given the correct advice, he would not have transferred the property to his daughters.

The fact that the daughters then embarked on a 4 year campaign through the courts to remove the widow from her home – despite the clear knowledge that their father wanted his widow to have a home for life – was taken into account.  They had used their rights granted by the transfer in an unconscionable manner that would only stop if the mistake was remedied.

The Court therefore found that the transfer of the property to the daughters was a direct result of a sufficiently serious mistake which should be remedied.  The property was to be held on a constructive trust for the deceased’s estate and could be used to provide financial support for the widow.

Calculating the financial provision under the Act

The widow had no capital and was receiving benefits.  She had also suffered a stroke, had very low prospects of living independently and was likely to have lifelong care needs.  It would be usual to use the Duxbury tables to calculate the award.  However, due to the lifelong medical care the widow needed, which is expected to increase ahead of inflation, the best way to give her financial security was to use the Ogden tables to calculate her award. 

Conclusion

The Court awarded the widow £731,309 to cover nursing home fees and pension loss.  After the deduction of the widow’s award, in usual circumstances the residue would be divided equally between the widow and two daughters as specified in the deceased’s Will. 

However, the Court found that the first daughter’s conduct, which included failing in her duties as executor, attempting to mislead the Court and HMRC, dissipating the deceased’s assets, misuse of the deceased’s LPA and ignoring Court orders, meant she should forfeit £80,000 of her share of the residue to the widow. The second daughter’s share was reduced by £1,000 in favour of the widow to reflect her conduct of failing to pay cost orders, comply with disclosure and ignoring the proceedings.

Comment

Most of the problems, and the court proceedings, could have been avoided if Mr and Mrs Clarke had been properly advised in the first place.  Choosing solicitors who specialise in Will drafting and life time planning will minimise the risk of poor advice.

The initial mistakes were exacerbated by the daughters’ ‘unconscionable’ conduct in the face of the obvious fact that their father’s wishes had not come to fruition because of errors along the way.  Had they behaved better, and not tried to benefit from legal rights that they were never intended to have, the outcome might have been very different.  The expense of several lengthy court cases could also have been avoided.