Reasonable Financial Provisions

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    A recent decision regarding a claim under the Inheritance (Provisions for Family and Dependants) Act 1975 gives us a welcome opportunity to review this area of law.

    In the case of Baker v Baker [2008] EWCH 977 a widow made an application under the Act following the unexpected death of her husband in 2001. By his Will the deceased left a life interest in his house in Ipswich (which was solely owned by him) to his wife.

    Before his death the deceased ran a well known scrap and motor parts business, the goodwill of which he left to his four sons who successfully and profitably developed the business after their father’s death. This was valued at around £750,000—£950,000 with the premises also being worth £150,000. His residuary estate valued at £55,000 was to be divided equally between his wife and the sons.

    The judge immediately concluded that the deceased’s Will had not left ‘reasonable financial provision’ for the widow. 

    In establishing this his starting point was s.3(2) of the Act which provides that upon the death of a spouse the court should consider the provision which the surviving spouse might expect to receive if the marriage had ended in divorce rather than the death of a spouse.

    A key factor in the judgement of this case was the value of the business. Figures were inaccurate and no expert evidence as to valuation was available. The judge used a very ‘broad brush’ approach to reach the current figure. He also made the point that, although the sons had made significant improvements to the business since their father’s death, they had traded on the well established good reputation of the firm which enabled them to take the business forward.

    Though he was mindful of the effect any award could have on the business he gave her the residential property and a lump sum making the total award just over half of the estate. He justified this on the basis that ‘the authorities do not provide a maximum figure and the factors set out within the Act have to be taken into account and applied against a yardstick of equality’.

    When they reported this case the New Law Journal made an interesting (though hypothetical) comparison to the possible outcome on divorce using the same assets.

    They concluded that unless the business could make capitalised periodic payments it is likely that the husband would have had a maintenance liability although much less capital to pay.

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    Matt Walkden Will Writer

    About Matt Walkden

    I am a Professional Will Writer and I offer a small number of other products that complement my Will Writing such as Lasting Power of Attorneys (LPA’s), Fixed Price Estate Administration, often called Probate and some Property Products such as changing a family home from Joint owners to Tenants in Common.

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