A promise is a promise – or is it? How lifetime assurances can override a Will
A person’s freedom to choose to whom to leave their estate, known as “freedom of testamentary disposition,” is a venerable principle of English law. The emphasis placed on this freedom means that the bar to overrule a validly executed Will is high. Indeed, case law confirms that the wishes of a person who is mentally capable of completing a Will, and is under no pressure to do so, should be honoured. A decision to deviate from the terms of a Will is not taken lightly. However, what happens where a person’s Will is inconsistent with a promise made during their lifetime? In instances such as these, the terms of the Will can be overturned under the alarming-sounding doctrine of ‘proprietary estoppel’.
For a court to deviate from the terms of a Will, the claimant must be able to prove that the deceased made a promise (not a mere indication) that the claimant would inherit the asset. The claimant must then rely on the promise and, in doing so, must have suffered a significant detriment – for example, working for little material reward over many years in the expectation of being a principal beneficiary in the Will. If these factors are present, the court may then decide to overrule the provisions of the Will, if it would be proportionate to do so in the circumstances.
A 2016 case concerning a family farm shows how this doctrine operates in practice. In Moore v Moore a son contested his father’s Will from which he had been excluded following a break down in their relationship.
Over the course of four decades the father had made consistent references to the son inheriting his share of the family farm after his death, and he completed a Will to this effect. The son, relying on this promise, dedicated his entire professional life to working on the farm and did not consider seeking a job elsewhere because of his expected inheritance. Unfortunately, the relationship between the father and the son became fractious, and some years later the father completed a new Will which removed the son as a beneficiary of his estate. The court agreed with the son that it would have been unfair to deprive him of the farm and ruled in his favour. The case is now subject to an appeal.
This case demonstrates what form a person’s “detriment” can take when acting on a promise. The detriment does not have to be financial in nature – although the court did allow that the son did not seek alternative employment which could have provided him with a higher wage.
A defining feature of proprietary estoppel is that the court has a degree of flexibility to make awards which it considers to be fair. This means that each case will turn on its own unique set of facts. While this makes predicting the outcome of a claim of this nature difficult to predict, the courts have been clear that the claimant is more likely to be successful where the expectation is clear, the detriment is substantial and the length of time that the expectation has been reasonably held is significant.
The doctrine does not only apply to cases where the testator has died or lost capacity. In Gillett v Holt the court immediately transferred the right to property to an individual who had acted to his detriment in relying on a promise – even though the owner of the property was still alive. This demonstrates the flexibility that the court has to give effect to a broken promise if it would be fair and proportionate in the circumstances.
Where a claim for proprietary estoppel is proven, there could be tax consequences to the award made by the court. Assets that pass to the surviving spouse do so free of inheritance tax. Where assets pass to a beneficiary such as a child, the value of the assets are chargeable to inheritance tax unless a relief applies to an asset.
A Will is in all circumstances an essential measure; the lack of it risks a person’s assets passing to unintended beneficiaries under the intestacy rules. The power of the court to rectify a perceived wrong by making good a promise, underlines how important it is that a testator should clearly communicate their intentions during their lifetime.
Obtaining specialist advice on the terms of a Will can prevent or alleviate significant legal and taxation issues which can arise as a result of a successful claim in proprietary estoppel. As a promise or an assurance can have significant repercussions on the destination of a client’s assets, professional advisers should consider checking whether proprietary estoppel might apply when providing advice.
This article was first published by ePrivate Client on 15 November 2018