LEGAL AND FINANCE QUARTER Wealth Management Edition IN PARTNERSHIP WITH:
SPECIAL FEATURE
Kleinwort Benson targets West Midlands growth Paul Bentley, head of entrepreneurs for Kleinwort Benson, meets with the region’s business leaders
(l-r) Jeremy Harrison, partner, Catalyst Corporate Finance, Paul Faulkner, chief executive of Greater Birmingham Chamber of Commerce, and Paul Bentley, head of entrepreneurs for Kleinwort Benson
INSIDE FOCUS: REGION OVERVIEW KLEINWORT BENSON INTERVIEW FINANCIAL PLANNING
Very Private & Client focused Lodders is a law firm built around outstanding legal advice and exceptional service to regional, national and international private clients. From business owners through to wealthy families, landowners, farmers and successful individuals, clients choose Lodders for our renowned technical expertise and our friendly, partner-led service. Our Private Client team is ranked top by both Legal 500 and Chambers, as well as being the first choice for many of the Midlands most successful individuals. You’ll find us away from the city lights. You’ll also find us discreet, friendly and very effective – always supporting your big decisions with our proven combination of technical innovation and thoughtful legal advice. We would welcome the opportunity to advise you. To begin the process simply contact your nearest Lodders office. We look forward to hearing from you. Martin P Green Senior Partner and head of the Private Client team Lodders Solicitors LLP
Stratford upon Avon office 01789 293259 Henley in Arden office 01564 792261 Cheltenham office 01242 228370
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OVERVIEW bqlive.co.uk
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Financial services sector boosts growth prospects Ian Bailey Chartered MCSI President of the CISI Birmingham and West Midlands branch looks at the sectors power to increase wealth and employment The West Midlands is rightly famous around the globe for its quality engineering but the past few years have also seen a dramatic increase in the importance of the financial services sector within the region. The move into Birmingham by well-established City names is now creating career opportunities in the region with enhanced potential for further growth over the coming decade. In a recent paper prepared for the House of Commons (26 February 2015) the sector was identified as contributing nationally £126.9bn to the UK Economy in 2013/14, with the banking sector alone providing £21.4 bn in UK tax receipts over the fiscal year. Recent estimates suggest that approximately 50% of this is produced within the ‘Square Mile’. The West Midlands remains an attractive place to relocate business units, particularly with the spiralling labour costs in London. Deutsche Bank’s recent re-location to Brindley Place is estimated to have created circa 1,000 jobs and the recent announcement by HSBC is conservatively estimated to ultimately create a similar number of opportunities. A combination of significantly lower housing costs and cheap and effective public transport (compared to the London commute!) are seen as being attractive to the large financial institutions. In addition they see in the West Midlands a young and vibrant work force looking for quality employment. This growth and vibrancy is further encouraged by the proposed HS2 project. The region’s attractions could further be enhanced by developments in the financial markets over the coming few years. Serious economic forecasting is always a perilous exercise, attempted only by the foolish or the brave it seems, but the significant falls we have seen in commodity prices indicate that the global investment markets perceive a noticeable drop in demand over the next few years. If
this is correct then whilst it may mean that we avoid any further significant recessions it also, potentially, indicates that we could be entering a period of relatively slow economic growth. In this scenario it would be realistic to expect both inflation and interest rates to remain subdued, not far from current levels. It could also mean lower overall investment returns of circa 5% a year, rather less than the 7-10% investors have been encouraged to anticipate over the last three decades. If (a big “if”!) this situation develops then the financial services sector is likely to come under renewed pressure. Most organisations have priced their services around a base figure of 1% per annum of the funds managed. When investments were growing at 10% per annum this was competitive and acceptable to the market place but at 5% this becomes a very big slice of the overall return. The pressure will be on the institutions to reduce their charges and they, correspondingly, will seek to reduce their costs to maintain their margins. Legal and insurance costs are unlikely to reduce (not least because the financial services sector has still got a long way to go to win back the trust lost during the excesses before the 2008/9 credit crunch) so reduced operational costs are one of the only viable ways of achieving this. In this scenario relocating as many functions as possible away from the expensive Square Mile looks increasingly attractive and offers a huge opportunity to our region we must be ready to grasp. Underlying this is the need within the Financial Services sector for increased integrity to regain the trust of the general public. A move into the regions may be
“The West Midlands has huge potential to increase its importance in this vital sector to the UK economy bringing wealth and employment to our region”
a useful part of this process helping the sector to seem less ‘South East’ orientated and more relevant to the wider country. In this respect practitioner membership of financial services sector bodies, such as the Chartered Institute for Securities & Investment (CISI), is an important mark of professionalism. The CISI believes integrity is a key component of professionalism, defined as the effective combination of knowledge, skills and behaviour. None of this will alter the basic fact that London will remain a global, international financial services centre. However, the West Midlands has huge potential to increase its importance in this vital sector to the UK economy bringing wealth and employment to our region. This is not an occasion where we can be found wanting. The potential is exciting! n
Ian Bailey Chartered MCSI President of the CISI Birmingham and West Midlands branch and senior investment director at Investec Wealth and Investment
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SPECIAL FEATURE bqlive.co.uk
The private bank Kleinwort Benson wants to help Greater Birmingham’s successful entrepreneurs plan their future financial security. BQ finds out more
Getting to know you - for better business and security As the UK’s economic recovery picks up speed, more and more privately-owned businesses are experiencing rapid growth. And this success is happening faster in Greater Birmingham than anywhere else outside of London, according to Kleinwort Benson. The private bank’s recent research has found that 381 private businesses in the region had annual profits of at least £2m, and of these 32% were growing at more than 50% per
year. As a result, Kleinwort Benson’s own business in the area has grown by 30% in the last 12 months. Paul Bentley, head of entrepreneurs at Kleinwort Benson, said: “Greater Birmingham is really showing its mettle as the UK’s second city, and entrepreneurialism is really flourishing there. Because of that, we’re meeting and helping more of the region’s successful entrepreneurs who need advice on what to do with their
wealth. And it’s often useful for this relationship to start at an early stage. “Being an entrepreneur can be a lonely place, as you are the person making day-to-day decisions on virtually everything. And so having conversations with those business leaders while their companies are still growing can be really useful – sitting down and asking them what it is they need. “That’s when Kleinwort Benson can start to
SPECIAL FEATURE bqlive.co.uk
(l-r) Jeremy Harrison, partner, Catalyst Corporate Finance, Paul Faulkner, chief executive of Greater Birmingham Chamber of Commerce, and Paul Bentley head of entrepreneurs for Kleinwort Benson
share its experience and ideas with business leaders. We can find out where they are heading with their businesses. And we can ask if they have the right team: do they have the right person giving them legal advice? Do they have the right person giving them corporate finance advice? “By getting to know entrepreneurs, it might be that we can open our contacts book and give them two or three names, perhaps local to them, people who have experience of working with entrepreneurs, and who might be able to help their business. “We’re not wanting to trample over existing relationships, but sometimes it’s good for entrepreneurs to have some outside input, even if they end up sticking with the same people. It’s all about making sure people they have the right teams around them to make the best
choices for their growing businesses and their eventual wealth.” To build its relationships with local entrepreneurs, Kleinwort Benson is organising a series of exclusive dinners in the Greater Birmingham area, each one with an interesting speaker. Paul Faulkner, the former chief executive at Aston Villa and Nottingham Forest football clubs, was the speaker at Kleinwort Benson’s dinner in October, held at Hotel du Vin, in Birmingham. He told guests about his time on the business management side of football, and contrasted it with his new career as chief executive of Greater Birmingham Chamber of Commerce. Bentley said: “Paul Faulkner was a really impressive, eloquent speaker. We had around 15 guests attending the dinner who were entrepreneurs – successful owner-managers – and they were able to listen to his experiences and find out how things had gone in Paul’s professional life. “We find that having a private dinner, with Chatham House rules, is a really good way of introducing ourselves to entrepreneurs. People are relaxed and find it useful both listening and sharing their own experiences, learning from each other. It’s amazing how receptive people are. It also gives Kleinwort Benson the
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Benson can really start assisting, by talking people through what they need to consider. He said: “Selling a business might, for example, result in proceeds of £20m. That’s all well and good, but it’s also a huge amount of responsibility for someone to suddenly have. Until that stage, they would often have been used to receiving dividends and a salary – whereas now they have a large amount of money in the bank and need to do something with it. “That’s when we take them through a stepby-step approach. Step one is to take a deep breath, and to let the dust settle, especially when a business has been such a large part of their life for a long time. So many people have loads of plans only for those to change entirely over the next six months, so it’s important to take things steadily. “Then they need to use their money to secure both their own and their family’s future. What we often explain is that for every pound of annual income they want, they are going to need £30 of capital to secure that. This tends to give them an idea of what they need to do to secure their futures. “Then they can start enjoying themselves. They might want to buy a boat, a smart car or a
“Being an entrepreneur can be a lonely place, as you are the person making day-to-day decisions on virtually everything” chance to find out about people. It’s not about saying: ‘We’re Kleinwort Benson and we have something to sell you.’ Instead, it’s very much about saying: ‘What is it that you might need help or advice with?’ “The time when we’re actually going to start working with these entrepreneurs is during their approach to sell the business, helping them to manage their wealth afterwards. Even then, we don’t expect to be the only call people make when they sell their business. But we do want to be the first call they make. And we’re aiming to be the first by helping them at an earlier stage when they’re building their business – helping them to make connections, and getting involved by sharing experiences and advice.” Bentley explained that it’s once entrepreneurs are at a ‘post-exit’ stage that he and Kleinwort
luxury holiday, and having secured the family’s future that’s when they can start having fun. And finally, for many people, there will still be money left over. That’s when we can start talking about how to give the money away, perhaps via charitable organisations, or by providing finance for their children. “But at all times at Kleinwort Benson we apply a logical way to deal with this process. Over the years we have advised a large number of people who have sold their businesses, and our guidance starts by sharing experiences with other entrepreneurs.” Bentley entered the industry after studying a finance degree at university, initially working at Prudential and then as a consultant at Mercer, before moving to Kleinwort Benson in 2003. He has always believed in and acted upon the principle of never giving financial advice that
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SPECIAL FEATURE bqlive.co.uk
“It is the very nature of a private banker’s role to work closely with a family. I get a lot out of knowing that I have had an impact on the security of future generations, or calming the sort of financial worries that we all go through from time to time.” he himself wouldn’t act upon. He said: “Working with businesses as they grow is a fascinating part of my work. I particularly enjoy guiding them when selling their businesses, but am also pleased if I can accompany them through the early stages, providing instructions around funding and working as a team with their lawyers and other advisers. “Another rewarding aspect is the close work with families. It is the very nature of a private banker’s role to work closely with a family. I get a lot out of knowing that I have had an impact on the security of future generations, or calming the sort of financial worries that we all go through from time to time.” According to Bentley, entrepreneurs often differ from other clients because they are often what might be called “the first generation of wealth”, in that their financial success is self-made as a result of their businesses. He said: “Funny though it sounds, this period of life which is essentially the first time a person or family has had a significant amount of money
Paul Bentley head of entrepreneurs for Kleinwort Benson poses its own problems. It’s a huge responsibility to take on. Having worked 24-hours a day, seven days a week to realise this situation, once the ultimate goal has been achieved, it can often take a bit of adjustment. “There’s the impression that entrepreneurs are born risk-takers who, if they sell the business, are going to want to be as aggressive in their financial affairs as they have had to be in building their businesses.
Two centres of wealth management Kleinwort Benson has offered private banking and wealth management services to private clients, families, business owners and entrepreneurs, and to institutions including pension funds, endowments and charities, for over 200 years. The private bank has a strong belief in building long-term relationships and aims to look at the whole spectrum of clients’ interests – both personal and corporate – to create, conserve and grow clients’ wealth. As an independently-owned company, Kleinwort Benson has no ties to any investment or retail bank. Its total focus is on achieving clients’ objectives. You can read more about entrepreneurs’ experiences at www.thehub.kleinwortbenson.com. And to find out more about what Kleinwort Benson can offer, you can contact Paul Bentley on 0203 207 7120 or at paul.bentley@kleinwortbenson.com.
“In my experience, the opposite is true: having worked so hard to build and realise the value of their business, entrepreneurs are often very conscious of the importance of conserving their wealth. In many cases, rather than putting aside money for the next venture as you might expect, the bulk of their capital is used to provide them and their families with financial security for the rest of their lives.” Bentley said that another difference with entrepreneurs is their initial wariness at handing over the responsibility for their wealth to a financial advisor. “An entrepreneur has invested so much of their time creating their own business, which includes running a team,” he said. “So handing over the responsibility to a financial adviser does not feel like the natural thing to do. “By working closely with my clients for many years before they sell their business, I have found that I am able to build up the sort of rapport and trust that is required for them to have that confidence in me and my team.” Whatever the challenges, Bentley said his overarching emphasis is to put the client first: “Being a private banker requires you to be one step ahead of your client at every point: think ahead, second guess the future, and, above all, never give advice that you yourself would not act upon with your own money.” Kleinwort Benson is planning more private dinners in Greater Birmingham in 2016, because it wants to continue to get to know more of the region’s successful entrepreneurs. Bentley added: “I’m really keen to get to meet those entrepreneurs – both when they’re ready to sell but also at earlier stages so that we can get to know and understand them and their businesses. “Kleinwort Benson has a wealth of knowledge and experience in providing the advice and direction which enables individuals to meet their new financial goals. The steps to achieving this involves the securing the cash proceeds, timely disposal of vested stock, establishing tax efficient vehicles and the maintenance of a regular and consistent income to replace salary. “We have guided numerous entrepreneurs and business owners in this way through the sale of their businesses, helping them to plan the next phase of their lives. And I hope we can continue doing the same for more and more successful entrepreneurs across Greater Birmingham.” n
Building Family Wealth John Hodgson, head of tax and business services at the Birmingham office of Smith & Williamson, the accountancy, investment management and tax group, explores ways to protect and grow your family’s wealth. Pensions and ISA’s allow wealth to steadily compound in a tax free environment; in a family context the multiple use of such arrangements can allow significant funds to be efficiently managed. There are annual caps on the tax free amounts that can be invested in such arrangements so it can take time to build up significant sums. For larger amounts there are alternative vehicles that offer different tax and administrative advantages. The modern alternative to the traditional family trust is the use of the standard company as a family investment company, particularly in conjunction with a family trading business. The essential point is that a company only suffers corporation tax at rates of 20% (reducing incrementally down to 18% by 2020) on its income and capital gains and does, typically, not pay any tax on dividends received. Property and investment portfolios can consequently accumulate value much more quickly than personal ownership. Value can then be returned to the individual/family members in a number of ways depending on the company structure and personal circumstances.
A further variant for wealthier individuals or families is to use an Open Ended Investment Company (OEIC) (most commonly used by investment houses for massmarket retail investors) as a core vehicle for investment purposes. Whilst running costs are higher, any gains realised on underlying investments are not subject to any capital gains tax; such tax is effectively deferred until shares in the OEIC itself are realised. We have advised, implemented and managed the above, family trusts and a range of other wealth management arrangements; more important than our technical expertise however, is the time we invest in ensuring we understand our clients thinking. John Hodgson t: 0121 710 5200 e: john.hodgson@smith.williamson.co.uk w: smith.williamson.co.uk
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing. The tax treatment depends on the individual circumstances of each client and may be subject to change in future. Smith & Williamson LLP Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International Smith & Williamson Financial Services Limited Authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate all of the products and services referred to here.
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PROFILE Personal Finance Society
Financial planning for high net-worth individuals (HNWIs) Robin Melley FPFS, chair of the Financial Planning Practitioner Panel for the Personal Finance Society assesses the opportunities and the risks High net-worth individuals come from all walks of life and have acquired wealth in a variety of ways; some have inherited wealth, others have won large amounts and many have earned it by building a successful business or professional careers. In my experience, they all expect the highest standards in terms of advice and service – they place a high value on professionalism and a bespoke service delivered with the personal touch. From a financial planning point of view, despite the investment adage “don’t let the tax tail wag the investment dog,” tax is often a key driver for seeking advice – typically including income tax, capital gains tax, corporation tax and inheritance tax. That said, the basic planning opportunities, such as pension contributions, ISAs, CGT Allowances and gift exemptions should not be overlooked. However, I have covered below some of the opportunities available to HNWIs: INHERITANCE TAX PLANNING (IHT) Pensions have recently become very interesting when providing estate-planning advice. This is principally because of the removal of the ‘55% Recovery Charge’ and the introduction of ‘Flexiaccess Drawdown’ in the Spring Budget 2015. This effectively means that a client’s pension fund is now outside of his/her estate for IHT purposes; allowing the client to nominate future generations to be paid cash from the pension fund, who will pay income tax at their marginal rate – for example, a nontaxpaying grandchild may receive tax-free income from the grand-parent’s pension fund to help fund university fees. DISCOUNTED GIFT TRUSTS (DGTS) AND WEALTH PRESERVATION ACCOUNTS (WPA’S) Preservation Accounts (WPAs) are a well-trodden path for HNWIs seeking to place capital into trust, outside of their estates for IHT purposes, whilst retaining control and access to their wealth. Gifting is often an effective way of planning a client’s affair to mitigate IHT. Careful planning is necessary with gifts during the lifetime of the client, particularly where there is a gift into
Robin Melley FPFS
“In my experience generational planning with affluent clients is far more effective, however, it does require a greater degree of transparency between family members, which can sometimes be a stumbling block” a discretionary trust. For example, a gift to a discretionary trust followed by an outright gift to either a bare trust or to a family member may extend the 7yr rule to the ‘14yr leapfrog’ rule, bringing the gift to the discretionary trust back into charge. INCOME TAX AND CAPITAL GAINS TAX (CGT) Enterprise Investment Schemes (EISs) offer 30% income tax relief and CGT deferral. There is an upper
limit of £1m and should only be contemplated by investors that fully understand and accept the risks and are able to cope with the lack of liquidity. Venture Capital Trusts (VCTs) also offer 30% income tax relief, but with a maximum of £200,000. Pension contributions offer income tax relief at your marginal rate (or Corporation Tax rates if made by your company) and grow in a tax-efficient environment. The maximum contribution for individuals is 100% of ‘UK relevant earnings’ or the Annual Allowance of £40,000 in 2015/16; but the member’s earnings do not restrict Company contributions though. Bear in mind that unused Annual Allowances for the previous three years may be brought forward for contributions in excess of this year’s limits. CGT Annual Exemptions (£11,100 – 2015/16) may be used each year to help ensure that your investment portfolio is not ‘pregnant with gain’ in the future when you may wish to sell down some or all of your portfolio. Many of our affluent clients use the concept of their money split between, “in play or out of play”. What they mean is that they want to ring-fence enough of their wealth to ensure that they never run out of money – even if they lost all of their money “in play”. In order to plan this properly, lifetime cash flow forecasting is invaluable because it is the only way in which precision may be applied to the decision-making process by modeling different scenarios. In my experience generational planning with affluent clients is far more effective, however, it does require a greater degree of transparency between family members, which can sometimes be a stumbling block. n Robin Melley FPFS is a Chartered Financial Planner with Matrix Capital Limited, which is a leading firm of Chartered Financial Planners. He chairs the Financial Planning Practitioner Panel for the Personal Finance Society; and is a strong advocate in the profession, encouraging his peers to achieve the highest standards in terms of technical competence and ethical behaviour. For him, it’s about “standards, professionalism and trust.”
PROFILE Higgs & Sons
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The summer budget – wealth management for all seasons Peter Gosling, a partner at Higgs & Sons and an expert in estate planning considers the impact
Peter Gosling The first budget after an election is always hotly anticipated and this year’s post-election ‘Summer’ budget, the first by a chancellor in a majority Conservative government for 19 years, was no exception. “The details of the summer budget set out some key long term measures that are pertinent to all aspects of personal wealth management,” explains Peter Gosling, a partner at Higgs & Sons and an expert in estate planning. “Inheritance tax was a key focus for the budget and it is important that individuals are aware of
“The details of the summer budget set out some key long term measures that are pertinent to all aspects of personal wealth management”
the changes announced by the Chancellor as the implications are far reaching.” The announced changes include a new relief from inheritance tax (IHT) applicable to the main residence. The residence nil-rate-band (RNRB) relief will eventually reach a maximum of £175,000 on top of the ordinary nil-rate-band (NRB) of £325,000. “This will be introduced in stages,” continues Peter, “starting at £100,000 in April 2017 and increasing in annual £25,000 increments until it reaches the maximum in 2020/21. NRB was frozen at its April 2009 level until April 2021.” “Like the existing NRB, the RNRB will be transferable between spouses and civil partners. This brings the total amount that can be passed on death free of IHT by a couple with a family home to £1m from April 2020.” The new RNRB will be tapered for those estates exceeding £2m, so that if the total value of the estate exceeds £2m, the additional allowance is reduced by £1 for every £2 of excess. “Individuals should also note that the additional allowance can only be used against a dwelling house that is bequeathed to what the Chancellor has termed ‘linear descendants’,” continues Peter. “Broadly that means children, step-children, grandchildren, adopted children and foster children. It is an interesting definition as many consider it to be discriminatory against those who are childless and those who do not own their own property.” The latest figures available from HMRC show that the IHT take on death has been increasing steadily, with £3,659m being paid on estates in 2014/15, an increase of 11 per cent on 2013/14. “The increase in IHT is attributable to the rise in house prices and the freezing of the NRB, so there is a need to take action to prevent the estates of ‘ordinary’ families becoming liable to IHT simply because of the rise in house prices,” explains Peter. “These new proposals introducing the new RNRB, rather than extending the existing NRB, add even more complexity and will force many people to
engage professionals just to calculate the available allowances. It would have been much simpler to increase the NRB to £500,000, while retaining a taper on the extra £175,000 for estates over £2m.” The summer budget also introduced a package of measures to reduce the advantages and tax benefits enjoyed by non-UK domiciled individuals. Legislation is set to follow a consultation that will introduce UK ‘deemed domiciled’ status for all UK taxes for those non-domiciled persons who have been resident in the UK for 15 out of the last 20 tax years. There was also long awaited clarification on pilot trusts after three separate consultations failed to produce a simplification of the tax rules. “It will no longer be possible to set up pilot trusts to receive a lump sum from a will in order to give each trust its own NRB for IHT relevant property purposes.” “The budget had far reaching implications across a range of key areas. Anyone who is concerned about wealth protection should consider a review of wills and their estate planning strategies to take into account the Chancellor’s summer budget and this continually evolving area of law,” concludes Peter. n Peter Gosling is a member of STEP, Solicitors for the Elderly and the Law Society Private Client Section. He acts for many families, trusts and high net worth individuals and has extensive experience working with other professional advisers in matters of tax and estate planning.
Contact Peter on 01384 327215 or via peter.gosling@higgsandsons.co.uk www.higgsandsons.co.uk
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PROFILE Irwin Mitchell
Should I make a will or not? Gavin Faber a Partner in the Wills, Trust & Estate Disputes team at Irwin Mitchell Solicitors explains why you should Most people will have had sight of the recent press coverage on the Ilott v Mitson case which is a Court of Appeal decision awarding an estranged adult daughter, one third of her mother’s estate, despite the mother’s wishes for this not to happen. The Will left the entire estate to charity and this was vigorously defended by them at a great cost. This has led to a number of people questioning whether they should make a Will at all and whether they really have a choice in what happens to their money once they have passed away. To put this into context, it is important to highlight that most Wills are regular and valid wills that are not contested and allow us to leave details of our last wishes for our friends and family to follow through. This can extend to whether we wish to be buried or cremated, who gets the family heirlooms and who receives the money, property and investments. This is the best attempt to speak from the grave and explain to our loved ones what we want to happen on our death, without this, there is no guidance and everyone will have their own view on how assets should be treated and divided up. My advice would always be to prepare a Will and to review and update it every five years or after a change in the family circumstances, such as a marriage, divorce, birth of children, retirement, change of job, buying of property or relocating, especially if this it to another jurisdiction. In addition to this prepare a letter of wishes explaining what you want to happen and why, talk to family members and friends to make sure that your wishes are made clear and are understood. If you decide to leave money to charity, explain why and highlight your rationale for the gift – this could extend to their particular cause or a regular donation of funds to them during lifetime, so that it can be established that there is a link to the charity or organisation. Over 60% of us still do not have Wills in place and most of us do not know what will happen on our death or are under what turns out to be a misapprehension that our loved ones will be provided for and looked after in the way we would expect on our death. If there is no will at the time of death, then the law decides who will inherit. Spouses, children, parents and siblings are included in that list but interestingly, cohabitees are not
Gavin Faber, partner at Irwin Mitchell
My advice would always be to prepare a Will and to review and update it every five years included and have no form of automatic protection available to them if there is no Will in place. In those circumstances, cohabitees would have to seek advice and consider bringing a claim for financial provision under The Inheritance (Provision for Family and Dependants) Act 1975. In the recent reported case, the mother effectively disowned her daughter who had eloped with her boyfriend when she was 17 years old. That boyfriend later became the husband and father to their five children and they remained married some 25 years later. The mother’s estate was worth around £500,000, in the main because of a substantial death in service benefit from her husband’s premature death. There were no other children or
family members and the mother left everything to charities, with whom she had no connection during her lifetime. The Court of Appeal awarded the daughter one third of the estate which the judges felt allowed her to purchase her local authority house and have some capital to supplement her benefits. The Court took a practical view of this case and highlighted the importance of family relations. It is also important in this case that the financial circumstances of the daughter were fairly modest and this was probably a main factor for the Court in making this decision. There are a number of cases where children are successfully disinherited from their parent’s estates for whatever reason and where Wills are not challenged. We do not have a system of forced heir ship in this country and so other than a moral obligation to children and an expectation on their part what they might inherit from parents, there is no obligation to provide for them and we have a freedom of choice to leave our money to whoever we like. However, this recent case highlight how risky it is for a parent to completely disinherit a child and in these circumstances, it might be worth considering leaving them something in order to prevent future litigation. For those bringing these claims, this is certainly a helpful case which demonstrates how the courts are viewing such claims. For those defending; this is something to be very wary of and needs to be considered carefully before becoming embroiled in litigation and trying to defend such claims.
If you are concerned about a will dispute or would like to talk to our team about any of the topics raised please contact Gavin Faber T: 0121 203 5366 E: Gavin.Faber@IrwinMitchell.com W: www.irwinmitchell.com/our-people/gavin-faber