It is possible for a gift in a Will to be made subject to conditions. An approach to trying to reduce challenges to the provisions in a Will, of which we have seen more in the last few years, has been to leave gifts, but only on the basis that the person receiving the gift will not challenge the Will.
This is known as a ‘No Contest’ clause, or ‘In-Terrorem’ – a Latin term meaning ‘in fear’. Essentially, this is a clause that pertains to a provision in a Will that threatens to reduce or eliminate the inheritance of anyone who contests the validity of the Will.
Its purpose is to discourage beneficiaries from causing legal trouble after the testator’s passing. Therefore, potential challengers take on a certain amount of risk.
In the recent case of Dr Sim, he chose to include such a clause in his Will, which led to numerous complications upon his death.
The Challenge to Dr Sim’s Will
As the Judge said, in his judgement, ‘Dr Sim lived a complicated life’. He had children from three marriages and one extramarital relationship. The claimant, his last wife, Valerie, married him in July 1998. By the time he gave instructions for his last Will in 2017, Dr Sim’s relationship with Valerie was strained, to say the least, and he was living in a nursing home.
Valerie had sued Dr Sim for divorce and had made a variety of allegations of abuse against him. However, the Judge found Valerie’s evidence unreliable, inconsistent and exaggerated.
When Dr Sim died in 2018, his Estate was worth approximately £1.2 million. In his Will, Dr Sim had left Valerie £250,000 if she executed a Deed of Release of all rights she may have to a claim under the Inheritance (Provision for Family and Dependants) Act 1975. He also left her a further £125,000 provided that she had done everything required to release her interest in a property in Dubai that she jointly owned with him. He also left her the income from the residue, which was to be held on Trust during her life and then distributed amongst various children.
Rather than accept that provision, Valerie brought a claim under the Inheritance (Provision for Family and Dependants) Act 1975, saying that the Will did not make reasonable financial provision for her and she also did not give up her rights in the Dubai property. Accordingly, under the In-Terrorem clause within the Will, she forfeited her entitlement to the monetary gifts of £375,000.
The Court said that Dr Sim was entitled to have such a clause in the Will and that said clause was effective. The Court found that it was reasonable for conditions to be attached to the payments. Also, the legacies of £375,000, coupled with the life interest in a Trust worth something like £600,000, constituted reasonable financial provision for Valerie, save in one aspect relating to housing.
The Court noted that where the provision, made by a Will, is objectively reasonable, it was also reasonable to include a provision intended to discourage beneficiaries from embarking upon claims, as they would cause delay in the administration and distribution of the assets and could also incur costs defending a claim. In this case, the beneficiaries had been kept out of their monies for over five years.
The Court recognised that, under the provisions of the Will, Valerie would be rendered homeless and therefore ordered a variation of the Trust to permit purchase of accommodation in which Valerie could live, which the judge said, with the £375,000 which she could have received under the Will, would have left her with reasonable financial provision.
Accordingly, having chosen to pursue the claims, the Court said it would be wrong to allow a claimant to pursue a 1975 Act claim, in the knowledge that by so doing they would forego a benefit and then say that because they have foregone the benefit, the Will fails to make reasonable financial provision for them.
Thus, the Court found that the Will did make reasonable financial provision for Valerie and therefore her claim failed, but also having brought the claim, she then had to forego the £250,000, which was only left to her if she did not bring a claim and also, as she had not given up her share in the Dubai property, she did not receive the £125,000.
The consequences of an ‘In-Terrorem’ clause
By bringing the claim, Valerie ended up far worse off. She did not receive the cash legacies and also, having been unsuccessful in challenging the clause, the judge made an adverse costs order against her.
Accordingly, it can be seen that a well-advised Testator can provide sums which a Court would find do provide the potential applicant, under the 1975 Act, with reasonable financial provision, but by including a No Contest (In-Terrorem) clause it will make potential claimants think long and hard about the benefits of bringing a challenge.
Whilst Inheritance Act claims are notoriously difficult to value with any precision, it may be that in circumstances where Testators are looking to cut-out, or reduce, provision for beneficiaries who would have a claim under the Act (spouses, civil partners, cohabitants and children and those dependant upon the deceased) that private client lawyers should have conversations with their colleagues who specialise in contentious probate, to best estimate what a Court would regard as reasonable financial provision.
A well-placed gift could then indeed have the advantage of avoiding claims and the costs and time associated with such claims. Indeed, it may be sensible to err on the generous side, given the savings in costs and time.
It is easier to estimate what that provision should be if the Testator is unlikely to survive that long, since the longer the gap between provision and a claim, the more chance there is of people’s circumstances changing, which will affect the answer to the question whether the conditional provision made in the Will is reasonable or not.
In this specific instance, it would also probably have helped Valerie if the Judge had liked Valerie more. However, he said he could not regard her as a reliable witness, or as a narrator of truth, and pointed out that another Judge, on a preliminary issue, had described her as unreliable, inconsistent and inherently contradictory, and had described her questioning of the witnesses as provocative and offensive, and that allegations she levelled at them were wholly without any substance.
Being likeable goes a long way towards being successful in many cases.
Should you require support in drafting a Will, or advice regarding specific gifts or the insertion of a No Contest (In-Terrorem) clause, the team at Buckles would welcome the opportunity to discuss your needs.
Equally, if you feel you have a claim or cause to challenge a Will, please contact our contentious probate team for an impartial, confidential consultation.
