Article provided by Yvette Jacobs-Lee, Private Client Tax Partner at Moore Kingston Smith, for Beacon Gainer, private wealth advisory services group.
With blended families or step families becoming increasingly common, we are frequently advising on succession issues for more complex family structures. Although the answer to ensuring that an individual’s aims on death are honoured can often be a well-drafted Will created during lifetime, where assets or relationships sit across jurisdictional borders, this can lead to surprising outcomes.
The law of England and Wales provides a testator with complete testamentary freedom of disposition – and the power to share wealth amongst the wider family unit in accordance with personal wishes. Despite this apparent freedom of choice, the deceased may still not have complete certainty as to how assets will pass on death. Adult beneficiaries can agree to vary a Will within two years of the date of death, and assets will pass in line with their wishes.
Legislation enacted in 1974 enables a family member who can show they have not been properly provided for by the deceased to apply to the court for their ‘fair’ division. Good advice to the blended family would be to document an explanation as to why reduced provision has been made, to minimise the risk of a successful challenge under these provisions.
As cases under the 1974 Act increase, it could be argued that England and Wales are moving closer to a forced heirship regime, such as that in France. France’s succession law is well-known for its principle of forced heirship. This means the interests of children are mandated by law, known as the “legal reserve” or “réserve héréditaire”. But what if the law doesn’t reflect the testator’s intention?
It may surprise some to learn that Scottish law imposes certain forced heirship requirements, in contrast to the less prescriptive approach of its near neighbours. A spouse or child can claim what are known as ‘legal rights’ – rights that can differ from the provision that has been made for them in the deceased’s Will. Any claim is limited to net moveable property and does not include interests in land and buildings.
A Will may be fully compliant with English and Welsh law, but a conflict with the laws of another jurisdiction may lead to unexpected results.
The case of famous turkey farmer Bernard Matthews highlights how varying provisions in jurisdictions can interact. Matthews died in 2010 at age 80, estranged from his wife. His UK Will left the bulk of his estate to his only biological child, but he also executed a French Will to leave his property in Saint-Tropez to his long-term partner. Reports stated Matthews had hoped that the three adopted children from his marriage, who all held substantial assets in their own right would accept his French Will and he left a letter of wishes expressing his desire. Against those wishes, Matthews’ adopted children used their rights under French law to make a claim for their share of the French Villa. A case of fowl revenge?
Another much-publicised case concerning ‘French Elvis’ Johnny Hallyday highlights how children from an earlier relationship can end up left out when it comes to inheritance. Hallyday, resident in Los Angeles in the years leading up to his death in 2017, executed a Will in the US, declaring it to be made in accordance with US law, benefitting his second wife and their two adopted children. Aggrieved and disinherited, the adult children from his first marriage brought a case in the French courts asserting their rights to a share under the principles of réserve héréditaire. Reportedly Hallyday declared he had made adequate provision for his adult children in his lifetime, but this was ignored.The case was settled out of court with the disinherited children taking a cash sum, leaving the bulk of Hallyday’s estate (and substantial debts) with his second wife.
Under US succession law, Hallyday was able to divert his estate away from his children. Had he sought to disinherit his new wife in the same way, the case may have ended differently. While there are no forced heirship rules in the US operating in quite the same way, many states allow a surviving spouse, and in some cases, minor children, certain rights against the deceased’s estate. Under Florida probate law for example, a surviving spouse has a right to elect to a 30% share of the estate of the deceased spouse as at the date of death. Should the Will make provision for a lesser amount, an application to the court will protect the spouse’s right to inherit – and as a result, potentially disinherit the next generation. Nine US states have community property laws stating that property acquired during a marriage (other than by gift or inheritance) is equally owned by each spouse and devolving accordingly on death, irrespective of what might be provided for by Will.
The increase in blended families and the possibility that harmony may not always be universal among them, has led testators to seek a balance between benefitting their spouse on the one hand and their children from a previous relationship on the other. It is clear that despite the best laid plans, professional advice is more vital than ever if this aim is to be achieved.
