Who wants to be a millionaire? Inheritance disputes in the UK in the age of the Great Wealth Transfer
4 July 2023 | Applicable law: England and Wales | 5 minute read
"I don’t", sang Celeste Holm in High Society – but increasing numbers of people are now millionaires. The Daily Telegraph reports that the number of inherited estates worth more than £1m has increased by over a third in five years, from 8,340 in 2013-14 to 11,210 in 2018-19. In the first half of the 2022-2023 tax year, inheritance tax receipts were the largest they have ever been, at £3.5 billion.
With the national conversation dominated by the cost-of-living crisis, generational wealth is under the spotlight. Now more than ever, family members may be relying on inheritance to get on the property ladder or even to make ends meet.
'Ask the Audience': What is the Great Wealth Transfer?
In the coming decades, billions of pounds will trickle down the generations as 'Baby Boomers' – roughly, those born between 1946 and 1964 – pass away, or make lifetime gifts as their own spending decreases. By one calculation, intergenerational wealth transfers are forecast to increase from £69 billion in 2017 to £115 billion in 2027 and £355 billion in 2047.
In April 2020, median total wealth amongst respondents aged in their early 60s was almost nine times as high as those aged in their early 30s.
The affluence of the 'Boomer' generation has been a source of considerable analysis - not to mention resentment from those growing up in more straitened times. One of the most reliable predictors of overall wealth is homeownership, and in 2021-2022 86.1% of those who owned their home mortgage-free were 55 or over. In 1970, when the Baby Boomers were coming of age, the median (male) salary was £1,414 and the average house price was £3,980. In 2022, their children and grandchildren might earn a median salary of £33,280 but the average house price has reached £294,000. In 1997, fewer than one in ten people in their mid-30s to mid-40s were renting from a private landlord; by 2017 it was a third.
'Phone A Friend': what does the Great Wealth Transfer mean for families?
The implication of rising prices is that home-ownership is further out of reach if starting from zero than it would have been in 1970. Much-maligned millennials are in many cases unable to get on the property ladder unless their asset-rich parents – literally – pass on their good fortune.
Many parents are very happy to do so, but under English law, there is no obligation. Children will inherit an estate if there is no Will, to a greater or lesser extent depending on whether there is also a surviving spouse, but when making a Will a testator can make any decision they like- unlike in much of Europe, where 'forced heirship' applies, they can leave nothing at all to family members if they choose.
The fact that this is legal on the face of it does not always stop disappointed family members embarking on what can be the lengthy, expensive and emotional process of challenging a will or making a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
'Baby boomers' with fairly normal asset bases – a mortgage-free property and cash – might assume that their estates are not worth enough to fight over. There is a perception that inheritance disputes belong in high society: Lady Tara Wellesley's claim for provision from the estate of her father the Earl Cowley, or the self-styled 'Lord' Brett McLean claiming that his mother left him her house so that he could continue to care for her green Amazonian orange-winged parrot.
In practice, especially in the current climate, the value at stake in an estate is no guarantee of or defence against a dispute. As well as the multi-million-pound estates which are seen as the usual target for such claims, we have encountered disputes over estates ranging from £250,000. And even disputes over relatively modest sums can be bitterly fought when there is a backdrop of disappointed expectation. In the recent case of Clitheroe v Bond, where siblings John Clitheroe and Susan Bond found themselves in Court three times in three years, the value of the estate was a comparatively modest £350,000, (making the disputed legacy, as the judge highlighted, 'materially less than the costs incurred'.
Whilst it's only one factor, the increasing sums tied up in estates might well herald an increase in disputes, especially when combined with austerity and an aging population.
'50:50': How can I reduce the chance of a challenge?
There is no sure-fire way of making your Will dispute-proof: a really determined challenger will always find an argument to make, even if it's a bad one. But there are some easy precautions.
- Involve a solicitor. The Court of Appeal has said (in Paul Hewitt and Natasha Stourton's case of Hawes v Burgess) that the involvement of an experienced independent solicitor is a powerful safeguard. More recently in Hughes v Pritchard, the Court said that it was a 'statement of the obvious' that an experienced solicitor's impression of a testator will be very important if there is a suggestion that the testator lacked capacity to make a will.
- Be open with your solicitor if you want to make a change. Under English law, you may decide to leave your estate to whoever you wish, but it is easier to cast doubt on that decision if it seems to come out of the blue. If you are making a decision which you know may upset certain family members, and/or if you want to go in a different direction from your previous pattern of will-making, tell the solicitor: knowing this will help them to help you.
- Go into more detail rather than less. If you have an existing Will, bring it along to the meeting and explain to the solicitor what changes you want to make and why. Take the solicitor through your immediate family tree (and other people who are close to you) and describe whether you are choosing to benefit them and why/why not.
- Involve a doctor if appropriate. Where testators are elderly or in poor health, a solicitor may recommend that they visit a GP to assess capacity before they execute their new Will. Don't be offended if your solicitor suggests this; it is a very common safeguard and can make a real difference if the Will is challenged later on.
- Have difficult conversations upfront. If you are planning to leave large parts of your estate to charity, or other than to close family, it can help to discuss this beforehand so that it does not come as a shock to those who might end up disappointed.
'Who wants the bother of a fancy estate?' asked Frank Sinatra in 1956. In 2023, families may not need the 'fancy' estate to encounter the 'bother'.