WE'RE all having to adjust our lifestyles according to the dictates of the credit crunch, and many businesses are having to adapt their services to these changing circumstances. For solicitors, this means dealing with more challenges to wills and inheritance.
One London law firm's research found that there were 228 will disputes dealt with by the High Court last year compared to only 83 in 2006. That figure doesn't accurately reflect how many wills are challenged, as many disputes are settled out of court
. Another result of the economic downturn which may influence challenges is the potential for insolvent estates, with many families worried about inheriting debts.
Even before the economic slump, our increasingly litigious society meant disputes over wills – or contentious probates – were on the rise. But, as the value of many estates drops due to the property market crash and investments take a nose-dive, even more people are mounting legal challenges.
It's been suggested that contention over wills began increasing during the boom years because rising property values meant more estates were worth fighting over. Now that estates are dropping in value, the number of disputes is continuing to rise, so it looks like we are as a society becoming more litigious, but another influence may well be that beneficiaries are more desperate to inherit than before due to their own straitened circumstances.
Increasingly complex family relationships, inadequate wills or intestacy, more bequests to charity and increased expectations of inheritance built up during years of rising property and investment values are all factors in the rise in litigation, too.
At the same time, estates may now be worth much less than envisaged because of business failures, fall in income from investments so that capital has to be used to fund living expenses, and the fact that the cost of long-term personal or nursing care for people who are living longer is absorbing a larger percentage of estates than previously expected.
All of this means it's more likely that disputes will arise, and in the last six months the number of inquiries about rights to challenge a will has increased, says Julia Rangecroft of McCormicks solicitors in Harrogate.
Any bequest, including those made to charity, may be disputed on the grounds of validity (the will or codicil is challenged because the testator did not understand what they were doing due to mental incapacity) or because those with reasonable expectations of being beneficiaries (including spouse, partner, civil partner, children or other dependents) have not received anything or not "enough". It's not seen as equitable to ignore people who've had those kinds of relationship with you in your will.
The business of bequests to charity is becoming thornier, as some legacies suddenly represent a larger proportion of an estate when the total value of that estate has shrunk substantially, thanks
to the state of the economy, and may not cover the needs of dependents.
"In one recent case, a son who had just been made redundant asked what could be done to challenge charities getting all of the estate," says Ms Rangecroft. "His mother had been in a nursing home for two years, but before that was cared for by her daughter-in-law (his wife).
"The house had been sold to pay for the mother's care, leaving an estate of £40,000. The will, made some years ago, provided for a number of legacies to charities totalling £40,000, and the residue to go to the son. But there would have been no residue after the bequests.
"Our advice to him was that there was nothing we could do. It was clear that his mother had been in her right mind when she made the will, and the son had not been dependent on her. In a situation like this, the charities
are in a difficult situation, as they can't easily turn down a legacy as a family member could if they felt something was unfair."
In another recent contentious probate case dealt with by McCormicks, a man left legacies to charity and grandchildren totalling £30,000 and the
residue of the estate to his
partner. The estate included a
half interest in his house, which, net of mortgage, was now worth £75,000, plus £30,000 of investments. The partner
wanted more cash to cushion
the loss of his income, and because, due to the state of the property market, she couldn't downsize or remortgage easily to increase liquidity.
"The partner, not unreasonably, wanted the cash, because when
a partner's income is suddenly gone, cash is very important. It wasn't that she didn't want the grandchildren or charities to
get their legacies.
"While in a lot of cases, adult individuals will agree to forgo legacies to help the principal beneficiary out, where charities
or minor children are the recipients it is particularly difficult to reconcile the competing interests.
"Charities have a duty to safeguard the interests of the charity, and children are not legally competent to give up their own property rights," says Ms Rangecroft. The deceased man's son stepped in and helped his father's partner, and both the charity and grandchildren got their legacies.
Legacy Foresight, which analyses the state of the legacy market and provides 38 of the UK's leading charities with research and forecasts, says legacy income is a vital element of voluntary sector economy, representing about six per cent of all income received by charities, but constituting as much as 10 per cent of income for the bigger charities.
Figures for the first quarter of this year show that legacy income growth in 12 months to December was just 1.7 per cent compared to 10.3 per cent in the previous year. Legacy Forecast predicts that in the coming year the average residual bequest (currently worth £54,400) will fall in value by a further 10-15 per cent.
"We're aware of a couple of current cases where charitable bequests are being challenged but it is something that will affect more and more charities," says Jenny Berry, director in the North of England for ACEVO, the Association of Chief Executives of Voluntary Organisations.
ACEVO advises those who wish to make substantial bequests to charities, including property, to consult the charity at the time they are drawing up their will and to make their family aware of their wishes.
As the effects of the credit crunch and recession increase, the chance of financial conflict over estates is likely to continue to increase, says Julia Rangecroft. She doesn't think the phenomenon will subside once the economy improves, either, because we as a nation have simply become more prone to seeking legal redress of one kind or another.