What is the Future For Claims Against Estates?

Laura McDermott, Senior Case Manager at Kings Court Trust, explains the impact of legal aid funding cuts on claims against estates and what you, as a Will writing professional, can do in order to minimise the risks for your clients.

In an effort to cut the £2bn annual legal aid bill in England and Wales by £350m a year, there have been cuts in the types of civil proceedings for which people can get funding, effective from 1 April 2013 under the Legal Aid, Sentencing and Punishment of Offenders Act.

As we are all well aware, in recent years the number of claims against estates has been on the increase. There are many different reasons why a claim is brought, for example if no provision has been made for a child or partner, or perhaps a disproportionate distribution of an estate between beneficiaries who may have expected an equal distribution. Another reason could be that in the economic downturn, people are relying on inheritance of an estate.

At the April Kings Court Trust seminars, it was outlined that more and more firms are dedicating specialist departments to estate disputes, showing the upturn in such claims. I have recently been seconded to a firm with a specialist department for trust and estate disputes. The bulk of the claims handled by this department were brought under the Inheritance (Provision for Family and Dependents) Act 1975 (“I(PFD) Act 1975”), many of which are being brought by adult children of low or no income who have not been provided for by the deceased parent (Illott v Mitson). As you can imagine, entering into any sort of litigation is an expensive venture, however, until April 2013 legal aid funding was available for eligible claimants under the I(PFD) Act 1975.

How will the cut of this funding impact on claims being brought? Aside from the argument for the access to justice, instead of being able to rely on public funding, claimants will now need to enter into conditional fee agreements (CFAs), also known as “no win no fee”, with their Solicitor if they cannot privately fund a claim and do not wish to be a litigant in person.

Entering into such agreements is a financial risk for both the claimant and their solicitor. Will we now see a decrease in claims?

During my secondment, I found the main reason for a claim is that claimants wish to “get what is rightfully theirs” and the end result was the motivation to enter a claim. With the majority of cases settling out of court at mediation/negotiation, one could argue that the risk element is somewhat reduced, since costs do not really escalate until the litigation enters into court proceedings and counsel need to be instructed.

Whilst the funding element may now make a claimant think much harder before embarking on litigation, it would seem that the number of claims may not drastically reduce, as the potential reward could be life-changing in some cases. Additionally, Solicitors faced with a reasonable prospect of success may be willing to enter into CFAs if the alternative is not getting the business at all.

In addition to the cut in legal aid funding, the Government has withdrawn the right for solicitors to claim success fees on CFAs and legal expenses insurance premiums from losing parties. It would seem that claimants are almost discouraged from making a claim, and this would perhaps discourage Solicitors from taking on borderline claims.

It would seem that regardless of the funding cuts in this area, there would still be a high number of claims owing to today’s family dynamics and increasing claim culture, as well as general economic uncertainty.

As outlined in the April seminars, when taking instructions for a Will or when making one yourself, always consider who could potentially claim against the estate. It is worthwhile recommending that your client writes a letter to the executors to be stored with their Will if any of the eligible claimants listed in the I(PFD) Act 1975 are not provided for. Whilst this will not preclude a claim, it will be important evidence for your client’s reasons for not providing for a potential claimant, and it will also show that your client did actually consider the moral claims against his estate, and therefore lessen the likelihood of a challenge to the Will on the grounds of the Testator’s mental capacity.