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Ilott v Mitson – Inheritance Act Claims

to the dogs

Animal Charities succeed in Appeal to Supreme Court.

On the 15th March 2017 the eagerly anticipated judgement on the case of Ilott v The Blue Cross and Others from the Supreme Court was handed down.

Mrs Ilott made an application under the Inheritance (Provision for Family and Dependants) Act 1975 following the death of her mother Mrs Jackson. This legislation allows people to challenge inheritance provision if they can prove that it does not provide “reasonable financial provision”.

Mrs Ilott and her mother had become estranged 26 years prior to Mrs Jacksons death. When Mrs Ilott was 17 years old she had left home to live with and later marry a man that her mother did not like. Despite a few attempted reconciliations over the years, they had remained estranged and Mrs Jackson made in clear in the number of wills over that time, including her last, which stated that she did not wish to leave any of her estate to her daughter.

On her death Mrs Jackson left an estate worth approximately £486,000. Her will stated that other than a small amount to be left to the BBC benevolent fund, the remainder was to be left to three charities.

Mrs Ilott’s position was that she was living in Housing Association Accommodation and was reliant upon state benefits. She stated that she had not had any expectation of receiving anything from her mother’s estate.

When the case was first dealt with, the court awarded her £50,000. Mrs Ilott appealed and in July 2016 the Court of Appeal determined that she should have £143,000 to enable her to purchase her accommodation plus a further £20,000 as maintenance to be paid in such a way as to enable Mrs Illot to continue to receive her state benefits. The charities appealed to the Supreme Court.

The Supreme Court decision was to set aside the order made in the Court of Appeal and restore the original decision.

In the Judgement the court confirmed that in accordance with the legislation, unless the applicant is a spouse or partner “reasonable financial provision” is limited to what is reasonable for maintenance only. They confirmed that what is “reasonable” is an objective standard to be determined by the court and that what is “reasonable” did not extend to everything that the applicant wants but is also not limited to bare essentials.

The court confirmed that the appropriate level is case specific requiring the court to consider various factors and whilst maintenance might usually be considered to be income it could be dealt with by the provision of a lump sum.

The factors which the court have to take into account when dealing with these cases include;

  • The financial needs income and resources of the applicant(s) and any beneficiary.
  • Any obligation or responsibility which the deceased had towards to the applicant(s) and any beneficiary.
  • The size and nature of the estate.
  • Any physical or mental disability of the applicant(s) and any beneficiary.
  • Any other matter including conduct of the applicant(s) or any other person which the court may consider relevant.

The Supreme Court considered that the judge first hearing the matter, had taken into account all the factors that he was supposed to and was entitled to reach the decision that he had after weighing up all of the evidence. As such the Appeal Court should not have interfered and their decision should be set aside.

Whilst there had been much discussion surrounding this case and whether it would provide new hope to disgruntled relatives cut out of a deceased’s will or provide further challenges to our right to leave our property to whoever we want, the outcome has not been quite so dramatic. A testator’s right to deal with his estate as he wishes remains intact subject only to very limited claims that can be bought where “reasonable provision” has not been made so long as the Will itself is valid. More particularly the Supreme Court have essentially confirmed that unless the judge first hearing the matter reaches a decision no other judge given the same information would have come to, gets the law wrong, takes into account something he shouldn’t or fails to take into account something he should have, then the appeal court can not interfere with the award.

The reality of these cases is that the court retains much discretion in their objective assessment of the case. These are challenging cases which require an assessment of competing interests and are made all the more difficult due to the fact that emotions will understandably run high. Early advice is key and ideally every attempt should be made to reach an agreement without going to court subject to the strict time limits that are in place in which to bring a claim.

If you have any issues in relation to an inheritance dispute you can contact our family team. Our team of specialist family solicitors are able to offer appointments at our offices in Bishops Stortford, Hertford and Enfield and Nationally via telephone and Skype.

For more information and advice contact us on 01992 558411 or complete our online enquiry form.

Karen Johnson is Director and Family Mediator of Breeze and Wyles Solicitors Ltd. Karen is a highly skilled and experienced Family Solicitor with in excess of 15 years experience of working in Family Law. She is a Resolution Accredited Specialist in the fields of Domestic Abuse and Financial Matters. Karen is additionally a Family Mediator trained by and a member of the Family Mediators Association (The FMA).


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Taking time to take stock pays off in inheritance tax planning

bankingAs the end of the tax year approaches, it’s a good time to make sure you’re maximising your opportunities for inheritance tax reliefs. This year, as well as taking advantage of exempt lifetime gifts and transfers, property owners should also look at how the new transferable residence nil rate band fits their profile.

The Residential Property Nil Rate Band

Under the new rules, when a person leaves a residential property to direct descendants there will be an additional nil-rate band for inheritance tax purposes – the transferable Residence Nil-Rate Band allowance (RNRB).

To qualify, the property must have been a residence of the taxpayer and be left to direct descendants, so that excludes brothers and sisters, nieces and nephews. It will include natural, adopted, step and foster children, grandchildren and remoter descendants.  The spouse or civil partner of a living or dead direct descendant may also be the beneficiary, unless they have remarried.

The RNRB will be available from April 2017, in a phased introduction over the next four years, starting at £100,000 per person. This additional IHT nil-rate band for residential property will be on top of the £325,000 per person nil-rate band, which continues to apply to all assets in your estate, regardless of their nature and without restriction on who inherits the assets.

Like the existing nil-rate band, the RNRB will be transferable to a surviving spouse or civil partner, if unused on the death of the first to die, as long as the first to die owned the property or a share in it. A transferable RNRB will be available even where a spouse has died before April 2017 and in this case, the property does not have to have been held in joint names.  By 2020, the RNRB will be £175,000 per person, giving a potential total IHT nil-rate allowance of £500,000 for a single person or £1m for a couple who satisfy the criteria. These RNRB figures are maximum figures: if the value of your house, or your share in a house, is less, then that lesser value will be your RNRB.

The potential savings are significant – by 2020, the estate of a couple could see a saving of £140,000 in inheritance tax where all criteria are satisfied and the maximum RNRB allowance is utilised. So, in tax planning terms it’s high priority and it is worth making sure your estate doesn’t miss out on the allowance if you are a potential match on the criteria.

What may not qualify for the allowance

The additional residential property relief will taper away once an estate is valued at £2m, and estates worth over £2.35m will not benefit, and neither will certain types of trusts. The treatment of trusts has been subject to review since the original announcement of RNRB, as it was not clear initially how they would be treated.  Trusts are frequently used to protect assets, for example when children are young or otherwise not fully capable of handling their affairs, or to provide for a new spouse after re-marriage while still making sure assets pass to children of an earlier relationship.   It’s now been clarified that the RNRB will be available where beneficiaries of a trust are direct descendants and the trusts provide an absolute right to benefit, or where a disabled person is the main beneficiary, but will not be available for so-called discretionary trusts.  As the position is complex, anyone who has any form of trust in their will should make sure that it is still the best arrangement.

People will be allowed to sell a larger house and still retain the relief from inheritance tax, as the Government are keen to encourage older owners to down-size to free up larger properties. Only one downsizing move may be taken into account, so if there are several downsizing moves between 8 July 2015 and the date of death the executors can choose which is to be used for the purpose of the RNRB.  Downsizing can include disposing of part of a property, for example part of your garden.

However, to hold on to the relief after downsizing, the proceeds of the downsizing cannot be passed to a direct descendant during a person’s lifetime, as the relief will not apply to reduce the tax payable on lifetime transfers that are chargeable on death within seven years of the gift. Again, this is rather complicated and requires specialist advice.

Gifts and exemptions

More straightforward is the opportunity to mitigate inheritance tax by making smaller gifts or out of surplus income.

Everyone can make use of the £3000 per annum annual exemption which can be used to make gifts up to the total each year, and if the allowance is not used fully in any year, it can be carried forward one year.

On top of the annual exemption, the rules on small gifts allow individuals to gift up to £250 per recipient per year with no limit to the number of recipients.   However, if you give more than £250 to any individual, you lose the exemption completely, even on the first £250.   And you can’t use your small gifts allowance together with any other exemption when giving to the same person.

Looking at these two allowances together, if you had three children, ten grandchildren and four godchildren, you could make gifts of £1000 to each of your three children by using the annual exemption of £3,000 for all such gifts.  Then you could give up to £250 per year to each of your grandchildren and godchildren using the small gift exemption.  You cannot make an exempt small gift to your children as you have already used the annual exemption to make a gift to them.   These allowances are automatic, but it’s a good idea to log and track the gifts as it makes it easier for your executors and simplifies dealing with HMRC.

Another opportunity is relief on gifts made out of surplus income, but the exemption for these gifts must be claimed by your executors after your death. Here, good record-keeping is vital, because to qualify as normal expenditure out of income it must:

  • Be part of a regular pattern of giving
  • Taking one year with another, be made out of income
  • After the gifts and other usual expenditure, you must be able to maintain your normal standard of living

So, to make such payments, you need to record in writing that you intend to make the gifts regularly and then keep a record of income and outgoings so that your executors will be able to demonstrate that you had surplus income from which the payments were made. Examples of the sorts of payments range from regular monthly payments to a grandchild’s savings account or payment of school fees through to regular gifts on special occasions.

Any other lifetime gifts you make, other than gifts into a trust, are known as potentially exempt transfers (PETs).  A PET becomes an exempt gift if you survive the making of the gift by seven years.  However, if you die within seven years of making the gift, the value must be brought into account when calculating inheritance tax due from the estate.  Tapering relief may be available on the tax attributable to PETS if you die more than three years after the gift, but only if the total value of the lifetime gifts made in the seven years before your death exceeds the nil rate band in force at your death.

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If you’re concerned about inheritance tax and hope to mitigate it through gifting, asset transfer or the new residential property allowances, it’s important to check the position regularly. Getting it right, and reviewing any existing will, is key to making sure reliefs are maximised. Give or Private Client Team a call on 01992 558411 to discuss it further.

Check list for the new inheritance tax residential nil rate band

 

  • You have direct descendants and intend to leave your residential property to one or more of them on your death
  •  You have a total estate worth more than the current £325,000 IHT nil rate band per person threshold, but less than £2.35m overall
  • You have downsized or sold your residential property, or intend to, where the sale took place after 8 July 2015 and you have retained the proceeds

 

ENDS
Web site content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Reference:

Clause 9 of the Finance Bill (2) 2015

https://www.gov.uk/government/publications/finance-bill-2015-public-bill-committee

http://www.publications.parliament.uk/pa/bills/cbill/2015-2016/0057/16057.pdf

https://www.gov.uk/government/publications/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note/inheritance-tax-on-main-residence-nil-rate-band-and-downsizing-proposals-technical-note

https://www.gov.uk/inheritance-tax


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Worrying number of older adults do not have a Will

Independent research conducted by Breeze & Wyles indicates that around half of UK adults have not written a will. The research goes on to indicate that in older people this number rises considerably with the percentage rising to over 60% for over 60s.

The certainties that arise from having a will should not be understated. We set out four reasons why you should make a will

  1. If you die without a will the law will apply to distribute your estate. This rarely reflects what people making wills would wish particularly if they have a spouse;
  2. A will gives certainty to the family of someone who has died at what is a very difficult and stressful time;
  3. Some of your family may be financially dependent on you and by not making a will it is always possible that this person may not be provided for adequately on your death compounding the grief that they feel at your death;
  4. There are legitimate ways in which you can reduce the tax you will pay by dealing with your estate in an appropriate way on your death. Without a will this is not possible.

If you do not have a will and any one or more of the above four items concerns you contact us on 01992 558411 and ask for Donna Collins or Patrice Lawrence.


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New rules for those without a will

From October, different rules come into force on how assets should be distributed when someone dies without making a will, but it is still likely to cause a shock to families, particularly where couples were not married or in a civil partnership
New rules on what happens when someone dies without making a will should make it easier for families in future, but the changes don’t go far enough according to experts.
The Inheritance and Trustees’ Powers Act 2014 received the Royal Assent on 14th May 2014 and is expected to come into force on 1st October 2014.
This includes changes to the intestacy rules, which govern how a person’s estate is distributed if they die without a will – which is known as dying ‘intestate’. The estate is made up of the assets owned solely by the person who has died, as any assets owned in joint names will pass automatically to the surviving joint owner, unless there is an agreement between the owners that they own the asset in specified shares.
The main change is that the surviving spouse or civil partner will now receive a higher proportion of the estate to use as they wish, but unmarried partners will still not benefit.
Under the old rules, where someone dies intestate leaving a spouse or civil partner and ‘issue’ – which means direct descendants such as children, grandchildren great grandchildren - the partner would take the first £250,000 and personal belongings absolutely, they would have a life interest in one half of the balance, and the children would take the other half of the balance. A life interest means that the surviving spouse is entitled to use the property or to receive its income until their own death at which point the property passes to the deceased’s issue.
Under the new rules, the surviving spouse or partner still receives the first £250,000 and personal belongings absolutely, but they receive half the balance absolutely, so it is their own property. The remainder of the balance continues to go to the issue.
Another change is that under the new rules, where a person dies intestate leaving a surviving spouse or civil partner but no issue, the surviving spouse or partner will take the whole estate. Under the old rules the spouse or partner would take the first £450,000 and they would have to share the balance, if any, with the deceased’s family, that is, their parents, siblings or nephews and nieces.
Another important change is that under the new rules, where a child is adopted after the death of an intestate parent, the child will not lose their interest under the deceased parent’s estate even though under the Adoption and Children Act 2002 the adoptive parents are to be treated as the only parents of the child for all legal purposes.
But none of the changes make any provision for couples who have not gone through a marriage or civil partnership ceremony. In their case, none would go to the survivor, it will all pass to children or, or if there are no children, then it will go to family, such as parents or siblings.
Said wills and trusts expert Hardeep Nijher of Breeze & Wyles Solicitors Limited: “The rules were last reviewed back in the 1970s. We’ve seen big changes in what defines ‘family’ since then, whether it’s because people are less likely to get married or because we’re seeing more ‘blended’ families following divorce and remarriage. Also, the value of property has gone up dramatically, so many more people who own property in their sole names are likely to be subject to the intestacy rules on how assets pass on.
“So, although these changes are certainly welcome, and well overdue, it remains the fact that without a will, you can’t make sure that your family will be cared for in the way you would wish. Whatever your marital status it’s worth doing – and if you’re not married and have significant assets such as property in sole names, then it really should be top of your list. It’s also particularly important where there is a second marriage, with children from previous relationships. “
He added: “Making a will is something that people often put off, but it’s not a difficult or expensive thing to do, and it means you get the outcome you want.”
ENDS
Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.
Inheritance and Trustees’ Powers Act 2014

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Avoiding family feuds when you die

Inheritance issues are in the headlines, following the reading of Nelson Mandela’s will, highlighting problems that are becoming increasingly common with the rising number of ‘blended’ families following remarriage.
Commentators have pointed to the international leader’s decision to exclude his second wife Winnie from the will and the restrictions he placed on legacies to some of his surviving children.
Closer to home, the dilemma of getting it right for your family has also been featured in the long-running Archers radio serial, following the reading of Jack Wooley’s will where the bulk of his estate went to his much-reviled adopted daughter Hazel, with a further revelation by widow Peggy of her own plans to exclude well-heeled family members who she thinks can manage without her assets.
Mandela left much of his estate in trust and these can be a simple and effective solution to the problem of providing for a husband or wife in a second marriage, whilst still making sure that children from an earlier relationship do not miss out. They can also be useful where there are concerns about a child inheriting a large amount of cash.
For a couple with children from previous relationships, part or all of their estate can be left in trust for the survivor, and then to their respective children following the survivor’s death. This means that the surviving partner can benefit from the assets – such as staying on in the home or receiving income from investments - but the children will be sure they receive their parent’s estate in due course.
Said wills and trusts expert Hardeep Nijher from Breeze & Wyles Solicitors LLP: “It’s clear that Nelson Mandela had given a lot of thought to the matter. He dealt with many of the gifts before he died, and put money into trust where he thought there might be problems.
“Although many headlines have pointed to Winnie Mandela being excluded, it’s not at all unusual for a first wife to be excluded, as the divorce settlement should have taken that into account. The important thing is to think through what will happen to inheritance for children when there is a second marriage. It can be a bit like having to satisfy two different families, so taking time to discuss the options and making sure everyone knows your intentions – like Peggy Archer has done in the radio serial – can help avoid disputes after you die.”
If there’s a dispute, where a partner or family member was being maintained financially and feels they have not received what’s known as ‘reasonable provision’ in a will, they can bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Any claims must be made within six months of the date of the grant of probate and ideally made before the estate has been distributed. If a couple were not married, then to make a claim the survivor would have to show they were living together throughout the previous two years.
ENDS
Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.

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Making it fair and square for all your families

Inheritance claims are on the rise, as family structures get more complicated with the increasing number of remarriages.

Currently 40% of marriages are second time round these days, and spouses and children of both first and second marriages are increasingly making claims where they feel they have been unfairly treated in the will of a former partner or parent.

And around 1000 new cases have been formally commenced in a three-year period according to recent figures by the Law Commission, which has highlighted the need for a change in the law to respond to the increasingly complex structure of families and increasing numbers of unmarried couples.

The problem was spelled out following the death of businessman Roy Lilleyman who bequeathed model cars, worth around £17,000, to his second wife Barbara, as well as some coins and 'limited rights of occupation' in the couple's two properties.

The majority of the estate was left to Mr Lilleyman's two sons from his previous marriage, Nigel and Christopher.

But Mrs Lilleyman, who had put the sale proceeds of her former house into property that was jointly owned with her husband, and had given up her job at her husband’s request to care for him, challenged the will on the basis that 'reasonable provision' entitled her to a 'substantial share' in the matrimonial property.

The claim was brought under the Inheritance (Provision for Family and Dependants) Act 1975 which allows the provisions of a will or an intestacy to be challenged if "reasonable provision" has not been made for a spouse or civil partner, a cohabitee, a child of the deceased or anyone else who was being maintained financially by the deceased when they were alive.

When the court considers whether or not reasonable financial provision has been made, factors include the needs and resources of the claimant and any other beneficiaries, the length and nature of the relationship with the deceased and the size of the estate. Spouses and civil partners are entitled to more generous provision under the Act than other classes of beneficiaries, which helped Mrs Lilleyman in her claim.

To make a claim under the Act, a disappointed beneficiary needs to bring any claim within six months from grant of probate, which is when the estate has been finalised and the assets distributed. For cohabitees, they need to show they were living with their partner throughout the two year period before they died, in the manner of a spouse or civil partner.

Said wills and trusts expert Hardeep Nijher, Solicitor at Breeze & Wyles Solicitors LLP : “People often put off writing their will, but when they do, it’s very important they understand the implications of their decision making, particularly when it comes to second marriages, where there are two different families to be satisfied in many cases.

“The person making the will won’t be around to see the problems, but it’s very unlikely they will secure the outcome they intended if they don’t take advice about what will and won’t cause problems later. Making a properly informed decision and sharing it with all the family is the best way.”

He added: “In the example of the Lilleymans, had Mr Lilleyman realised that his wife was entitled to a certain level of financial provision, it would have made more sense for him to leave her a larger inheritance, which would have avoided the costs to his estate and the damage to family relationships caused by the litigation.”

ENDS

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Lilleyman v Lilleyman & Anor [2012] EWHC 1056 (Ch)

http://www.bailii.org/ew/cases/EWHC/Ch/2012/1056.html

The Law Commission : INTESTACY AND FAMILY PROVISION CLAIMS ON DEATH

http://lawcommission.justice.gov.uk/docs/lc331_intestacy_report.pdf


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Why disclosing all may be best for the kids

The recent case of Kloosman v Aylen highlights the need to obtain proper legal advice and to openly discuss intentions before making large lifetime gifts.
Elderly parents wanting to benefit children or friends before they die need to consider the consequences, and be clear and open about their intentions if they want to avoid family fights and court battles.
A recent case highlighting this problem revolved around the will made by Richard Frost in September 2007, when he set out that he wanted to leave a third of his estate to each of his daughters, Linda and Susan, and a third to his son and his grandchildren.
Shortly afterwards he moved in with his daughter Susan and sold his house for £350,000. Then, knowing that he was dying of bowel cancer, he made gifts of £100,000 to each of his daughters out of the proceeds of his house sale. He died a few months later in March 2008 and, as a result of the gifts made during his lifetime, his estate was worth only £135,000.
The executor of his will, Mr Kloosman, did not know whether Mr Frost intended the gifts to the daughters to be treated as payments on account of the gifts under the will and so he asked the Courts to decide the matter.
The judge was persuaded that Mr Frost made the gifts to the daughters to show his gratitude to them for looking after him and to compensate them for the expense incurred in doing so, and she ordered that the estate should be distributed as set out in the will without regard to the lifetime gifts.
No one will ever know for certain what Mr Frost intended. He may have assumed that it was obvious that the gifts to his daughters should be brought into account in distributing his estate equally, but it is just as likely that that he never gave the issue a moment’s thought.
What is certain is that he left a legacy of ill will and division amongst his family by not stating his intentions. If he had taken advice and made a properly informed decision, his family might have found it easier to accept the outcome.
ENDS
Web site content note:
This is not legal advice; it is intended to provide information of general interest about current legal issues.

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Fakin’ it when they should have been makin’ it….

The partner of a millionaire estate agent who died suddenly has been found guilty of creating a fake will, when she discovered his divorce had never been finalised.

But Gillian Clemo, who forged the will of her lover Chris John, would have had an excellent chance of receiving a large pay out from his estate if she had obtained legal advice on her rights, instead of taking the law into her own hands.

That’s the view of legal experts following her conviction for forgery.

Mr John was a wealthy estate agent from Wales whose wife, Helen, left him when had an affair with Gillian Clemo. Acrimonious divorce proceedings followed and Mr John and Ms Clemo set up home together.

Seven years later Mr John died leaving an estate valued at £5 million but with no will. A dispute over who should administer the estate developed and in the midst of this it was discovered, to the surprise of everyone involved - including Helen John herself - that the divorce between Mr and Mrs John had never been finalised. The result was that Mrs John and her daughter would be entitled to the estate between them.

A few days later, Ms Clemo claimed to have discovered a will, in which Mr John left the estate to his daughter and appointing his sisters to be executors.

In a bizarre twist, his ex wife Helen then produced what she claimed was a codicil, an addition to the will, changing the executors. This was quickly shown to be a forgery and Mrs John was cautioned by the police, but soon suspicion fell on the will recently discovered by Ms Clemo, as the signature did not look like Mr John’s and his daughter’s name was mis-spelt twice.
When the case reached court, it took the jury just 90 minutes to decide that Ms Clemo was guilty of having forged the will, in the apparent hope that Mr John’s sister would allow her to continue to live in the home she had shared with Chris John.

“The sad aspect of this case is that any solicitor skilled in this area of the law would have advised Ms Clemo that she would have an excellent chance of benefitting from the estate if she made a claim under the Inheritance (Provision for Family and Dependants) Act 1975,” said contentious probate expert Jane Dismore of Breeze & Wyles Solicitors LLP: “ This Act allows certain people to make a claim to the Courts if they feel that the will of a person who has died, or the intestacy rules if the deceased left no will, do not make ‘adequate financial provision’ for the person claiming.”

The class of people who may make a claim under the Inheritance Act includes a person who has, for at least two years ending with the date of death, been living in the same household as the deceased if they were living ‘as man and wife’.

On this basis Ms Clemo would have qualified to make a claim, and although there is no guarantee of success, the courts can take a very wide range of factors into account. The fact that the Johns’ divorce was never finalised because of an oversight that remained undetected would be one of them. The courts have power to make a wide variety of orders which can include that a claimant can carry on living in a particular property, which appears to have been all that Ms Clemo was seeking.

Mrs Dismore added: “This is an extraordinary story and the awful mess could so easily have been avoided if either Mr John or Ms Clemo had taken legal advice. Mr John could easily have made a will that would have satisfied Ms Clemo’s need for security without denying his daughter any of her reasonable expectations. And even with that will missing, Ms Clemo would very likely have succeeded in obtaining her fairly modest wish to remain in the couples’ house in Cardiff, if she had made a claim under the Inheritance Act.”

Web site content note:

This is not legal advice; it is intended to provide information of general interest about current legal issues.

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