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Case law: Family and dependents claiming from a deceased’s estate can rely on ‘standstill’ agreements to explain late filing of claim

Family and dependents wishing to claim ‘reasonable financial provision’ from a deceased estate may be able to file their claim after expiry of the statutory six month time limit for such claims, as the Court of Appeal has overturned a decision that they can no longer rely on a ‘standstill’ agreement to justify their delay.

September 2019

This update was published in Legal Alert - September 2019

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Family members and dependents of a person who has died can, in certain circumstances, make a claim against the deceased’s estate on the basis that the deceased did not make ‘reasonable financial provision’ for them. They may be entitled to such financial provision as would be reasonable in all the circumstances of the case for them to receive for their maintenance.

However, such claims must be made within six months of the date the personal representatives obtain probate (or letters of administration if there is no will), unless the court gives permission for a claim to be brought outside that period.

In one case, a spouse applied to extend the time for bringing a claim for reasonable financial provision after her husband had died. Her application was made almost 17 months after her husband’s executors obtained probate.

The relevant Act does not contain guidance on how the court should exercise its discretion, although legal decisions in court cases do provide some help – one criterion is that the person making the claim must give good reasons for the delay.

In this case, the couple who split their time between the UK and USA had cohabited for many years, but married when the husband discovered he had a fatal brain tumour. At that time the husband set up a joint account which his wife automatically inherited when he died, which meant she received $375,000.

He also made a new will, setting up two will trusts from the date of his death, and provided the trustees with a letter of wishes. Letters of wishes are non-binding letters to trustees, letting them know who the person setting up the trust would like them to consider when deciding who should benefit from it. Trustees can then decide whether they will be guided by what is in the letter.

The trusts were complex, the trust funds were significant and the widow was the primary beneficiary. She was able to live in a house the couple had bought in California, and could expect to receive significant income from them – in fact the trustees were eventually paying her $26,250 per month.

She stated that her reasons for the late application included that:

  • She had signed a ‘standstill agreement’ with the trustees, under which they agreed not to object if she made a claim after the six months had expired, while they waited for her to serve a letter of claim on them; so had not seen the need to file her claim at court.
  • After she had served her letter of claim on the trustees there had been ongoing negotiations with a view to a settlement.

The High Court said it would only take the standstill agreement into account up to the time the trustees received her letter of claim, which was on 1 May 2018, but not thereafter. She had not filed her court claim until 18 November 2018, so had left it another six months after the standstill agreement had expired. It expressed its general disapproval of standstill agreements, saying that their use must come to ‘an immediate end’.

However, the Court of Appeal has overturned the High Court’s ruling, saying it was ‘plainly wrong’. It ruled that the six-month time limit was not intended to include a disciplinary element, and there was no need to present the court with a ‘good reason’ to justify a delay in bringing such a claim. Generally, the time limit should not be enforced for its own sake – the real issue was whether a claim had a real, and not a fanciful, prospect of success.

The Court of Appeal also seemed to endorse the continued use of standstill agreements, saying that without prejudice negotiations should be encouraged in such claims, rather than forcing potential applicants for reasonable financial provision into issuing proceedings - which might harden attitudes, increase costs and delay distribution of the relevant estate to beneficiaries.

While they were not legally binding the court should, provided both sides had been legally represented, give effect to standstill agreements. However, significantly, it recommended that ‘… if parties choose the ‘stand-still’ route, there should be clear written agreement setting out the terms/duration of such an agreement and each of the potential parties should be included in the agreement’.

Operative date

  • Now

Recommendation

  • Family and dependents wishing to make a claim that a deceased has not made ‘reasonable financial provision’ for them should ensure they file their claim within the statutory six-month time limit as the courts will be strict when deciding whether to allow an extension; and, particularly, will not take ‘standstill’ agreements into account as a reason for failing to file a claim within the time limits.

Case ref: Cowan v Foreman & Ors [2019] EWCA Civ 1336

Please note: An article published in the April 2019 edition of Legal Alert covered this case at an earlier stage in the legal process.

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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