In most cases, a testator's property will represent a significant proportion of their estate. However, problems can arise if the deceased had allowed a child to live in the property up until their death. While the child living in the property may want to continue to do so and may not have the means to move out, other children or beneficiaries of the Estate will want to sell the property in order to access their inheritance.
With the chances of getting on to the property ladder becoming more remote for many, and children returning to their parents' home after further education, as well as the effects of the pandemic on the job market, many adults are simply unable to afford to move out. Many parents fail to consider the effects their death may have on this arrangement.
It is far easier to be clear about and to record your intentions during your lifetime than it is to try and unpick a situation at a later stage, particularly if those left to do so are your family members. Making clear agreements and recording them accurately can be the difference between leaving the stress and uncertainty of a bitter dispute on one hand, and the clarity and certainty of a well-organised estate on the other.
How can parents prevent a dispute over their property occurring?
The most effective way of preventing the majority of probate disputes is to draft an effective will, clearly stating your intentions. This can be bolstered with a letter of wishes if necessary, anticipating any particular decisions which you believe might cause potential concern or upset. You should clearly state what should happen to your property when you pass away, and refer to any evidence that may support this statement, such as an email exchange between you and your child demonstrating any shared intentions or agreement. In a bid to avoid any future disputes, you should aim to include as much detail as possible. For example, you may have decided that you want your child to remain in the property for the duration of their life, known as a ‘lifetime interest'. Alternatively, you might allow them to remain in the property for a fixed period of time after your death, creating some space so that they don't feel pressured to leave the house in the midst of a bereavement.
Lifetime interest explained
A lifetime interest is an effective way of allowing a person the right to remain in a property for the duration of their life, or contingent on the occurrence of a future event, such as their marriage. Lifetime interests usually cease either with the death of the occupier or if they do not occupy the property for a specified period of time. This arrangement can offer flexibility and the testator can choose to impose any number of conditions, such as a requirement that rent is paid to the estate, or that the remaining occupier pays for routine maintenance and insurance of the property. There is no doubt that this is an important decision, particularly where there are other children or relatives who might feel hard done by. A letter of wishes might be particularly useful in these circumstances in explaining why the lifetime interest has been granted. For example, if following a testator's death, a claim were contemplated against the estate for financial provision, in which the applicant might seek the sale or transfer of the property, the letter of wishes would be directly relevant as evidence of the testator's reasoning behind the lifetime interest being granted.
As well as clearly stating your intentions in your will, it is also advisable to consult with your family members and inform them of such plans or decisions so that they don't come as a shock further down the line.
What does this mean for adult children living in the family home?
Whilst the most efficient way of enabling a child to stay in the family home after a parent's passing is for this to be stated in their will, there are some alternate avenues which can be explored should the former not have happened.
For example, in the event a parent's will states that their property should be sold and their estate should be divided equally between all of their children, the child living in the property might consider the following:
The Inheritance (Provision for Family and Dependants) Act 1975
A claim made under this act is based on the premise that either no provision has been made for the child, or that what provision has been made does not amount to ‘reasonable financial provision'. Claims for provision brought by an adult child are not regarded as as difficult as they once were. Occupation of the parent's home by an applicant child, especially if the child doesn't have the means to house themselves elsewhere, would be suggestive of the child being dependent on the parent for their housing needs, and meeting a housing need can amount to maintenance – another ground for advancing a claim as distinct from merely being a child of the deceased. Additionally, the occupying child may have provided care to their parent at the expense of their own earning and mortgage potential, and that can be another compelling factor. The court has a range of powers and whilst it is unlikely that it would order the home be transferred outright to the occupying child, the grant of a lifetime interest is possible. An order for the sale of the home and an award out of the proceeds to the occupying child enabling them to buy another, smaller property, is an alternative outcome where a claim succeeds.
Merits are heavily case-specific, and the court must weigh and balance a raft of other factors such as the adult child's income, the needs and resources of others with an interest in the estate, their potential earning capacity and the size of the estate.
Proprietary Estoppel or Constructive Trust
The adult child may be able to establish a beneficial interest in the property on the grounds of conduct or discussions with their parent during their lifetime. This is known as the doctrine of proprietary estoppel. There are significant overlaps with the doctrine of the constructive trust and the same facts are often relied upon in both claims. Essentially, if a child can show that they were ‘promised' the property, or a share of or right of occupation in relation to it, and that they relied on that promise or representation to their detriment, a claim may arise. To bring a successful claim on this basis, the child would need to demonstrate that:
- A representation or assurance had been made to the child by their parent;
- The child has subsequently relied on this assurance; and
- That they have suffered a detriment as a result of their reliance.
An example of detrimental reliance might be having spent time and money in extending or improving the property on the basis of an assurance that it or part of it would one day be theirs, or giving up a job in order to provide full time care to a parent on the promise that they will be ‘looked after' later on.
Both doctrines provide a means by which the courts can intervene to prevent an unconscionable result arising from a broken promise.
Where does this leave the siblings of a child who is granted a lifetime interest in the family home?
If a will is clear in stating that a child is left a lifetime interest in the family home, this can understandably lead to frustration on the part of siblings or other family members. Whilst challenges are possible, where there are no grounds for impugning the validity of the will on the basis of capacity, undue influence or technical failings, the options are limited. If all relevant parties agree, it is possible to rearrange the dispositions in a will by means of a Deed of Variation which can redistribute assets and / or money. It a useful option available to those interested in estates and which is capable of satisfying competing interests (and mitigating tax) without hostile litigation. It is, though, something that needs to be agreed between the parties and the agreement concluded within 2 years of the date of death.
Originally Published by Birketts, March 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.