Individual autonomy and freedom in estate planning

For many, the ability to choose who receives their wealth on death is seen as an important freedom. But any such freedom is not absolute.

Various people can, potentially, bring claims against an estate (thereby challenging the terms of a will) if the will fails to make reasonable financial provision for them. These people include spouses, cohabitants and children. Many claims are brought by surviving spouses, but can anything be done to try and prevent such a claim during lifetime? An obvious possibility is a pre or post marital agreement intended to set out the couple’s agreement to limit the possibility of a claim post-death. There may, for example, be certain assets which are to be treated in a particular way such as shares in a family company or inherited wealth which has always been treated separately.

In 2009, the Court of Appeal said that ‘There are many instances in which mature couples, perhaps each contemplating a second marriage, wish to regulate the future enjoyment of their assets and perhaps to protect the interests of the children of the earlier marriages upon dissolution of a second marriage. They may not unreasonably seek that clarity before making the commitment to a second marriage. Due respect for adult autonomy suggests that, subject of course to proper safeguards, a carefully fashioned contract should be available as an alternative to the stress, anxieties and expense of a submission to the width of the judicial discretion’. Twelve years on agreements are increasingly being used by couples to regularise their financial affairs on divorce and death.

Anybody contemplating a marital agreement, whether before or during marriage, needs to appreciate that it is only likely to be upheld if (a) it is entered into by both parties with a full appreciation of its implications – this will almost certainly involve an exchange of financial information and independent legal advice – and (b) the result produced by the agreement is fair and does not leave one party in a predicament of need.

Marital agreements may not be enforceable as contracts and must be prepared with care, but they can provide much needed clarity about how a couple agreed to organise their financial affairs once one of them has died and relations may have broken down between a surviving spouse and children from an earlier marriage.