Inheritance disputes: How to avoid broken promise claims

The value of farms and changes to inheritance tax (IHT) relief have prompted much discussion and advice about succession and inheritance.

When expectations are not met it can lead to a legal challenge under proprietary estoppel.

Claims of this type may be brought by a person expecting to inherit because of a promise made to them, only for that promise to be broken.

The claimant, having relied on the promise, may have worked for many years on a farm for relatively little reward.

They may also have invested in the business or land and passed up other business or employment opportunities.

See also: Why valuation preparation is key under new IHT relief regime

Proprietary estoppel claims are often brought after a death, but increasingly are brought before this happens.

Relatively few claims get to court but those that do have further highlighted proprietary estoppel to families affected by the issue.

They have also made people aware of the risks of a claim, which is helping shape plans to avoid it, say advisers.

Matt Brown heads Savills’ rural consultancy team in the south of England and regularly acts as an expert witness for valuation in cases where there is a dispute over family farming assets, including proprietary estoppel.

He also advises farming families looking to avoid such issues.

Even when cases do not end up in court, the emotional and financial cost can be great, sometimes resulting on farms or land having to be sold.

Clear communication is key

The IHT relief changes have brought forward succession discussions in recent years, bringing out more issues and challenges to inheritance plans, says Matt.

“The fact discussions are taking place is a positive,” he says.

“Clear and consistent communication is key to avoiding proprietary estoppel claims. It’s important to avoid off-the-cuff remarks or commitments.”

Discussions about the future of a farm should be planned and notes taken about what is said, to avoid disputes, he advises.

He cautions that he has also seen claims attempted by people who have been adequately provided for but who nevertheless feel aggrieved.

Barny Croft is a partner in the private wealth disputes team at law firm Birketts and is advising on several proprietary estoppel claims, including two new instructions in the past two weeks.

Developments can happen over time in family farming businesses that may end up supporting proprietary estoppel claims, he says.

For example, a son or daughter may invest in the business, by improving or building their own house on land owned by the farming business or by family members.

“This is not uncommon and because the nature of landholding within families can be complex and sometime opaque, it can complicate matters,” says Barny.

Document changes and agreements

Experienced professional advice is essential before changes like those described above take place, says Barny.

Matters should be clearly documented in terms of who owns what and who is entitled to do what on what land.

Complications can also arise when promises are made about company owned assets, says Barny.

“Ambiguous and inconsistent references to inheritance also cause issues.

“Sadly, there are also cases where a farm or part of it has to be sold to cover care costs even though it may have been promised as an inheritance, and this has also caused disputes.

“People are living longer and funding care is a big issue.

“Families often think they can work things out if there is an inheritance issue but it often ends up in a mess and, while they might not want to pay for professional advice before that happens, it is a lot less expensive than once a dispute is under way,” says Barny.

He adds that things should be considered in the round, not just from a legal perspective, so tax and land agency advice should be involved, too.