If someone is making a claim under the Inheritance Act 1975, they will generally have just six months from the date of the Grant of Probate or Grant of Letters of Administration in which to start the legal process.
Standstill agreements are often used to try and extend this period. They constitute an agreement between the parties involved in the dispute to wait before issuing legal proceedings to see if a solution can be found without the need for litigation.
However, the law states that it is for the courts to decide whether a late application will be allowed. This means that if a standstill agreement is entered into, there is a risk that the person who intends to make a claim will be unable to do so once the six-month time limit has passed.
Why enter into a standstill agreement?
After a death, emotions are often running high and it can be difficult for families to make progress in dealing with disagreements over the estate of the deceased. Executors have a duty to act in the best interests of the beneficiaries and to protect the estate for them where necessary.
There is a risk that issuing proceedings at an early stage, within six months of the date of the grant, will reduce the likelihood of the dispute being resolved out of court.
Standstill agreements have been used to give those involved the time to work towards a compromise agreement. It allows the parties to explore different options and to attempt alternative dispute resolution, such as mediation.
Estate sizes
The effect of price increases is also likely to reduce the amount left, with 72% saying that although they expect to leave an inheritance, living costs will ‘unquestionably’ reduce the amount in their estate.
The estimated value of an average estate has fallen by over 23% in two years, dropping from £289,000 in 2020 to £221,000 in 2022.
The risks of a standstill agreement
The problem with a standstill agreement is that the Inheritance (Provision for Family and Dependants) Act 1975 states that an application can only be made out of time ‘with the permission of the court’. This means that while the parties are free to enter into the agreement, the court still has the option of disallowing a late claim.
The executors may agree not to object to proceedings started out of time, but there is no guarantee that the court will permit them.
Cowan v Foreman and others [2019]
In the recent case of Cowan v Foreman and others, the judge initially refused to allow a widow to make a claim out of time despite the existence of a standstill agreement. He felt that it was not for the parties to ignore the law and that the rules were clear: a claim must be made within the six-month time limit.
He stated that the correct procedure was for a claimant to start proceedings, then ask the court to stay these while attempts are made to resolve the disagreement.
The claimant took the case to the Appeal Court, where the judges unanimously reversed this decision.
Lady Justice King stated that issuing proceedings risks hardening the attitudes of those involved and increasing the focus on litigation. She said that if there is a ‘properly evidenced agreement to which no objection has been taken by the executors and beneficiaries, it is unlikely that in the ordinary way, a Judge would dismiss an application for an extension of time’.
Lady Justice Asplin felt that ‘if both parties have been legally represented, it would be unlikely that the court would refuse to endorse the approach’.
However, this does not mean that a judge will automatically agree to allow a case to proceed if it has been filed after the end of the six-month deadline.
It is essential to take independent legal advice if you believe you have a valid inheritance claim. While the Court of Appeal is promoting attempts to resolve claims without the need for litigation, there remains a risk that a claimant could lose out if a claim is not made in time.
If you would like to speak to one of our expert estate planners, ring us on 01634 353 658 or email us at rob@pembrokewillwriters.com