The economic impact of the “unprecedented” COVID-19 crisis on the wealth and investments of private individuals is a story we are all too familiar with. Yet, with large uncertainty still looming about the shape of the current recession, few can predict how investment advisors, accountants and lawyers will deal with the fall (or rise) in their clients’ wealth and holdings in the coming months. What we do know is that disputes tend to flow from unprecedented times of crisis, and in turn, people need to be increasingly wary as to what these disputes might look like.
There are some helpful chimes with history that can help here - although the COVID pandemic is indeed unprecedented, many of the issues created by it are not, and there is a roadmap for some of the disputes that might emerge, which can be followed. Now is the time to consider the disputes created by the difficulties surrounding the execution of documents during the pandemic, particularly wills, as well as disputes (or the need for disputes) created by the significant drop in the value of estates or asset-holding structures with exposure to the market (the FTSE dropped almost 30 per cent between 25 February and 23 March 2020).
The signing problem
When the UK went into lockdown, many private client lawyers were quick to ask how the restrictions on human interaction would affect the signing of documents - how could a document be witnessed when our ability to be near others was so limited? Nowhere is this more of an issue than with the execution of wills. For a will to be properly executed it requires (in the vast majority of circumstances) the testator and two witnesses to be able to see each other sign a single piece of paper, where (ideally) the witnesses are not related to the testator and do not take any benefit from the will. When the UK was in lockdown and people were living primarily with immediate family, this posed a substantial problem.
The Law Society was quick to make clear that Wills witnessed over Zoom and other video services were not likely to be considered valid. Stories emerged about wills being signed over the fence with the neighbours on either side, or on a car bonnet, but overall executing wills became, overnight, very problematic. Then, in July, the Ministry of Justice announced that remote witnessing of wills over live video streams would be permitted, although at the time of writing, the legislation implementing this change has not yet come into force. This would, it is said, apply from January 2020 (when the applicable guidance was that remote witnessing would not create a validly executed will).
It is inevitable that this confusion and inability to witness will signings will eventually lead to disputes. For example, the dispute could be over whether the will had been validly executed in lockdown and how that happened; whether all the parties could see the same document over Zoom; who else was in the room or house at the time the will was prepared or signed, and could have potentially been putting pressure on the testator off camera; as well as whether the will was signed with remote witnesses when it was not yet valid to do, and so on. The primary basis for the likely increase in such claims is uncertainty.
Before lockdown, in many cases, wills were prepared and executed in solicitors’ offices, where a degree of control and scrutiny could be applied to how the document is signed and the part played by any others in the preparation and execution of the document. With lockdown and with so many potential testators being cut off from access to friends, family and professional support from their lawyer, the opportunity for things to go wrong is obvious.
The courts already deal with a number of disputes of this nature - only last month, the court had to decide whether a will had been properly executed in the case of Wrangle v Brunt, where it was alleged that the testator had not consented to his will being signed in the way that it was, by a third party signing on his behalf. In the end, the court upheld the will and decided that the will had been properly signed, but the fact that such claims are pursued from times before lockdown, when getting a will properly executed was much simpler, only supports the idea that disputes about such basic mechanics as the right people being in the right place at the right time are likely to increase.
Economic duress and investments
The decline (short-term or otherwise) in the value of some estates and assets as a result of the pandemic may also point to other disputes too. One of the features of the fallout from the 2008 financial crisis was the rise in the profile of claims concerning estates under the Inheritance (Provision for Family and Dependants) Act 1975 and in probate claims generally. In 2009, the year after the credit crunch began in earnest, 37 per cent more claims under the Act were issued, along with 43 per cent more probate claims and over 200 per cent more claims about trust property.
Although the reasons for this are doubtlessly many, one contributing factor might be the lack of access to money. As the economy contracted and individuals struggled to make ends meet, a claim on the estate of a relative seeking an increased provision from their estate may have looked more appealing than before, just as disputing a will for the prospect of an increased inheritance would have done.
Over the years we have also seen the number of disputes arising, as the popularity and profile of such cases increased. For instance, Heather Ilott’s quest to receive something from her mother’s estate and to take such provision away from the charities to whom the estate had been left, provoked a lively debate in 2017 about the extent of testamentary freedom in England. This can be seen in the number of claims brought under the Act between 2009 and 2019, which increased by over 200 per cent.
Further, the 2008 financial crisis brought the investment management of trusts and trustees under increasing scrutiny, which led to a spate of (mostly unsuccessful) claims against trustees by beneficiaries attempting to recoup losses suffered by their fund as a result of the worldwide financial meltdown at that time.
Dispute avoidance?
The question therefore remains, is there anything that can be done to guard against such disputes arising? For claims under the 1975 Act, the short answer is usually “no”. Being upfront with family members about the terms of a will and what they should expect to receive can help to manage expectations, but ultimately a disgruntled child can bring a claim in any event.
For claims about execution of wills, there is better news however - now, more than ever, the need for meticulous record-keeping will help significantly. Although it will feel artificial, keeping a careful record of how a will came to be prepared, by whom, and how exactly it was executed will assist considerably should questions be raised later about those issues. That means that testators and witnesses alike can help avoid disputes in the future by keeping notes and taking pictures of the documents they are asked to sign, in order to reduce the possibility of those events being challenged later on.
This article was first published in Wealth Briefing, see here
James Lister