10 May 2019

Disputes over inheritance are common, especially if promises are made verbally, so families must tread carefully to avoid legal claims.

The recent legal cases of Thompson v Thompson and Gee v Gee highlight this issue.

Both involved the children of farmers, who had been promised verbally, that they would inherit the family farm in return for working long hours with little or no pay.

The children toiled for years on low wages and never pursued an alternative career.

Both fell out with the landowner and were denied their inheritance so were left with nothing.

However, in both instances, the High Court ruled in favour of the offspring and made a case for ‘proprietary estoppel’ against their parents which made them deliver their promise and give them the family farm.

What is proprietary estoppel?

Proprietary estoppel is a remedy which prevents someone from breaking inheritance promises when they have materially benefitted from someone’s behaviour. It is based on three elements:

  • A promise or assurance made by the landowner to the Claimant that the property would be theirs
  • The Claimant suffered some sort of detriment as a result of relying on the promise or assurance
  • The circumstances of the promise and reliance have led to an unfair result

Advice for property and landowners

These cases highlight important lessons for families with property and land which is set to be inherited:

1. Carefully document your succession plans

Work with your professional advisors to create clear and unambiguous succession plans which can prevent disputes arising and their unintended consequences.

2. Think long term

The recent cases show that promises can’t be withdrawn once an expectation is formed and relied upon. Landowners should think about how circumstances could change in the future, and analyse all working arrangements and assurances when reviewing Wills and succession plans.

3. Be careful what you say

To avoid unrealistic expectations between family members, discussions should be frank, honest and clear so that potential successors are aware of the reality of your wishes.

It is strongly advised to appoint professional advisors to facilitate and document family meetings as assurances don’t need to be regular or formal to be relied upon.

4. Names are important

The courts looked at the facts as a whole – for example, in Thompson v Thompson, the Court partly relied on the fact that the business was named ‘Thompson & Sons’, when deciding to give his son a stake in the family business.

Prepare for all eventualities

Farms, families and land go hand in hand but if the succession from one generation to the next is not openly and properly handled, bitter disputes over inheritance can arise.

Proprietary estoppel means that verbal promises can be enforced by the court, so steps must be taken by property and landowners to prepare for all eventualities and ensure that the interests of everyone in the family are protected now and in the future.

For further information or advice on succession planning, please contact Andrew Williamson or Louise Moore.