We use cookies to collect and analyse information on site performance and usage to improve and customise your experience, where applicable. Click OK to use our website.

Legal standing for 'moral provision'

Legal standing for 'moral provision'

LRC moots radical shake-up in inheritance law



Radical societal and legal changes have been put under the microscope ahead of reform of the 52-year-old Succession Act 1965.

The Law Reform Commission (LRC)  on 30 May 2017 announced the outcome of its year-long probe into the act.

The legislation has been considered in the light of social changes, which now call into question whether the statutory provision for children to make claims on their parents’ wealth should endure.

Legal standing for 'moral provision'
Parents will dispose of assets while alive Pic: Shutterstock

Legal standing for 'moral provision'
Pic: Shutterstock

The LRC has examined section 117 of the Act, which provides that a child, including an adult child, of a deceased parent who has made a will, may apply to court for a declaration that the parent failed in his or her “moral duty to make proper provision for the child” in accordance with the parent’s means during the parent’s lifetime, whether in the parent’s will or otherwise.

The 1965 act imposed significant restrictions on “testamentary freedom”. Section 117 is contained in part 9 of the Succession Act 1965, the underlying policy of which is to protect the spouse and children of a testator from being completely disinherited. If the court agrees that the parent failed to comply with the duty to make proper provision for the child, it may make an order that such provision as it considers just should be made for the child out of the deceased parent’s estate.

Fixed share

The act reserves a fixed legal-right share for certain fixed categories of beneficiary, the spouse and surviving children – regardless of dependency.

During the Oireachtas debates on the 1965 act, the Minister for Justice observed that “in a country such as ours, which recognises the very special position of the family [in article 41.1.1° of the Constitution] ‘as a moral institution possessing inalienable and imprescriptible rights, antecedent and superior to all positive law’, so-called freedom of testation is a paradox which cannot be defended on any ground.”

The act provides that if there is a surviving spouse and children, the spouse has a “legal-right share” to two-thirds of the estate, with the remaining one-third distributed equally between the children.

The 1965 act contains no legal-right share for children where there is a will, so that the 1965 act allows the testator to:

  • Leave nothing in the will to any children,
  • Leave two-thirds to one or more child, or to
  • Leave each child the same share.

This relative freedom of disposition is subject only to a possible application by a child under section 117 of the 1965 act. Section 117, therefore, reflects an intention by the Oireachtas to allow for some adjustment of the terms of a will to take account of individual circumstances of children.

Until 1988, children born to parents who were not married to each other were not entitled to claim under section 117. This changed when the Status of Children Act 1987 removed many of the legal distinctions between children born within and outside marriage.

The Family Law (Divorce) Act 1996 means more complex family patterns may now be at play, with claims by children of a number of different parents. 

Legacy

However, expectations of a legacy may have to be lowered in the 21st century, as ageing parents live longer and must fund their health and care for a greater length of time. 

The original intention of the 1965 act was to make provision for dependent or vulnerable children. Thus, a ‘moral duty’ was read into legislation.

Values

Some commentators have suggested that family provision laws are a product of the values of the early 20th century, and that the courts have been interpreting the “moral duty” in this context.

Family provision legislation, they argue, was designed to provide adequately for non-adult or dependent adult children, and widows, rather than for all adult children. 

It could be argued that if section 117 continues to apply, needy and deserving beneficiaries under a will may be displaced by comfortable, middle-aged applicants seeking proper provision.

Section 117 declined to impose any age ceilings that would preclude middle-aged or even elderly offspring from obtaining relief.

Australian law reform bodies have recommended a reversal of this trend. 

In Ireland, section 117 was derived from the judicial discretion system that had been first adopted in New Zealand.

In New Zealand, recent court judgments are less inclined to make provision orders out of an estate because they now take note of changed family dynamics.

Fertility

Falling fertility and increased longevity are also causing dramatic changes in inheritance planning.

Life expectancy has lengthened by a full ten years since the Succession Act 1965, thanks to medical and scientific advances. Meanwhile, family dynamics are changing, in that adult children remain dependent on parents for much longer, despite having access to far greater opportunities than previous generations.

People are also coming to parenthood later in life, and whole lifetime earnings may be viewed as a safety net for later years.

Ageing expert, Prof Sarah Harper (Oxford University) has noted that we are moving into an “adapted generational contract” as a result of falling fertility, which means parents will have to take more responsibility for their care needs as they age.

Family home

Many parents will, in future, rely on the value of the family home to fund the health and care needs accompanying longer life expectancy – an asset that would previously have been inherited without encumbrance.

Prof Harper believes this will play out in the 21st century, with the older generation no longer believing they have a duty to pass on wealth to their adult children.

There is evidence that those with means are now paying an ‘upfront’ inheritance while they are still alive, in the form of college fees or a down-payment on a house.

Parental gifts of money or property, if and when they occur in the remainder of the 21st century, are more likely to happen while the parents are alive, and additional transfers on death are likely to become less common, and to be seen as a form of double provision.

However, the upshot of these social changes will be a widening of the wealth gap between those who can fund house ownership and higher education, and those who can’t. Prof Harper notes a disproportionate impact between those with sufficient capital to own a house and fund old age, and those who will rely on State provision.

'The gap between the two groups will widen over time

In the 21st century, inherited wealth may grow faster than earned wealth, so that the gap between the two groups will widen over time. 

Parental gifts of money or property, if and when they occur in the remainder of the 21st century, are more likely to happen while the parents are alive, and additional transfers on death are likely to become less common, and to be seen as a form of double provision.

Wealth gap

However, the upshot of these social changes will be a widening of the wealth gap between those who can fund house ownership and higher education, and those who can’t. Prof Harper notes a disproportionate impact between those with sufficient capital to own a house and fund old age, and those who will rely on State provision.

In the 21st century, inherited wealth may grow faster than earned wealth, so that the gap between the two groups will widen over time.

At a glance

The 1965 act allows the testator to:

  • Leave nothing in the will to any children,
  • Leave two-thirds to one or more child, or to
  • Leave each child the same share