Contentious probate cases are on the increase, in fact according to research 1 in 4 people would challenge bequests in a will of a loved one if they were dissatisfied with the division of the estate (1). To help people who may want to dispute an inheritance, but who can’t afford the legal costs, Tower Street Finance has launched Inheritance Dispute Funding.
We talked to founder and managing director Martin Holdsworth of IDR Law, the only firm in the UK which deals solely with contentious probate cases, about how our new product will help clients and solicitors alike…
Q: Tower Street Finance consulted with you in the development of the Inheritance Dispute Funding product. How is this product different to anything clients and the legal sector has seen before?
A: It’s definitely unique. The few other products in this space are traditional lending products provided by institutional lenders – they see an opportunity and they try to fit their lending products into it.
By being involved in the development of Inheritance Dispute Funding we were able to share with Tower Street Finance the challenges we, and clients face so we could create a product that provides a solution.
Q: What are the key things about the product that will help you as a lawyer?
A: We are often faced with the choice of bank rolling client’s cases or seeing them abandon them as they lack the funds to pay legal fees. It is common to find that your prospective client has a good claim, but can’t afford to fund it themselves.
Some of these cases are compelling, where you know you could make a significant difference to resolving the mess left behind by a financially disorganised or punitive death, but can’t afford to take them on. Law firms are not geared up to bank roll cases – cashflow will always dictate what we can or can’t do for clients.
Q: And for the client?
A: In my experience, there is no other product like it. Tower Street Finance is not a traditional lender – there are no checks on affordability and the customer does not need to pay the loan back monthly – payment comes at the end out of their inheritance. If they’ve got a bad credit history, it doesn’t matter as they’re not personally assessed – it is the estate value, the customer’s expected inheritance and the strength of their claim that the lending is decided upon.
Even where existing clients fund their own legal fees (seeking to recover them at the end), I’m seeing more frequently the use of personal credit cards to discharge their legal fees, presumably with the intention to recoup the balance at the end. This is a more expensive way to fund fees than with the Inheritance Dispute Funding product. Some clients prefer the “no win no fee” type funding arrangement that brings the advantage of not paying their own legal fees, but the downside is likely having to pay a success fee to the solicitor that is commonly 50 per cent higher than their standard fees.
Q: What’s the market for this type of product at the moment – in terms of numbers of cases and people struggling to fund them?
A: Each year the number of inheritance disputes increases.
The value of estates are bigger than ever too. It’s believed that by 2027, around £1.3 trillion will be passed to the next generation through inheritance – very few estates have nothing.
People are living longer and often leave it late to change their will – if they make one at all. And the ageing population brings an equivalent increase in the incidence of dementia rates – this all fuels the number of claims that a will-maker lacked the required testamentary capacity to make the will, which is a common claim that we see.
There are more and more blended families in society generally meaning on death, distribution of wealth is often not straightforward – these dynamics are often present within claims.
Over the last decade I have seen a shift in society’s view on inheritance generally – it has become an expected event and for many, one that they are relying upon to fund a retirement, pay off debt or mortgage. One in 3 now rely on such inheritance payments to clear debts or retire. When they don’t receive what they expect, family members are more likely than ever to take legal action to try and recover what they perceive they have lost.
Q: What are the most common reasons for wills being contested?
A: There are lots of different types of claims, but the two most common are – seeking a declaration that a will is not valid, because of a lack of the required mental capacity, undue influence, fraud, etc., or where the applicant wishes to claim more than they received under a will – or if no will under intestacy. These latter claims seek an order from the court for “reasonable financial provision” for someone who feels they have not received enough.
Q: How does the Inheritance Dispute Funding product compare with other similar products which are available?
A: There are very few other products on the market to help fund contentious probate. The main point of difference with Inheritance Dispute Funding for me is that what is assessed is the strength of the claim and the likely result, rather than the ability of the client borrower to repay, i.e. the affordability check that all institutional lenders require.
This immediately places the focus in the right place – the ability of the solicitor and the merits of the claim.
Tower Street Finance has an appetite and willingness to lend and to make it straightforward and quick. My previous experience of using litigation funders in the probate dispute sector was so poor that I stopped using them altogether years ago – it was slow, expensive and difficult to navigate for both me and the clients. The introduction of Inheritance Dispute Funding will change that.
- Direct Line Life Insurance: 2019