At the end of last year, a grieving mother lost her appeal to reclaim money from her deceased son’s estate after he used the loan to help purchase his first home.
The contentious case is fairly historic, dating back to 2005 when the claimant’s son borrowed £170,000 to purchase a property worth £360,000.
Unfortunately, the son was diagnosed with an aggressive form of cancer, mesothelioma, in 2010, dying in 2016.
Following the original diagnosis, he was awarded £350,000 in compensation. It was also documented that £90,000 of the money was repaid to the mother and claimant in the case.
In the time since the loan, the son married with the entirety of his estate being left to his wife and a number of named charities.
In June last year, the unnamed claimant made a claim upon the estate for the outstanding loan after the mother was not provided for in the deceased’s estate.
However, the first judge found that the claimant had failed to prove the £90,000 was a repayment of the original loan rather than a gift. Furthermore, the mother was unable to prove the original money was loaned rather than gifted to her son, ultimately ruling against the claimant insisting the presumption of advancement applied.
The Court of Appeal’s December judgement has consequently upheld the June decision because of the lack of evidence suggesting the money was a loan which would override the presumption of advancement.
The case highlights the need to show clear intent when gifting or loaning money to loved ones, especially when contentious probate is on the rise.
According to the Financial Times, inheritance disputes increased from 227 cases in 2018 to 368 in 2019; representing a 62% increase year on year.
Michelle Chapman, a solicitor at Irwin Mitchell, said:
“This case acts as a cautionary tale for family members wanting to financially assist their relatives to ensure that any loans are carefully documented.
“In particular, the presumption of advancement is a little known legal principle which places special emphasis on certain relationships, for example between spouses or parents and children. In these circumstances, unless contrary evidence exists, it is presumed that a transfer of property between the parties is a gift rather than a loan.
“We would advise anyone in a similar position to document any loan agreements before making payments and to consider how the terms could be enforced, particularly after death or if the relationship subsequently breaks down.”
