For the first time in 800 years, a woman controls the UK’s purse strings. Acknowledgement at last, on an institutional level, that women can manage money. Why then are patriarchal views still so evident in the transfer of private wealth from one generation to the next?
[See also: Inheritance tax explained: How does it work and who is affected?]
Most parents will swear they do not play favourites with their children, but that does not seem to apply to succession planning in family businesses.
Favouring sons over daughters
Cynergy Bank’s 2020 research found that twice as many family business owners plan to pass their firms on to sons rather than daughters.
[See also: Worried about children-in-law inheriting your wealth? This is how to avoid it]
Remarkably, 26 per cent of female business owners surveyed said it was natural for businesses to be passed on to male relatives, though they were more inclined than men to consider passing the business on to a daughter or other female family member.
Even where there is no business to consider, it is not uncommon to see sons and daughters treated differently in wills and trusts – for example men being given capital and women receiving income-only interests.
Content from our partners
[See also: The best tax lawyers for high-net-worth individuals]
Succession plans – some conceived many years ago and reflecting different societal norms – are on occasion still tainted by paternalistic assumptions that daughters or granddaughters will either be looked after by their husbands, or that family wealth should be protected from the influence and interference of untrustworthy husbands.
Testamentary freedom v equality
Unlike much of Europe and the Middle East, where ‘forced heirship’ provisions dictate that certain shares must pass to particular family members, the freedom to do what you want with your money (known as testamentary freedom in relation to wills) is a fundamental and closely-guarded public policy principle in England and Wales.
But equality is a fundamental principle in England and Wales too. The law is largely supposed to give equal rights, irrespective of gender.
[See also: What Succession tells us about protecting your assets]
There is no general statutory provision against discrimination when it comes to inheritance. But that does not mean individuals and trustees can simply ignore the principles of non-discrimination.
In Representation of Zedra Trust Company (Suisse) SA re C and D Trusts, the Jersey court recently approved a trustee’s decision to vary a trust, which had been set up to benefit the male line only, to add the female line as beneficiaries. In that case both the male and female lines supported the change.
How to challenge discriminatory succession planning
If there is agreement in the family – and quite often brothers will agree that their sisters deserve to be treated equally – then much of the mischief created by discriminatory succession planning – whether by trusts or in wills – may be managed. It is, for example, equally possible for beneficiaries of a will to agree a Deed of Variation designed to equalise benefit and the court’s approval will not always be required.
Alternatively it may be possible to agree that income interests should be ‘capitalised’ and paid out as a lump sum.
But sometimes treating male and female descendants differently will breed disharmony in the family, with battle lines drawn between those whose interests are served by discriminatory gifts, and those disadvantaged by them.
[See also: Why now might be the time to get your affairs in order]
Even then there are potential remedies – the Inheritance (Provision for Family and Dependants) Act 1975 may assist children or dependants of a testator where a will does not make reasonable financial provision for their maintenance. Rarely, traditional probate claims (for example fraudulent calumny or undue influence) may also assist.
With the passing of the last generation for whom it was ‘normal’ for women to stay at home, it seems likely that discriminatory succession planning may become less common. But for now it is a reality for some families.
While in general, most want to respect the wishes of their parents and grandparents, in some situations it is right, and importantly recognised by the courts, to take steps to equalise benefit where inequality is driven by outdated and discriminatory views.
Sarah Aughwane (partner) and Olivia Turner (associate) are part of the Withers‘ Trust, Estate and Inheritance Disputes team
