WANT TO AVOID YOUR FAMILY BEING MADE HOMELESS? MAKE A WILL

21/05/2010

Many people die without having made a will. Some make invalid wills that have no effect. Some people make wills which, although valid as far as they go, do not deal with all of their assets, and cause partial intestacy. Nicholas Beetham of Kings Court Trust Corporation looks at some of the effects of intestacy.

Although to die intestate is not unusual, it almost always creates problems. A common myth is that “everything will go to my partner” which, although in some cases possibly true, is no reason not to make a will. Where the deceased leaves a surviving spouse (read also Registered Civil Partner) and children, the spouse will take the Statutory Legacy of all the deceased’s personal chattels, the first £250,000 and a life interest in half the balance of the estate. The remaining half of the balance is shared between the deceased’s children of 18 years of age or above (including illegitimate and adopted children) immediately and they receive the other half on the surviving spouse’s death.

Where the deceased has left no surviving spouse or children (or remoter issue), the estate will be distributed amongst surviving members of the eligible classes of blood kin – the most distant admissible in England & Wales being the class of the deceased’s uncles and aunts of the half blood and, where predeceased, their issue – failing which the relevant bona vacantia authority.

Reform of intestacy provisions?

Intestate estates are administered and distributed according to the Administration of Estates Act 1925. Given its age it could be argued that it’s long overdue for review and, perhaps, overhaul. Certainly, the Law Commission thinks so and is currently consulting regarding a review of the intestacy rules and also claims under the Inheritance (Provision for Family and Dependants) Act 1975.

Although there is a clear framework for administering fully or partially intestate estates, the rules in themselves are not flexible; rather they impose a “one size fits all” regime on the assets passing on intestacy and the entitled next of kin. Heirs on intestacy are either entitled as of right, or not at all. So, while there is certainty as to the application of the intestacy provisions, their rigidity leaves little room for discretionary distribution by Administrators to cohabitants, deserving friends of the deceased (e.g. carers), or to kin too distantly related to take as of right. But is this inflexible approach appropriate in the modern world, where family structures are so much more fluid than when the rules were drafted?

Effect of the Statutory Legacy?

More significantly, the effect of the intestacy provisions as they are at present can be to make a deserving spouse, or cohabitant, and family, homeless. Consider: a typical asset-rich but cash-poor couple (whether spouses or cohabitants), with two or three children. The effect of the Statutory Legacy might easily be to force the sale of the family home in order to pay out to the children. Litigation might have to be entered, with lawyers appointed to act in the children’s interest defending the action brought by the surviving parent in order to keep a roof over the family’s heads. Needless to say, the present intestacy rules on their own would not help a surviving cohabitant, notwithstanding his or her parenthood of the deceased’s children.

However, on a successful application under the Inheritance (provision for Family and Dependants) Act 1975, the Court can order a distribution other than per the intestacy provisions. One of the aims of the Commission’s review is to enable a more equitable distribution of an intestate’s estate without the need to launch an action under the 1975 Act. The Commission recognises that the family home might have to be sold for other reasons – for example the deceased’s indebtedness - and perhaps the family unfortunately made homeless as a result, but is concerned to avoid this outcome simply as a result of the deceased’s intestacy.

Law Commission’s proposals

The Commission proposes to reform the intestacy provisions so that, in some circumstances, a cohabitant can share in his or her deceased partner’s intestate estate (as is the case in other Commonwealth jurisdictions) without having to bring a 1975 Act claim. However, which cohabitants? And to what extent? The Commission proposes, provisionally, that the survivor of cohabitants who have been living together for more than five years, or have a child together, should have the same rights as a surviving spouse does at present.

The Commission also proposes that, where a couple has cohabited for between two and five years, the estate should be shared between the cohabitant and other family members. A two year period has been adopted in other areas, e.g. in Fatal Accident Act cases.

One objection to reforming the position of cohabitants in this way has been the perceived difficulty of demonstrating cohabitation for the required period. However, there has been no problem with this in overseas jurisdictions.

The Commission also asks whether it is right that parents should share in the intestate estate of a predeceasing child in preference to the child’s siblings and also suggests that the distinction between whole- and half-blood kin could be dropped so that, say, siblings with whom the deceased shared either parent would be entitled equally with those with whom he or she shared both. In addition, were the deceased’s child has been adopted out, the Commission queries whether the adoptive parents should replace the birth parents on all intestacies, for example in cases where the premature death of one parent leads to the re-marriage of the widowed parent and the adoption of the child by the surviving parent and step-parent.

The Law Commission has gone to considerable lengths to publicise its consultation paper and has prepared an overview document as well as an executive summary. It has also commissioned The National Centre for Social Research to carry out focus group research and has made its findings public at www.lawcom.gov.uk/docs/NCSR_research_report.pdf. Although the consultation period ended on 28th February 2010, if you would like to make a late submission, see www.lawcom.gov.uk/intestacy.htm for details.

For more information about this article please contact Nick Beetham.