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All change for the Intestacy Rules?

06 February 2012 #Real Estate


When a person dies “intestate”, that is without leaving a valid Will disposing of the whole of his or her property, the distribution of any money and other assets among surviving family members is governed by a set of legal rules known as the intestacy rules.

These rules date back to 1925 and have not been comprehensively reviewed for over 20 years.  At the end of last year however the Law Commission published its review of the rules (Law Com No 331) and draft legislation (the draft Inheritance and Trustees’ Powers Bill and the draft Inheritance (Cohabitants) Bill) proposing a number of amendments including giving rights in intestacy to cohabiters equal to those of spouses and civil partners.

But what do the proposed changes mean for you?

Example 1 – Deceased dies intestate with a spouse/civil partner and direct descendants (usually children).

Currently, where the intestate is survived by his spouse or civil partner and direct descendants the residuary estate is distributed as follows:

  • The spouse or civil partner receives all personal chattels absolutely.
  • The spouse or civil partner receives a statutory legacy of £250,000 free of inheritance tax (IHT). If the residuary estate is worth less than £250,000, the spouse or civil partner receives everything and the direct descendants receive nothing.
  • The rest of the residuary estate is split equally in to two halves. The spouse or civil partner has a life interest in one half (with remainder to the direct descendants on the statutory trusts) and the direct descendants take the other half on the statutory trusts absolutely.

Under the planned reforms, rather than receiving a 50% share of the residuary estate as a life interest, the spouse or civil partner would inherit this absolutely.

Example 2 – Deceased dies intestate with a spouse/civil partner, no direct descendants but has surviving parents or siblings

At present, if the deceased dies leaving a surviving spouse or civil partner (but no direct descendants) and surviving parents or brothers and sisters (or their direct descendants):

  • The spouse or civil partner receives all personal chattels absolutely.
  • The spouse or civil partner receives a statutory legacy of £450,000 free of IHT. If the residuary estate is worth less than £450,000, the spouse or civil partner receives everything.
  • The rest of the residuary estate is split equally in to two halves. The spouse or civil partner takes one half absolutely and the other half is distributed:
    • to the intestate`s parents absolutely (equally if both alive);
    • if the parents are dead, to the brothers and sisters (not including half brothers and sisters) on the statutory trusts. The substitution provision of the statutory trusts means that if a brother or sister of the intestate has died before him leaving direct descendants, the nephews and/or nieces of the intestate take their parent`s share, equally if more than one.

Under the proposed reform, in this example the parents and siblings would have no entitlement, as in all cases where the deceased has a spouse and no direct descendants the whole estate would pass to the surviving spouse. This is currently only the case if the deceased dies leaving a surviving spouse or civil partner and no other close relatives.

Example 3 – Deceased dies intestate with no spouse/civil partner but is cohabiting with a partner

Where the deceased lives with their partner as if they were a spouse or civil partner, but no formal ceremony has taken place (the so called “common law man and wife”), contrary to widely held public belief the partner would have no right to the deceased’s assets if they were to die intestate.

The proposed changes will give unmarried partners who have lived together in the same household for five years ending immediately before the deceased’s death (and whose partner does not have a spouse or civil partner) the same rights to inherit on each other’s death under the intestacy rules as they would if they were spouses or civil partners. Where the couple have a child together, this entitlement would accrue after two years’ cohabitation, provided the child was living with the couple when the deceased died.

How Clarkslegal LLP can help you

It is not yet clear if or when these changes will be made. However, whether the above recommendations are implemented or not, intestacy will remain a complex area of law. In reality the only way for an individual to ensure that when they die their property is distributed according to their wishes is to leave a valid Will. If you do not already have a Will in place, or wish to review the provisions in your current Will, please contact the Private Client Team at Clarkslegal who would be happy to assist.

Clarkslegal, specialist Real Estate lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Real Estate matter please contact Clarkslegal's real estate team by email at realestate@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Simon Berry

Simon Berry
Partner

E: sberry@clarkslegal.com
T: 0118 960 4661
M: 07920 144 780

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