Although we are free to make a will so that, when we die, we can leave our assets to whoever we like, we are also free to die without having made a will – or intestate – so that the state decides how our estate will be divided up. Either way, if we leave behind people who need and could reasonably expect financial help from our estate, the law can step in to make sure they get it under the Inheritance (Provision for Family and Dependants) Act 1975. The intestacy rules in England and Wales are set out in the Administration of Estates Act 1925 and have not materially changed since their creation. Nick Beetham looks at amendments proposed by The Law Commission after exhaustive research and consultation.
When someone dies without a will – i.e. intestate – their assets are distributed according to the rules of intestacy. For example, where someone dies intestate and leaves a surviving spouse or civil partner but no children, the survivor is entitled to the statutory legacy: all the deceased’s possessions (chattels), the first £450,000 of the estate and half of whatever’s left – the rest goes to the parents or brothers and sisters if there are no parents. Where there are children, the surviving spouse or civil partner has a similar entitlement but has a £250,000 legacy and chattels and a lifetime interest in half of whatever’s left – the balance goes to the children.
Where someone dies without making suitable financial provision for someone who could reasonable expect it, whether or not there’s a will, the disappointed person can make a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
The intestacy rules and family provision under the 1975 Act are important areas of the law with practical day-to-day relevance and effect. Given that anything between half and two thirds of the adult population don’t have a will, the intestacy rules ought to make adequate provision for close family members and / or dependants. Where they don’t, the law ought not to obstruct valid claims under the 1975 Act.
In 2008, The Law Commission set about examining the Anglo-Welsh intestacy rules and their interaction with the 1975 Act. Given that the intestacy rules had not been seriously revised since their creation in 1925, and the 1975 Act had not been reviewed since its enactment, were they still fit for purpose in modern society? The fluidity of modern family relationships is such that, although our intestacy rules provide certainty, their one-size-fits-all-circumstances approach can cause inequitable outcomes including, in some cases, homelessness. In addition, it has been necessary for deserving claimants (for example a surviving unmarried cohabitant) to bring actions for reasonable financial provision from the deceased’s estate under the 1975 Act.
Consider, for example, a typical asset-rich but cash-poor couple (whether married, in a civil partnership or cohabiting), with two or three children. One of the couple dies, intestate. The effect of the limited 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 into, 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. Similarly, if any of the children are by a previous relationship of the surviving partner’s, but were being provided for by the deceased, it would be necessary for them to make a claim for reasonable provision under the 1975 Act.
The Law Commission has consulted widely and has conducted research amongst focus groups and considered the results of a survey of public attitudes to will making and intestacy as well as data from HMRC regarding the value of testate and intestate estates.
The Law Commission’s recommendations
The Law Commission’s report was published in December 2011 and sets out its proposals for reform and presents two draft Bills to implement the proposed reforms.
The draft Inheritance and Trustee’s Powers Bill would, if made law, make sure that all the assets of someone who dies intestate would pass to their spouse or civil partner where there are no children or other descendants. If there are children, then the spouse or civil partner would receive a statutory legacy. However, rather than the statutory legacy being a cash sum and a lifetime interest in half of whatever’s left over in the estate as at present, The Commission proposes that it should be a cash sum and an outright entitlement to half of everything left over.
The Commission also proposes that the 1975 Act should be amended so that someone claiming to be a dependant of the deceased can bring a claim, even if the deceased did not maintain them financially during lifetime. It goes on to say that someone that the deceased treated as a child of the family ought to be able to make a claim under the 1975 Act even if the deceased was not married or in a civil partnership.
The draft Inheritance (Cohabitants) Bill would, if made law, enable a surviving cohabitant to inherit from the deceased’s estate under the intestacy rules without having to make a claim under the 1975 Act claim, if they had cohabited for five years. If they had a child of the family living with them as at the date of death, the qualifying period would be two years.