Intestacy In this month s CPD paper we will cover intestacy, including when an intestacy may occur and the specific rules of who will inherit under the rules of intestacy. We will also consider what property can pass by intestacy and the rules that govern who is entitled to act as an administrator in an intestate estate. The rules relating to intestacy were amended by the Inheritance and Trustee s Powers Act 2014. This paper will only cover the law for deaths after 1 October 2014. WHAT IS INTESTACY? If a person dies leaving some or all of their assets undisposed of, they are intestate. When a person dies intestate there is a statutory order for who can inherit and how the estate will be distributed, known as the rules of intestacy. This order is established under section 46 of the Administration of Estates Act 1925 (AEA 1925). Who inherits what depends on the size and nature of the estate as well as the intestate s surviving family members. Intestacy may either be total or partial. A total intestacy occurs where the intestate dies leaving no valid will so all of their estate is undisposed of. In this case there would be no executors appointed so we will consider the appointment of administrators later on. A partial intestacy occurs where only some of the estate is undisposed of. This occurs where a person leaves a valid will but no valid residuary gift, or where the residuary gift completely fails for any reason. The intestacy rules apply to the parts of the estate left undistributed. Where there is a partial intestacy section 49 AEA 1925 governs who is responsible for distributing the estate. The executors appointed under the will act as trustees for the people entitled on the intestacy, so there is no need for separate administrators to be appointed. REASONS FOR INTESTATE DEATHS A total intestacy occurs where a person dies leaving no valid will. With 2/3 of the adult population in the UK going without a valid will the most common reason for intestacy is simply not having written a will. Intestacy will occur where a person made a will, but it was unfortunately invalid. This may happen because the will was not executed in accordance with the section 9 Wills Act 1837 formalities, or because it is later established that the deceased lacked capacity or was subjected to undue influence at the time the will was executed. A further reason for intestacy is the case of a person who makes a will but revokes it prior to their death. This revocation might be deliberate, for example by destroying the will or executing a codicil to revoke it (s20 WA 1837). The revocation by destruction has to be intentional for it to validly revoke the will, so a will accidentally destroyed in a flood or a housefire won t result in an intestacy. A will can be revoked by another on the testator s behalf, but this can only validly be done at the testator s direction and in their Page 1 of 7
presence. It s therefore recommended that if you store original copies of wills you return them to the testator to destroy themselves if they ask you to dispose of them. If a will cannot be found after the testator s death and it was last known to be in their possession there is a presumption that the testator destroyed the will with the intention of revoking it. This presumption is rebuttable provided evidence that the testator did not destroy the will or intended to adhere to it can be presented. Where a will was in the possession of the testator and is found to be mutilated at death there is a rebuttable presumption that the testator destroyed it intending to revoke it. Revocation may also happen automatically. Many testator s may be unaware that their will is revoked if they enter into a marriage or civil partnership and the will does not clearly state that they intend to marry a particular person and for their will to remain in force after the marriage (s18 WA 1837). The forfeiture rule may also create an intestacy. If a person is found guilty of unlawfully causing the death of the deceased, then they cannot benefit from the deceased s estate as a point of public policy. This will mean if the sole residuary beneficiary has unlawfully killed the testator there will be an intestacy as the residuary gift will fail. A person who has unlawfully killed the intestate also forfeits any entitlement under the intestacy rules. For deaths on or after 12 February 2012 the person who has forfeited their entitlement is treated as having immediately predeceased so their issue may still inherit their failed share. This is provided for by s1 Estates of Deceased Person s (Forfeiture Rule and Law of Succession) Act 2011. THE RIGHTS OF A SURVIVING SPOUSE OR CIVIL PARTNER The spouse or civil partner s entitlement depends on the value of the intestate s estate and whether they also left issue. If the intestate dies leaving a spouse but no issue the spouse will receive all undisposed of property, no matter the value of the estate. If the intestate dies leaving a spouse and issue but the estate is valued below 250,000 the spouse will receive everything. If the intestate dies leaving a spouse and issue the spouse will receive: the deceased s personal chattels* absolutely. a statutory legacy of 250,000 plus interest on the statutory legacy from the death of the deceased to the date of payment half of the residue absolutely The issue will take the remaining half of the residue on the statutory trusts. * Personal chattels has the same meaning here as is given when dealing with personal chattels in a will. This is defined by s55(1)(x) AEA 1925, amended by the Inheritance and Trustee s Powers Act 2014: Personal chattels means tangible movable property, other than any such property which consists of money or securities for money, or was used at the death of the intestate solely or mainly for business Page 2 of 7
purposes, or was held at the death of the intestate solely as an investment:. If at the time of the intestate s death, they were judicially separated from their spouse the surviving spouse will take no interest in their estate. Interestingly a spouse includes surviving polygamous spouses of the intestate as long as the polygamous marriages were valid in the country they were entered into. The surviving spouses will be recognised together as the surviving spouse. (Official Solicitor to the Senior Courts v Yemoh [2010] EWHC 3727 (CH)). The spouse must survive the intestate by 28 days in order to inherit on their intestacy (s46(2a) AEA 1925). This survivorship condition does not affect any assets they inherit by survivorship. The matrimonial home If the intestate was the sole owner of the home, or it was held by them as their spouse as tenants in common then their share will become part of their undisposed of property. The second schedule to the Intestate Estates Act 1952 contains various provisions that make it easier for a surviving spouse to acquire the matrimonial home. 1. Extended powers of appropriation Under s41 AEA 1925 the personal representatives have a statutory power to appropriate any of the deceased s assets in satisfaction of any interest in his estate. For obvious reasons this power cannot be exercised if the value of the asset to be appropriated exceeds the value of the beneficiary s interest. Sch.2 para 5(2) IAE 1925 creates an exception to this rule where the surviving spouse is living in the house at the time of the intestate s death. The interest may be appropriated partly in satisfaction of the spouse s interest and partly in return for equality money paid to the personal representatives by the spouse. 2. Right of appropriation of matrimonial home Normally a beneficiary can t require a PR to exercise their statutory right of appropriation because they wish to take a particular asset in the estate. In the case of a spouse occupying the matrimonial home there is another exception, and they can require the PR to appropriate the intestate s share in the property. Again, this can be wholly in satisfaction of the spouse s absolute interest in the estate, or partly in satisfaction and partly in return for equality money. 3. Right to purchase It is usually the case that the purchase of an asset from the estate by a PR is voidable on the insistence of any beneficiary. There is an exception to this rule if the surviving spouse, acting as one of two or more PR s, wishes to purchase an interest in the matrimonial home that they were living in at the time of the intestate s death. They cannot do this if they are the sole PR, in this case they would need to purchase it from the beneficiaries if possible. THE RIGHTS OF SURVIVING ISSUE & OTHERS Issue refers to all direct descendants and has its usual meaning in intestacy, so includes adopted children, legitimate, illegitimate, and children en ventre sa mère, but does not include step children. Page 3 of 7
Subject to the inheritance rights of the surviving spouse, the estate is held on the statutory trusts for the issue, or other beneficiaries if no issue. Apart from the spouse, parents, and grandparents, each category of relative who is entitled on an intestacy will take subject to the statutory trusts. The statutory trusts are set out in s47 AEA 1925. Under the statutory trusts the residuary estate is held for the relevant category of relatives of the intestate living at the date of the death; they are entitled to take in equal shares. Living also includes anyone en ventre sa mère at the time of the intestate s death. Which category of relatives is entitled to take will depend on the makeup of the intestate s surviving relatives. This is easier to demonstrate with a flowchart, so one is provided on the final page of this paper. Before any beneficiary can inherit from the estate, they must attain the age of 18, or marry or enter a civil partnership before that age. For deaths on or after 1 February 2012 if a beneficiary survives the intestate but dies before the contingency is met leaving issue, those issue will inherit in their parent s place. If a member of the category of relatives dies before the intestate leaving issue then their share is distributed per stirpes, so their issue will take their parent s share. This is again contingent on the issue reaching 18 or marrying earlier. Adopted children are treated as the natural born children of their adopters. This means they have the same inheritance rights as their adopter s natural child would have on an intestacy. They cannot usually inherit on their biological parent s intestacy, but there is one important exception. In the case of S v TI [2006] WTLR 1461 a five-year-old child would have lost his entitlement to his deceased father s estate if he was adopted. His entitlement wouldn t vest until he was 18 so any adoption would extinguish his entitlement to his natural father s estate. In this case the courts made an order under the Variation of Trusts Act 1958 to vest the estate in the child early to avoid the loss. This type of situation would not arise now as s4 of the ITPA 2014 made an amendment to the Adoption and Children Act 2002 now allowing a minor who has a contingent interest in a parent s estate following an intestacy to retain this interest if they are adopted. WHAT IF THERE ARE NO SURVIVING RELATIVES? If a person dies intestate leaving no spouse or civil partner and no issue or other qualifying relative obtains a vested interest the estate will pass to the Crown as bona vacantia (vacant goods) and will be dealt with by the Treasury Solicitor in most of England & Wales. For estates based in Cornwall and Lancaster estates that are bona vacantia instead vest in the Duchy of Cornwall or Duchy of Lancaster and are dealt with by Farrer& Co solicitors. The Duchies usually donate what they receive bona vacantia to charity and have charitable funds send up to manage this. When an estate passes to the Crown or the Duchies they have power to make discretionary payments to dependents of the intestate. Page 4 of 7
WHAT PROPERTY CAN PASS BY INTESTACY? Under s33(1) AEA 1925 the deceased s personal representatives must hold all property undisposed of on trust with the power to sell it. The usual order for payment applies, so the funeral, testamentary, and administration expenses, as well as debts must be paid first before distribution. In the case of a partial intestacy also add the payment of legacies under the will to the end of this list. Everything that is left is what must be distributed to those entitled on intestacy. Any property that could have passed by will had the deceased made one can pass on their intestacy. This means that assets held jointly with another person, such as a property held as joint tenants, will not pass on intestacy as they will naturally pass by survivorship. Similarly nominated assets and life insurance policies written into trust or nominated to pay to a particular beneficiary will be excluded from the intestacy rules. WHO IS ENTITLED TO THE GRANT? When a person dies totally intestate there will obviously be no executors appointed to administer the estate. It is important then to determine who is entitled to obtain the grant and administer the estate. The person(s) entitled to administer the estate on a total intestacy are referred to as administrators, and the grant they are entitled to apply for and from which they derive their authority is a grant of letters of administration. If the deceased was partially intestate so has a valid will that appoints executors these may apply for a grant of letters of administration with the will annexed. There is an order of priority for who is entitled to act as an administrator. This order is set out in Rule 22 of the Non-Contentious Probate Rules 1987. The order mirrors the order of entitlement under intestacy, and to apply for the grant the person must have an entitlement to part of the estate which they declare in the oath. If there are multiple people in a category of relatives who are entitled, they all have an equal right to act as an administrator. They don t need to give notice to the other entitled people who aren t applying or explain on the application why others aren t applying. Under Rule 27(5) NCPR 1987 the application of a living person will be preferred over the application of a PR of a deceased person. Similarly, an adult s application is preferred over the application of a person on behalf of a minor who is entitled. As with executors there is a limit on how many administrators may apply for the grant. Under s114(1) Senior Courts Act 1981 a maximum of four people may apply for the grant. Unlike executors, those who do not apply cannot take power reserved. If there are any minor interests in the estate, then two administrators are required. If there is only one adult in the category with the highest entitlement to apply for the grant then this person may apply together with a person from the next category under Rule 22 (Rule 25(2) NCPR 1987). This is also the case where there are beneficiaries with a life interest in the estate, but since 1 October 2014 this can now only arise on a partial intestacy. Page 5 of 7
If the estate is bona vacantia then the Treasury Solicitor may apply for the grant under Rule 22(2) NCPR 1987. Important Reminder: These notes are produced solely for the benefit of SWW members when completing the January 2019 CPD test to gain 1 hour of structured CPD towards their annual quota. The notes do not represent legal advice and no reliance can be made on the content of the notes in any or individual specific client circumstances. Having read the notes members should cement their understanding by considering further reading around the subject cases details can be found by searching the case references using BAILII or GOOGLE. Page 6 of 7
Page 7 of 7