The Law Commission has proposed alleviating some of the misery when your partner dies intestate. Chris Belcher of Mills & Reeve explores what these changes might mean for you
WHILE YOUR LAWYER will always tell you how important it is to make a will, it is estimated that two-thirds of adults in the UK have failed to do so and will therefore die intestate.
When a person dies intestate, certain rules are imposed to determine how the assets in that person’s sole name should pass on their death (separate provisions deal with jointly owned property, which is outside the scope of this article). These complex rules date from 1925 and are generally seen as being out of kilter with modern social expectations. Their reform is long overdue, and this article will look at the latest proposals published by the Law Commission on 14 December 2011 to bring them up to date.
How the intestacy rules operate depends on the wealth of the deceased and the family members he or she leaves behind. Most people assume that their spouse (which for the purposes of this article includes civil partner) will inherit their entire estate on intestacy, but this is only the case for smaller estates, and even then part of the spouse’s share may be held in trust rather than given to him or her outright.
For some people, particularly those who own property or businesses, the effect of the intestacy rules can be divisive and occasionally quite devastating. I have been involved in one such case where the trusts which were imposed by the intestacy rules caused an irreconcilable rift within an otherwise tight-knit family, affecting the value of the family company and the emotional well-being of the individuals concerned.
The Law Commission has proposed that where a person dies intestate survived by a spouse but no children or descendants, the spouse will inherit the whole estate regardless of its value. Where there are children, the spouse will share the estate with those children, but the spouse’s share will pass outright rather than being held in trust.
There are also proposals to ensure that, in a case where there is a surviving spouse and children, the amount the spouse receives is reviewed at least every five years, and to simplify some of the provisions relating to the trusts which are automatically set up when children under 18 inherit under an intestacy.
This is very good news for married couples and civil partners who die intestate, but what about those in long-term relationships who are neither married nor in a civil partnership?
It is estimated that there are 2.3 million couples in the UK who are living together but are not married; this figure is expected to rise to 4 million by 2033. The Law Commission has proposed granting these so-called “common-law” spouses, in certain circumstances, the same status as married couples or civil partners when it comes to the application of the intestacy rules.
The proposals do recognise that not every cohabitation should be afforded the same status as a marriage or civil partnership. The Law Commission has therefore proposed that only couples who have lived in the same household, as spouses, for at least five years will be granted the status of “qualifying cohabitant”. In cases where the couple have a child or children, the period of cohabitation is reduced to two years.
A change to the intestacy rules in this way would mean that many thousands of people who currently have no right to inherit anything on their partner’s intestacy would instead be entitled to receive at least some, and possibly all of their partner’s estate. This goes some way to recognising that in today’s society, cohabitation is a far more common and socially acceptable way of living than was the case eighty-five years ago when the intestacy rules were written.
Having said that, the Law Commission does recognise the primacy of marriage and civil partnership, and so cohabitants will only be able to benefit from these changes providing neither is already married or in a civil partnership.
The Law Commission has also proposed several reforms to the Inheritance (Provision for Family and Dependants) Act 1975 under which a family member or a dependant can challenge either a Will or an intestacy which fails to provide adequately for that person. These reforms are largely technical, but two are worth mentioning.
At present a person who is treated by the deceased as his child can only make a claim if that treatment was in the context of a marriage or civil partnership. It is in keeping with the changes mentioned above that the Law Commission has proposed removing that restriction.
Finally, family provision claims have never been possible unless the deceased died domiciled in England and Wales. In order to reflect the increasingly international society in which we live, the Law Commission has proposed that a claim should be possible if the deceased left assets which are governed by English succession law, regardless of the domicile of the deceased.
This lawyer would certainly always recommend making a Will so that you can control who inherits your estate in the way in which you would like. But reform of the rules which apply annually in the many thousands of instances where this has not been done is long overdue and the Law Commission’s report contains sensible and effective recommendations for such reform. Whether the government has the appetite to enact the proposals remains to be seen.
Chris Belcher is Partner and Head of Landed Estates at national law firm Mills & Reeve. He can be contacted at firstname.lastname@example.org