Wills and Estate Administration - Intestacy and Property Outside the Estate

Question 1

Intestacy

Answer 1

Person who dies without a will

Can be whole or partial

Whole: where person has no valid will

Partial: deceased’s will does not dispose of all or part of the residue

Question 2

Intestate Succession

Answer 2

• After paying funeral and other admin expenses and debts of deceased the administrators will divide the residue according to the statutory rules
• Was deceased survived by a spouse for more than 28 days? If yes, are there issue of the deceased?

No issue: the spouse inherits everything

Issue: spouse receives:

• Personal chattels (tangible moveable property other than money and assets used for business or held for investment purposes)
• £322,000 (funds permitting)
• 50% of remaining assets (deceased’s issue take other 50%, if they a minors it will be held on trust until 18)

Question 3

Matrimonial Home

Answer 3

• Surviving spouse can require PRs to appropriate this to the spouse in partial or total satisfaction of their interest
• If this is more than their entitlement they can still require appropriation but must pay over the difference to the estate

Question 4

Order of Entitlement

Answer 4

If no surviving spouse

1. Issue of intestate on statutory trusts
2. Parents (equally if both alive)
3. Brothers and sisters of whole blood on statutory trusts
4. Brothers and sisters of half blood on statutory trusts
5. Grandparents (equally if more than one)
6. Uncles and aunts of whole blood on statutory trusts
7. Uncles and aunts of half blood on statutory trusts
8. The Crown

As soon as a person falling into a category is identified the other categories of person are ignored

If there is more than one person in each category it is shared equally

Must be 18 to inherit by intestacy (if they die before they reach 18 they are treated as though they never existed)

Adopted children treated as children of adoptive parents

Rules apply regardless of child’s parents’ marital status

Step-children not considered issue

Question 5

Statutory Trusts

Answer 5

For all classes of beneficiary (save for parents and grandparents), if class member dies before intestate, their issue takes their parent’s share per stirpes

Question 6

Property passing outside the will or intestacy

Answer 6

Joint tenancy:

• Right of survivorship
• Surviving joint tenant entitled to asset when other joint tenant dies
• If co-owner does not want this to happen they should own the asset as tenants in common

Life assurance policies: may be held on trust or assigned to beneficiaries or expressly for the benefit of their spouse and/or children

Pension scheme death benefits: individual indicates preferred recipient

Interests in trusts: pass according to the terms of the trust (may be subject to IHT)

Gifts where donor retained a benefit: does not belong to deceased for succession purposes

Jointly owned property, life interests in trust property and gifts with reservation of benefit do form part of estate for IHT purposes

Question 7

Life Assurance Policy

Answer 7

• Names who deceased wishes to receive policy proceeds
• Policy held in trust for nominated beneficiaries
• Proceeds payable to beneficiaries on policy holder’s death
• Proceeds can normally be paid out on production of death certificate only
• Proceeds do not form part of deceased’s estate and not subject to IHT

Question 8

Pension Scheme Death Benefits

Answer 8

• Pass outside will and rules of intestacy to person name of beneficiary
• Proceeds do not form part of deceased’s taxable estate for IHT

Question 9

Life Interest Trusts

Answer 9

• May be subject to IHT
• Do not pass by will or intestacy

Question 10

Gift in which donor retained benefit

Answer 10

• For example, a house gifted to children that deceased continued to live in rent free they retained a benefit in the property
• Treated as part of deceased’s estate for IHT
• Does not pass by will or intestacy

Question 11

Potential Beneficiaries

Answer 11

• If potential beneficiary dies before attaining a vested interest their issue take their share on statutory trust
• If they do not have issue the estate will be administered as if that beneficiary never existed

Question 12

Illegitimate Children

Answer 12

Rules apply regardless of whether the intestate’s parents were married or not

However, if a person dies intestate and their parents were never married the law presumes that their father has not survived the deceased (unless contrary evidence or named on birth certificate)