Distribution of estates and intestacy

Question 1

What is intestacy?

Answer 1

• Whether the deceased left a valid will, in which case they are called a testator and the will determines how their assets are distributed.
• If not, intestacy rules are followed.
• Nature of assets owned by the deceased. Assets capable of passing under a will or by intestacy are referred to as succession estate or distribution estate.
  If they are testate only the will is relevant when determining how to distribute their succession estate.
  Intestacy – died without leaving a will – died intestate
  Partial intestacy – if will does not cover entire estate
  The intestacy rules found in Administration of Estates Act 1925 AEA determine who inherits and what each beneficiary inherits

Question 2

Identifying the succession estate?

Answer 2

Main types that will not pass to succession estate
- Donations mortis causa
- A gift made in contemplation of death. It has 3 requirements
- Gift is made because donor believes they may die imminently
- Donor makes it clear that gift is conditional upon them dying
- Donor either parts with property or something representing ownership of it

• Discretionary pension scheme benefits
• If deceased was a member of a discretionary pension scheme, then payments made by the trustees will not be included in this
• Insurance policies
• If deceased has a simple life insurance policy, then proceeds of policy pass to succession estate
• If benefit of the policy was written in TRUST for someone else then not part of succession estate.
• Statutory nominations
• Amount nominated cannot exceed 5,000
• On death the monies in relevant account pass to the nominee rather than under the will or intestacy
• Property held as beneficial joint tenants
• Joint tenants – pass through survives

Question 3

Other beneficial interests that don’t pass in succession estate?

Answer 3

• If deceased was a beneficiary under a trust, their beneficial interest will not necessarily form part of succession estate
• If deceased was a life tenant under a life interest trust their beneficial life interest does NOT form part of succession estate. Their life interest expires on their death and remainder usually vests in possession.
• In contrast remainder interest can survive remainderman’s death provided the interest is vests, so not contingent on remainderman outliving life tenant.
• Then the remainder interest passes to their estate

Question 4

Intestacy rules?

Answer 4

Entitlement to the estate
- Based on which relatives survive the deceased.
- Statutory order of entitlement set out in s46 AEA
- If been survived by a spouse by at least 28 days they are only class of relatives too need to consider.

Question 5

Intestacy rules? Spouse and issue?

Answer 5

Entitlement of spouse and issue
- If intestate and leaves a spouse but no issue – spouse inherits entire succession estate
- If intestate leaves issue but no spouse, the issue inherits everything on statutory trusts
- In testate and leaves to both – position is more complicated and depends on nature and value of assets
o Spouse – inherits
o Personal chattels absolutely
o Statutory legacy of 322,000 free of tax
o One half of residue
o Issue
o Received other of residue on the statutory trusts
Surviving the deceased
Spouse - Dependent on them surviving by at least 28 days
Issue – take interests on statutory trusts s47 AEA
- Contingency limb – each entitled beneficiary must service the intestate and reach the age of 18 – until this is satisfied, they have a contingent interest
- If 18+ they have a vested interest
- Substitution limb
- If an entitled beneficiary dies before the intestate that beneficiary’s own issue can inherit in their place provided, they satisfy contingency limb

Question 6

Distribution prioirty?

Answer 6

Distribution where intestate dies without leaving spouse or issue (CHILDREN, GRANDCHILDREN, ADOPTED CHILDREN AN)
- (a) Parents
- (b) Siblings of whole blood (share both parents) on the statutory trusts
- (c) Siblings of half-blood (share one parent) on the statutory trusts
- (d) Grandparents
- (e) Uncles and aunts of whole blood (whole blood siblings of a parent) on the statutory trusts
- (f) Uncles and aunts of half-blood (half-blood siblings of a parent) on the statutory trusts
- (g) The crown as bona vacantia
- Where there is more than one person in the relevant category (e.g., if the intestate is survived by
- both parents), the succession estate is divided equally.

Question 7

Personal chattels and family home?

Answer 7

Personal chattels are defined as tangible movable property BUT EXLCUDES
- Money or securities for money
- Property uses by intestate at death solely for business
- Property held at death solely as investment

Appropriation of marital home
- If joint tenants then pass through survivorship
- If tenants in common – deceased portion forms part of estate – spouse has not automatic right to receive the deceased’s share of marital home