The death of a loved one without a will (intestate) can bring significant complications, especially when it involves diverse assets like property, shares, and income. In a recent case, I was instructed to advise on the distribution of an estate where the deceased left behind a complex set of assets and several beneficiaries. Below, I outline the key legal issues and potential solutions based on my advice to those involved.
The Estate and Its Beneficiaries
Upon the death of the deceased, the estate was left to be divided under the rules of intestacy. They had two children from a previous relationship and two adult children from a marriage to their surviving spouse.
Under intestacy rules, the surviving spouse is entitled to the first £250,000 of the estate as a statutory legacy. The total estate’s net capital amounted to approximately £252,000, leaving a small sum to be divided between the children. Much of the estate consisted of shares, and during the estate’s administration, a net income of £43,000 from dividends and rental income was also received.
The Key Question: Fair Distribution of Income
My advice was sought regarding the division of this income. Could it be distributed in proportion to each party’s entitlement to the estate? Specifically, could the surviving spouse receive a larger share of the income based on their entitlement to the estate’s assets? This approach would seem fairer in light of the estate’s structure.
Legal Options
1. Deed of Variation
One option was to consider a deed of variation to alter the intestacy rules by agreement among the beneficiaries. However, since more than two years had passed since the deceased’s death, careful attention needed to be given to potential inheritance tax and capital gains tax implications.
2. Inheritance Act Claim
If a deed of variation was not feasible, the surviving spouse could consider a claim under the Inheritance (Provision for Family and Dependants) Act 1975, which allows dependants to seek greater provision from an estate. However, given the size of the estate and the likely legal costs, I advised that this option could be disproportionate.
3. Mediation
Mediation could be an effective way to reach an agreement without incurring the costs and time associated with a formal claim. This would allow the parties to negotiate a fair distribution, but it was essential to determine in advance how mediation costs would be covered—whether by the estate or individual contributions.
4. Default Intestacy Distribution
Failing an agreement, the estate would have to be distributed according to the strict rules of intestacy. This default approach would likely leave the spouse dissatisfied, given the disproportionate share they would receive in terms of income from the estate.
Conclusion
This case highlights the complexity of intestacy, especially when an estate includes mixed assets like property, shares, and ongoing income. There are various legal avenues to explore, but each must be carefully weighed against the potential costs, duration, and impact on family relationships.
For anyone dealing with similar estate issues, getting early legal advice is critical. If you have questions about estate distribution or need assistance navigating intestacy, feel free to reach out to clerks@anvilchambers.co.uk