Sharing out

On 14 December 2011 the Law Commission published its report, Intestacy and Family Provision Claims on Death. This is not the first time that the commission has worked in this area. The Inheritance (Provision for Family and Dependants) Act 1975 was the result of our work, as were the reforms enacted in the Law Reform (Succession) Act 1995. Looking back, there is a pattern of reviewing this area of the law roughly once a generation, in order to keep it up to date and in tune with the needs of families as society changes.

The importance of these issues is considerable. Intestacy remains pervasive; nearly two thirds of adults do not have a will, and up to one half may die without one. Family provision applications are uncountable, because so many are settled out of court, and it is important to ensure that the intestacy rules are framed so as to ensure that families are not forced into litigation.

Forward march

The project covered a wide range of topics; here, we summarise our key recommendations.

Spouses. English law gives spouses (by which we mean husbands, wives and civil partners) a clear priority on intestacy. We have recommended maintaining the existing structure of the spousal entitlement, so that spouses will continue to receive all personal chattels and a statutory legacy.

However, we recommend two principal changes. First, where there is a surviving spouse but no issue, currently the spouse must share half of any surplus over £450,000 with the deceased's parents (or, if none, siblings or their descendants). This happens in less than two per cent of intestate estates (according to research undertaken for this project), and consultation responses indicate that it is not what people expect; so we recommend that the whole estate should pass to the surviving spouse in these cases.

Second, we recommend that where there is a surviving spouse and issue, rather than the current life interest structure, the surviving spouse and issue should simply share that portion of the estate that exceeds the statutory legacy of (currently) £250,000. The administration of a trust is a burden for non-lawyers, and there was strong consultation support '“ even from lawyers '“ for this reform.

Cohabitants. Unmarried partners have long had a place in family provision claims and, therefore, in the law of intestacy. They were given separate recognition in the Inheritance (Provision for Family and Dependants) Act 1975 in 1995, but even before then they could usually claim as dependants. The awards made are often as generous as those given to spouses.

But the absence of cohabitants from the intestacy rules means that cohabitants must litigate in order to access an entitlement and, where there are children, the cohabitant will be suing his or her own children in order to make the family provision claim. Cohabitation is an increasingly prevalent and accepted lifestyle. Yet cohabitants are often caught out by the 'common law marriage myth', expecting that there will be an automatic inheritance for the survivor when in fact there is none. Our report recommends that certain cohabitants should have the same entitlement on intestacy as spouses, provided that they meet one of two alternative conditions:?

• five years' cohabitation; or
  

• two years' cohabitation if the couple had a child together who was living with them at the date of the death.?
  

In both cases, the cohabitation must have been continuous and lasted until the death. The definition of cohabitation we have used '“ living in the same household and as the deceased's husband, wife or civil partner (the 'marriage analogy') '“ is taken from the 1975 Act and excludes friends and relatives who live together, as well as those in a commercial relationship such as landlord and tenant.

Structured approach

We have also recommended removing the two-year threshold for family provision claims where the couple had a child together. The overall result is a graduated structure under which entitlement increases according to the length of the relationship and the presence of children.

Family provision: other issues. Currently an application for family provision can be made by someone treated by the deceased as a 'child of the family' in relation to the deceased's marriage or civil partnership. Our recommendations would remove that qualification, so that what matters is the parent-child relationship with the deceased.

We recommend that, where the deceased left property that is subject to English succession law or section 8, 9 or 10 of the 1975 Act, a claim for family provision should be possible even if he or she did not die domiciled in England and Wales.

The report also recommends giving the court greater flexibility in making orders under the 1975 Act. Of interest to practitioners will be the recommended removal of the six-month time limit on bringing property which the deceased held as a joint tenant into the net estate for the purposes of making a family provision award, and a new power to vary the trusts on which the estate is held.

Our consultation raised questions about widening the classes of persons eligible to apply for family provision '“ should parents, siblings and carers be included? We concluded that they should not be added as separate classes of applicant, as that would be an inappropriate incursion on testamentary freedom; all can nevertheless apply as dependants of the deceased if they were in fact being maintained.

Flexible learning

The consultation paper published in October 2009 discussed reforms to trustees' powers under the Trustee Act 1925 to pay out income and capital before the beneficiary becomes absolutely entitled. In light of the responses we received, in May 2011 we conducted a supplementary consultation on amending sections 31 and 32 of the 1925 Act for the purposes of all trusts. Following that, we recommend the removal of the proviso to section 31(1), substituting an absolute discretion for the trustees to pay or apply trust income; we also recommend that trustees be able to pay or apply the whole of the beneficiary's share under section 32. Both changes would reflect standard drafting practice and give trustees increased flexibility.

We also addressed a trap that the law sets for children who are adopted after the death of one or both of their parents, whose contingent interest in their parents' estate is eliminated by the adoption (unless the problem is noticed and a court order obtained as in S v T [2006] WTLR 1461). We recommend amendment to section 69 of the Adoption and Children Act 2002 to preserve the contingent interest.

Administrative issues. Several issues arose in relation to the administration of estates. The application of the rule against self-dealing to administrators, and the small payments regime, both presented problems beyond the scope of the project. We recommended that the government conduct a review of the latter.

The law in this area is inevitably an evolving set ?of material; there is a constant quiet development in the case law, punctuated by less frequent statutory reform. Change is inevitable given the changing nature of society. A Law Commission project focused on family provision and intestacy has attracted comment and discussion, all of which we welcome not only as a exploration of our proposals but also because it draws the difficulties of these areas of the law to the attention of the public. While working on refinements to intestacy law, there is no more useful message that we can communicate to the public than this: make a will. n

Research assistant Stefan Liberadzki also contributed to ?this article

For expert analysis of the Law Commission's proposals see the PCA website