Will the government act on the Law Commission's proposals?

While we lawyers will always tell our clients 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.

The Law Commission’s report on reform of the law relating to intestacy and family provision was published on 14 December 2011 (see https://www.justice.gov.uk/lawcommission/areas/intestacy-and-family-provision-claims-on-death.htm) and from a practitioner’s point of view the reforms are, for the most part, very welcome.

Great expectations

As all practitioners know, the intestacy rules can be complex for lay clients and, dating back to 1925, can produce some surprising results which are generally out of kilter with modern social expectations. The Law Commission has sought to deal with some of the most obvious anomalies and has recommended changes to the Inheritance (Provision for Family and Dependants) Act 1975 and a review of certain aspects of probate practice.

How the intestacy rules operate in practice depends on the wealth of the deceased and the family members he or she leaves behind. Most people assume that their spouse (i.e. husband, wife or 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 statutory trusts 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.

Family ties

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 still share the estate with those children, but the spouse’s share will pass to him or her outright rather than being held in trust.

The abolition of the statutory trusts in the latter case will certainly simplify matters, though there is a risk that in pursuing such simplification, the protection afforded to both the spouse and the children will be lost. The wealthy spouse’s absolute inheritance could make him or her vulnerable, and the capital which under the present rules would pass ultimately to the children would now pass under the spouse’s will (or own intestacy). Yet another reason for making a will…

There are also proposals to change the law for unmarried couples. It is estimated that the UK there are 2.3m couples who are living together but are not married, a figure that is expected to rise to 4m 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.

Again, in general terms these changes should be welcomed as they reflect much more accurately the current social norm. However, where arrangements between couples are perhaps more fluid than in the past, I do have concerns about the extent to which a cohabitant will be able to prove that he or she had actually been living with the deceased “as husband and wife” for the requisite period.

Healthy appetite

For those who wish to challenge the provision made for them – either in a will or under the intestacy rules – the Law Commission has proposed several reforms to the Inheritance (Provision for Family and Dependants) Act 1975. These reforms are largely technical, but two are worth mentioning briefly.

At present a person who is treated by the deceased as a 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 for cohabitants that the Law Commission has proposed removing that restriction.

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 reform in itself would be extremely welcome for those dealing with multi-jurisdictional estates.

Finally, there are proposed changes to sections 31 and 32 of the Trustee Act 1925. In almost all modern wills these are varied to remove the proviso to section 31 and allowing trustees to apply the whole of a share under section 32. Bringing the Trustee Act 1925 into line with current practice is most welcome.

Like all practitioners, I would certainly always recommend a client makes a will to ensure the estate passes in the manner the client would like. But reform of the rules which apply annually in the many thousands of instances where this has not been done is very welcome. Whether the government has the appetite to enact the proposals remains to be seen.

Chris Belcher is a partner at Mills & Reeve www.mills-reeve.com

See the February issue of PCA for more insight into the Law Commission’s proposals n