Intestacy, a Surviving Spouse and a Remoter Issue Problem
Mrs. B dies intestate in England domiciled in England. She leaves a husband, H, from whom she was separated but not divorced, two children from that marriage (C1 and C2), and one child (C3) who predeceased her leaving two grandchildren (G1 and G2). Her estate comprises a jointly-owned matrimonial home (£480,000, held as joint tenants with H), a sole bank account (£210,000), personal chattels (£30,000) and a life policy written in trust for C1 (£100,000). Debts and funeral costs total £18,000. There is no will. H has asked whether he can keep the house, and C1 asks whether the trust policy and the joint tenancy count towards the estate for distribution.
1. Calculate the distributable estate and explain how it is distributed under the intestacy rules.
Read the worked answer
Step 1 - Identify the estate. The joint tenancy passes by survivorship to H, so the £480,000 house is outside the estate. The life policy written in trust passes to the trustees (for C1) outside the estate. Only the bank account (£210,000) and chattels (£30,000) form the estate: £240,000 gross.
Step 2 - Deduct liabilities. £240,000 − £18,000 = £222,000 net distributable estate.
Step 3 - Apply the intestacy rules (Administration of Estates Act 1925, s.46, as amended). Where the deceased leaves a spouse and issue: the spouse takes (i) the personal chattels absolutely, (ii) a statutory legacy (currently £322,000, subject to the applicable rate), and (iii) one half of the residue absolutely, with the other half held on the statutory trusts for the issue.
Here the net estate (£222,000) is less than the statutory legacy. The spouse therefore takes the chattels plus the entire residue - effectively the whole £222,000. The children receive nothing from the intestate estate.
Note: the statutory legacy figure should be checked against the current statutory instrument in force at death; the calculation method (spouse first, issue only on surplus) is what matters.
2. C1 argues that G1 and G2 should share C3's 'portion'. Explain whether the grandchildren take, and how the statutory trusts operate.
Read the worked answer
Because the net estate falls below the statutory legacy, the issue take nothing in this estate - the question is academic here, but the principle matters for advising C1.
Had there been a surplus, the half held for the issue is held on the statutory trusts (AEA 1925, s.47): it is divided equally between the children of the intestate living at death, and the share of any child who predeceased leaving issue passes to that child's issue, per stirpes, in equal shares when they attain 18 or marry earlier.
So C3's predecease would not defeat C3's line: G1 and G2 would take C3's share equally between them, by representation. C1's suggestion that the grandchildren should be excluded is wrong - they step into C3's shoes. But in the present estate there is no surplus, so C1, C2, G1 and G2 all receive nothing from the intestate estate; C1 benefits only from the trust policy.
Advise C1 that the correct analysis turns on the size of the net estate relative to the statutory legacy, not on the number of children. The practical lesson: such an outcome (spouse takes all, children nothing) is a common reason to recommend a will.