Intestacy, when someone dies without a will, is still relatively common in farming families. It means more scope for disagreements over who is entitled to what. It also often takes longer to sort out an intestate estate than one with a will and it can bring significant problems for businesses.
Where there is no will, or one cannot be found, the first step is for family and friends of the deceased, or a solicitor, to take reasonable steps to establish this.
“This involves writing to local solicitors and to any others which the person may be known to have used, to ask whether they know of a will. Family and friends should be asked, too,” says Matthew Elias of Nigel Davis Solicitors, Derbyshire.
This will probably take a few weeks. In the meantime assets must be valued so the size of the estate can be established and any inheritance tax liability calculated. With the right advice, a lot of tax can be saved at this stage, says Mr Elias.
One of a range of Inland Revenue forms must then be completed, depending on the size of the estate and tax bill. Any IHT must be paid before any other distribution can be made.
“The main problem with intestacy is that the people who you want to inherit your estate may not,” says Mr Elias. “The estate will be distributed according to the Law of Intestacy, 1925. For example, without a will, the surviving partner of a cohabiting couple would not be entitled to anything.”
The way assets are distributed under intestacy law can be varied, but only if all beneficiaries agree to proposed changes, which can be a problem.
With a will, executors are appointed to administer the estate. In an intestacy, a personal representative (one or more) is appointed to carry out the same function, according to the laws of intestacy and the best interests of the estate, rather than the terms of a will. Personal representatives apply for a grant of letters of administration so they can collect and divide the assets of the estate.
“Any interested party can apply for a grant of letters, but must show that anyone with a better claim (a nearer relative) is unable or unwilling to apply.”
A very simple intestacy can be dealt with in eight to 10 weeks, says Mr Elias. However, with disagreements about how assets are to be split, it can take many years and cost tens of thousands of pounds or more in legal fees.
“Intestacy means there is no clear statement of wishes of the deceased. Guardians will not have been appointed for any minor children and the state may step in to do this. Family members may then have to become involved in court applications and procedures at an already very difficult time.
“Without a will there will be no nominated successor to any Agricultural Holdings Act Tenancies which may cause arguments as to who should succeed.
“Also, nobody has authority to deal with your affairs from the date of death. So there may be nobody authorised to sign cheques and other documents such as BCMS forms, or to appoint staff to get work done.”
In a farming intestacy, arrangements can often be made with the bank for the business to continue in the interim until the grant of letters is obtained.
“However, in the case of a sole trader, you are relying on the goodwill of the bank for this, they are under no obligation and where the relationship is difficult or the business has financial problems it can become impossible to continue,” says Mr Elias.
For partnerships, continuing the business is not usually such a problem. As long as surviving partners have signatory rights they can continue to run the business and the business bank account will remain active, although intestacy is still likely to complicate and prolong settling the estate.
Under a company structure, the company persists but problems can arise where the deceased is the only person who can sign on behalf of the company. There will also be the issue of how that person’s shares are to be valued and distributed.
Intestacy: Who gets what?
If spouse and children: Spouse receives first £250,000 plus personal chattels, excess divided 50:50 between children and life interest trust for spouse
If no spouse but children: Estate divided equally between children once they reach age 18
If spouse but no children: Spouse receives first £450,000 and chattels and half of everything else, other half of residue to parents or siblings
These are the most common circumstances but the Law of Intestacy covers how assets are divided in all situations
If no relatives, the estate could be “bona vacantia” (ownerless goods) and pass to Crown (or Duchy of Lancaster or Cornwall)