Intestate estate - who benefits from increase in value?

Trusts Discussion
1

I am acting for the surviving spouse of an estate in which the husband died in 2012 intestate.

For various reasons (including a caveat), the spouse did not obtain LOA, and a son of the deceased (not her son) obtained LOA in 2017. In the intervening years, the main asset in the estate, the house owed by the deceased, increased in value substantially. The total estate was valued at £363,000 at death, but the house was sold in 2018 for £475,000.

The spouse has received the fixed net sum of £250,000 but now wants to claim interest on her unpaid fixed net sum of £250,000, at the statutory rate of 6%. The son is offering to pay her 4%.

She is also entitled to a life interest in half of the remainder or its capitalised value if so elected. However, I am unclear whether the calculation for half of the remainder should be:

a. based on the original probate value of £363,000 and not include any interest (i.e £363k-£250k)?
b. based on the original probate value of £363,000 and should include any interest (i.e. £363k - (£250k + interest)?
c. based on the value of assets realised after sale and not include interest (i.e. £475k - £250k)?
d. based on the value of assets realised after sale and should include interest (i.e. £475k - (£250k + interest)?

Benjamin May
Patron Law

2

The surviving spouse is entitled to interest at the statutory rate of 6%. The son has no right to “offer” less.

I believe that the payment made is made up of interest on £250,000 up to the date of payment, with the balance being part of the capital. The remainder of the capital due is still owing, plus interest at 6% until paid.

The residue comprises the balance of the proceeds of sale plus the current value of other assets. The widow is entitled to a life interest in half of this.

Simon Northcott

3

In determining the division of the estate, you need to look at the value as at the date of distribution (applying Re Charteris, 1917). This will be net of any valid deductions from the estate, such as the administration expenses and the balance of the statutory legacy and interest accruing thereon.

It should be noted that despite the widow having received the “full” statutory legacy, any such payment is deemed first to satisfy the interest due to the date of payment, before reducing the balance of the legacy due (Re Morley’s Estate, 1937). Accordingly if, say, at the date the payment of £250,000 was made, interest of £6,000 had accrued, only £244,000 of the legacy will actually have been paid.

Paul Saunders