I have a case where husband died in april 1995 intestate. Only asset was house valued then at £160K. Currenlty vaued at £900k, but i suspect this is irrelvant.
Spouse and kids survived the deceased.
As the Statutory legacy was not paid, does the interest on that now mean that effectively the whole house passes to spouse as the £125k stat legacy + interest (for approx 29 years) comes to more than the date of death value of the house?
TIA
The date the asset is appropriated to the beneficiaries, is the date that is considered when distributing the estate, i.e. the current value. This means some of the house will now pass to the children, even taking into account the interest due to wife on her stat legacy.
Ihsan Ali
I Will Solicitors Ltd
I agree with Ihsan that the property needs to be revalued as at the date of appropriation (applying Re Charteris, 1917), so that the children are also entitled to a share of the house.
An additional aspect that needs to be taken into account is the Limitation Act 1980, the effect of which is that the statutory legacy will only attract interest for the last 6 years and not for the entire period since the death.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you both. Makes more sense reading it now. Paul, on the interest point, my understanding is that the limitation act would apply if a claim for the interest is made by the souse, but the entitlement for the full amount remains and if it is paid without dispute, it can be paid in full. Have I misunderstood that?
The effect of the Limitation Act essentially is to extinguish the right/entitlement and, once extinguished, it cannot be revived.
I have been reminded of the decision in Re Bhusate {2018] EWHC 2362 (Ch) where, at paragraph 70, the judge stated: “The claimant’s claim arising from section 46 AEA 1925 is statute barred and will be struck out”. This was a claim to be entitled to the statutory legacy on the intestacy of her husband, who died intestate in 1990.
The matter was referred to on appeal – Thakare v. Bhusate [2020} EWHC 52 (Ch) – and in a number of places the appal judgement confirmed that the claim for the statutory legacy was statute barred.
Upon reflection, the widow’s claim for payment of the statutory legacy in the present case would appear to be statute barred, which would also apply to any claim for interest.
There may be distinguishing features between the present case and Bhusate that might change the position, and I suggest reference might be made to Chancery counsel to confirm how the estate should now be distributed.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
That’s interesting, and thank you. So, does that meant that the estate is still administered in accordance with the intestacy rules, just without the Stat Legacy?
That is my understanding.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
After 30 years and the estate not administered I am surprised that any entitlement under the intestacy has survived the Limitation Act, 12 years for land and 6 years for personal estate. HMT Bona vacantia division accepts claims outside of that time limit but not at all after 30 years. If letters of administration have been granted presumably the incumbent administrators will don a pair of brown trousers and press on regardless. Glad it’s not me.
Jack Harper
For a taste of the entertainment that such cases can generate (at least for non-parties!) see the Green and Others v Gaul litigation, 2005 in the High Court and 2006 in the Court of Appeal.
Jack Harper
Whilst it is interesting to note there is no time limit on a beneficiary seeking an accounting from the PRs, Jack has reminded me that a beneficial interest in an estate can be time-barred, although for personal estates it is the same as for land – 12 years (s.22.(1) Limitation Act 1980 (although only 6 years for interest).
What is, perhaps, the disconcerting point is that the time limit is recognised by few practitioners. I understand even counsel has advised on the distribution of an estate that had laid dormant for, perhaps, 20 years without any reference to bona vacantia.
“Brown trousers” is, perhaps, a little too understated!
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
So, Paul, are you suggesting that the whole entitlement under intestacy, not just the Stat Legacy, is time-barred and so none of the beneficiaries under the Intestacy Rules can now benefit?
You do not say whether letters of administration have been granted. If not, the widow would still have a separate live claim for reasonable provision within six months of the grant wouldn’t she?
The effect of statute-barring is to extinguish the right of action; it does not extinguish the pre-existing substantive right or obligation. On this basis PRs can properly pay a statute-barred debt which is not otherwise open to challenge as being due and payable.
I do therefore question whether it is entirely safe for PRs to be selective in the way they choose to administer an estate; in the OP by ignoring the statutory legacy but acknowledging the other statutory claims which (if true) are equally stale.
I would also suggest that if the PRs act improperly by such selective action a new right of action would accrue to those disappointed thereby. A choice of trousers in a different shade might be more circumspect; indeed it might even be wise to instruct one of m’ Learned Friends specialising in executor’s apparel or follow Part 64 of the CPR to the judicial outfitters for a bespoke pair in an unassailably appropriate style.
I would also add, as we are probably dealing here with registered land, that it has its own type of bona vacantia regime on which HMLR’s PG4 is most illuminating.
Jack Harper
It may well be the case, as regards the particular estate in the OP, that all those persons on whom statutory entitlement was conferred under the intestacy rules have by now vested by operation of law and are adults. It seems inconceivable that also by now residue will not have been ascertained, although s.91 IHTA operates in any event for IHT.
The PRs can realistically and pragmatically administer the estate according to the unanimous wishes of the relevant persons and in return for an indemnity. (There may be a complication if they are not all still living). However, a variation otherwise than in strict accordance with the intestacy rules will unavoidably constitute a TOV for IHT and a disposal of chargeable assets for CGT by those whose entitlement is thereby reduced or eliminated. Therefore HMRC are in principle a potentially interested party.
While HMRC is, uncharacteristically, relaxed to the point of paralysis on the identification of the date residue is claimed to have been ascertained in all normal circumstances, in this case it must have already occurred so long ago that it may need verification by carbon dating. It must surely follow that the rights of all relevant persons will have crystallised and the PRs now hold all estate assets on bare trust for them.
Given the considerable increase in value of the main asset-the property-and subject to PPRR, it will presumably be desirable to ensure that beneficiaries acquire as legatees at OMV on date of death, especially if the house is to be retained long-term, to avoid disposals either by PRs or beneficiaries. It seems very likely that any TOVs will at least be PETs if chargeable.
Jack Harper
Thank you all, very helpful. No Grant has been applied for as of yet. And the property was the only asset in the estate and it was left that way as life carried on - it is only now that they have realised that the house should really be transferred. So, my initial query about ‘appropriation’ was the incorrect approach and, in effect, it is a simple transfer of legal title.
So, my understanding is that whilst the limitation act bars the remedy (for all concerned due to the time that has elapsed), if all parties (Spouse and adult kids) are in agreement, they can still carry out the terms of the Rules of Intestacy, at the date of death values (as opposed to date of appropriation as that is not what is happening here). As the property was the only asset, it can clearly be stated that residue was ascertained shortly after date of death.
Only issue is if any of the kids disagree with that approach, they are by default supporting the ‘statute barred’ approach, in which case Bona Vacantia comes into play.
You can forget bona vacantia because, entirely plausibly, the intestacy rights apparently vested no later than the very early date on which residue can be argued to have been ascertained. Where any beneficiary disagrees with the plan to distribute the estate on that footing, if they are due nothing ignore them and if they are due something recognise their entitlement appropriately.
If they do not like the outcome leave them to such right of action as they may have. The PRs will have adopted an entirely tenable view of the law and will be at minimal risk of a personal devastavit claim, backed up by ss. 61 and 69(1) TA 1925 and indemnities from those beneficiaries who do agree to the plan. This assumes that sufficient of them do agree!
I consider that it is not contradictory or inconsistent to regard interest on the statutory legacy as statute-barred as it is a distinct right. It is however a bold view as both interest and legacy are conferred by s.46(1)(i)B of AEA 1925. However, to pay interest (net of tax on it!) to the surviving spouse or their estate would be highly distortive of a plan which is in essence to place all the beneficiaries as fairly as possible in the position they would have been in had administration been completed within a reasonable time of the ascertainment of residue; this harmonious rationale will appeal to the fastidious conscience of Equity (as would be applied by Cocklecarrot J.) because the failure to make that happen was due to a collective oversight of the beneficiaries, or some of them, but certainly not of the administrators.
I would set that plan out in the deed of indemnity as an agreed basis on which the administrators are authorised to proceed and identifying a chosen date as the most realistic earliest notional date of residue being ascertained (so rather as one would draft a compromise and settlement agreement).
If the property is to be retained a residual difficulty might be caused by preserving the statutory legacy as a debt and charge; so appropriating a share of the property in satisfaction of it may be ideally preferable: ss. 48 and 41. But a consent may be required under the latter section (as of course on intestacy there is no usual clause dispensing with that per admin provisions). If consent is required it should be given within the deed which should also contain the appropriation and thus also secure agreement of the relevant party or parties to the valuation basis of the appropriated share.
Jack Harper