I am dealing with a situation whereby Mrs D died intestate. She is survived by Mr B (Husband) and her two daughters (Step-daughters of Mr B).
The estate consists of a property (valued at £300K) and cash (£220K). There is an overall sentiment to vary the intestacy by incorporating a notional Will, directing that the property be left to Mr B for life, then to the daughters in equal shares thereafter. The general idea is that Mr B will then take cash up to £22K to satisfy the statutory legacy, then the rest will be divided 50% to Mr B and 50% to the daughters.
My questions is - does the creation of a life interest (rather than the property being appropriated to him outright) mean that the statutory legacy of £322K is not satisfied. If so, does that mean that £322K must be made up from all liquid cash (£220K) and possibly a charge in favour of MR B against the property for at least the remainder of the statutory legacy?
We could deal with everything via the deed of variation for a cleaner outcome - which is what I would propose - but I wish to ensure that Mr B is correctly advised as to his entitlement to the liquid assets if he takes a life interest instead.
If the husband and daughters are the only persons entitled on intestacy, by deed of variation they can divide the estate up any way they wish.
If the deed deals exhaustively with the entire estate, this will negate the intestacy provisions including the statutory legacy.
Personally, I would avoid the notional will route, instead setting out the intended reallocation of the estate in a schedule, including the appointment of trustees and terms of the trust.
Using a notional will can often cause confusion, especially when it purports to appoint executors and include provisions that would normally appear in a will when you cannot be certain of the events that will occur or the assets that will be held at death.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
From a point of advice then, the husband can be advised:
He is entitled to the statutory legacy + 50% of residue.
If he settles for a life interest of the property and the DoV only deals with this element, he still owned the life interest plus 50% residue. This would be made up from the liquid assets (220K) and presumably a charge on the property in favour of his estate for the balance. If I was advising the daughters I would obviously not recommend this.
A DoV should really deal with the entire estate, with everyone having had advice with respect to their entitlements (not by notional Will - as suggested).
I am unclear who you are acting for - be very careful to be clear about who you are acting for and what advise your retainer covers: make sure that Mr B, and all the beneficiaries, take full advise in their capacity as beneficiaries as apposed to executors or trustees - Mr B needs to understand what he is entitled to under the intestacy rules, what is being proposed and how it will restrict his use of the trust fund during his life, and the other ways he could benefit the step daughters (e.g. by provision in his will) rather than a DOV. They may all get on now but if relations are not always as cordial he would be putting himself in a position where he does not have the same freedom than if he inherited outright.
If they are all on the same page and have all been advised separately then the agreed terms of the DOV will replace the Intestacy rules; in most circumstances I do like a notional will.
Any agreement needs to include a clause about claims against the estate and I(PFD)A 1975 claims.