Is it time for reform?
When a person dies intestate, that is, without leaving a will, the Administration of Estates Act sets out the rules as to who inherits and the procedure by which the estate will be distributed. In Gibraltar, the first £ 150,000 of the estate goes to the spouse or civil partner (“the spouse”) of the deceased absolutely and additionally all the chattels of the deceased, that is, personal property including cash, furniture, the family car and all other tangible assets; bank accounts and debentures are considered intangible assets and are not included as chattels. Where there are children, the remainder of the estate is divided in half. Half is given to the children with the spouse receiving a life interest in the other half.
These rules appear reasonable and ensure that the children of the deceased receive a fair share of their parents’ estate. However, this may leave a surviving spouse financially vulnerable and with no legal recourse.
The main issue concerns the life interest the spouse obtains over the remainder of the estate after the initial £ 150,000. Whilst the children may dispose of their share of the estate in any way they choose, the spouse’s share must be maintained on trust for the children; the ultimate beneficiaries. The capital cannot be depleted and can only be invested by the spouse and benefit from the interest produced, although this may merely produce a meagre income. Considering the ever-increasing cost of living and the rising value of property in Gibraltar, the current rules can leave a surviving partner in a difficult financial position.
In the UK this issue was addressed in 2014. In England and Wales, in addition to receiving the chattels, surviving spouses take the first £ 250,000 of the estate of their deceased spouse and have absolute control over half of the remainder. This means they can spend and freely use their share.
Naturally, the law must provide an objective solution which justly caters for as many situations as possible. In some cases, the intestacy rules as they stand would seem to fairly protect the children and in so doing fulfil the wishes of loving parents. But, as is apparent, in other cases it will leave spouses vulnerable. To give a typical example, where a spouse has left a property worth £ 250,000 with a further £ 50,000 in debentures, the surviving spouse will effectively receive only £ 150,000 which can be used freely, but this only if the home is sold. Although there will be available a further £ 75,000, being half of the remaining estate, the spouse will be unable to access this money as it is held merely as a life interest for the children. This can be invested but, even at an interest of 5%, it will be a struggle to make ends meet. One can imagine an elderly person, who has worked throughout life to maintain the family home and set aside a little for old age, struggling and unable to enjoy the savings without restriction and not merely held on trust for the children.
The reality in practice, of course, is that families do not adhere to the law and use the intestate estate as they wish when the surviving spouse will keep and use the estate without restriction. So, to reform our laws in line with what actually happens is sensible.
The Government has a responsibly to update our law as is now the case in the UK and reform the intestacy rules so that,
1. The statutory amount to which the spouse of a deceased person is entitled in an intestacy is increased from £ 150,000 to £ 250,000,
2.Half of the remaining part of the estate after the initial £ 250,000 is available to the surviving spouse absolutely to be used without restriction.
As a novel proposal, where spouses or civil partners have been living in a family home owned by one of them alone, on the death of the spouse owning the home where there has been no will, the surviving spouse should be entitled to inherit, in addition to the £250,000, a life interest in the home. In this way, the surviving spouse will be protected for life from losing the home and the children too will be protected against the spouse remarrying or entering into a civil partnership and the new spouse or partner inheriting the home in certain circumstances such as divorce or the predeceasing of the surviving owner.