Caroline Garnham on why dying intestate will only heap further grief on your family, loved ones and other beneficiaries
MANY PEOPLE ARE superstitious about planning for their death for fear that, once the plan is implemented, death awaits. But, given that death is not an option for any of us, the Girl Guide slogan to ‘be prepared’ is far more appropriate. Not that it is in the lawyer’s interests for you to plan your estate in advance: far more money is spent on legal fees in unravelling an out-of-date estate plan or an intestacy (dying without a will or estate plan) than is paid in planning one, even if you have assets in several jurisdictions.
It’s expensive not because lawyers charge excessive fees, but because there is a complete lack of coordination between one country and another and little willingness to do much about it. Each country is wedded to their laws of succession and the connecting factors that determine whether their laws apply to a particular person or not, and it is not uncommon for the laws of several countries to apply to one estate, or indeed none.
Mario (a fictitious character) was a hedge fund manager who, at the age of 48, suffered a fatal heart attack. He had neither a will nor an estate plan. He left a wife, Lucy, and their two children, Zac and Lara, aged three and five. Mario and Lucy had an apartment in Verbier, a house in Cap d’Antibes and a flat in Eaton Square, which was their main home. Mario was from Argentina and Lucy is English. He was therefore domiciled in Argentina, but resident in the UK for UK law purposes; Lucy is domiciled and resident in the UK.
If Lucy had died without a will, as opposed to Mario, the provisions of the Administration of Estates Act 1925 would have applied to determine who got what. However, Mario was not domiciled in the UK, so in this case UK law says that the law of his domicile governs the succession to his moveables (everything but land), which is Argentina, and the law of the country in which the land is situated governs the succession of his land.
Argentina, however, is a civil-law jurisdiction with a completely different legal system to that of the UK. It is based around rules that depend upon the type of marriage contract Lucy and Mario entered into. But they got married in Deal, in Kent, without any thought of a marriage contract!
The first thing Lucy should do is take advice from an Argentinian lawyer to determine what succession laws apply to Mario’s estate. This is not straightforward because the legal distinctions and concepts in Argentina are very different from those in the UK, which is a common-law country.
Under Argentina’s succession laws, because Mario lives in the UK, UK law governs his estate, meaning that neither country’s law applies! In a situation like this the complicated laws of renvoi kick in, which, in essence, is an attempt to get one of the two countries to agree to apply their laws of succession to Mario’s ‘moveable estate’, which in this case would mean UK law.
Under UK law, the administration of an estate involves the UK courts. Although in most cases the court involvement is minimal, in a cross-border estate such as this, the court aspect would be far from minimal and a judge needs to be convinced that what is being proposed is correct in law and that he or she can and should apply UK law and not just throw the case out for lack of jurisdiction.
Lucy was dependent upon Mario, she did not work and needed Mario for financial support. Under the Administration of Estates Act 1925, any person who is a dependent on the deceased can apply to the court for proper financial provision, but this provision can only be relied upon if the deceased was, at the time of death, UK domiciled. If the deceased is not UK domiciled, like Mario, although the court needs to apply UK law under the rule of renvoi, it cannot then act as if Mario were UK domiciled and make proper provision for Lucy.
Under the UK intestacy rules, Lucy is entitled only to the personal chattels, a lump sum of £125,000 and a life interest in half the residue of the estate. The other half is to be distributed between the children in trust while they are minors. Most of Mario’s estate is his business, and his partners are not pleased with the idea of buying out Lucy, who is unlikely to get a sum sufficient to live on for the rest of her life. The children’s inheritance therefore needs to be varied and redirected as far as possible to Lucy.
Since the children are minors, any variation a judge makes must be for their benefit. This is not therefore a straightforward application, because any redirection of the assets is taking monies away from children to their mother. If the judge is of the opinion that Lucy is a spendthrift, he could well decide not to rule in her favour.
Given the real danger to the financial well-being of Mario’s wife and family on his death, let alone the stress caused to Lucy in resolving this mess at a time when she is grieving, anyone with an estate similar to that of Mario owes it to his or her family to put a proper plan in place, regardless of the expense.
All names and details of this case are fictitious. Click here for another international legal tangle.