March 20, 2012

Are you sure that family members would do the right thing in the event of your death?

The company of which David was secretary was a household name international public company. He was getting paid a good salary and was also entitled to significant share options. He was in his mid fifties. He and Mavis had married relatively late in life – his pipe smoking went with the confirmed bachelor image. They had no children. He had an aged mother who has already in a nursing home and a married sister with two daughters at university. Mavis had no family.

One evening David was having his normal postprandial bath, Mavis went into see him – and was horrified to discover that he had died from a massive heart attack. He had died intestate (without making a Will).

The semi-detached house had been David’s before the marriage. It was still in his name. It was valued at £450,000 and on intestacy, this (together with his personal chattels) equated to the entitlement that Mavis had as his surviving spouse.

The remainder of his estate, which was the order of the sum of £1,000,000, passed as to one half to Mavis on a life interest only-after her death the capital of that half passed to David’s mother (if she was still alive or, if not, to David’s sister). As to the other half of the excess over the initial £450,000 – that passed to David’s mother outright.

By the time of David’s death, David’s mother’s dementia had reached such a stage that she did not understand that David had died. A few months later she herself had passed away. It being a family tradition, she also had not made a Will. The whole of her estate, including the half a million or so pounds she was about inherit from David’s estate passed to David’s sister.

David’s sister was embarrassed about this all and believed that morally the money was Mavis’s. Accordingly, because the deaths had taken place in fairly swift order, she was able to enter into a Deed of Variation relating to Mavis of her mother’s half share of David’s estate to the effect that that passed back to Mavis – incidentally it also saved something like £70,000 in Inheritance Tax.

It is not entirely clear what the moral of this tale is. It is rare in my experience for families to ‘do the right thing’ when money is involved. David’s sister certainly did the right thing. Mavis has done her best, particularly for David’s nieces, ever since.

However, this issue that was left to chance could easily have been dealt with by David having made a proper Will. There should also have been a Power of Attorney for his mother. Whilst the characters in this story are fictional, we do have to deal with situations like this – and sometimes even more upsetting - on a regular basis. You do not need to be rich for it to be important to make a Will.

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