Intestacy: when a baby inherits a house

[MyNameIsUrl]

A young man dies without a will, having lived with his partner but not married, with a small baby. He owns a mortgaged house in his name only.

I’m a family friend, trying to help with some of the admin. I googled intestacy rules, and as I understand it the baby inherits the house, but trustees manage the estate on its behalf. This situation doesn’t sound like it’s suitable for diy, and I’m not asking for any detailed how-to advice, but can someone please give me a steer what to put on my to-do list?

What sort of professional help do we need, who do I need to contact to move this forward, who would be a trustee for the next 18 years? I’m a friend of the young man’s parents and we are probably all too old to last that long.

I believe there is a mortgage protection insurance policy, are there likely to be any circumstances when it doesn’t pay out? How do we ensure the mother has the right to live in the house with her baby? Is it really the case that she can’t use the young man’s bank account to continue to pay the bills, that his car has to be sold and the proceeds put in trust? She’s on maternity leave, what will she live on?

Of course my problem is that I don’t know what I don’t know, so any suggestions to put on my list are welcome.

[Mike4]

I believe there is a mortgage protection insurance policy, are there likely to be any circumstances when it doesn’t pay out?

I suspect not. The policy is likely to have been required by the lender, and they will have wanted to approve the terms of the policy to protect their interests. I can imagine (but don't know for sure) that ordinary life insurance might not pay out in the death was suicide, but for a mortgage protection policy I doubt even that would be an exclusion. IANAL though, which is what I think you need to start with.

I can't help with the main thrust of your questions but I must say what a terrible situation this is for the mother and partner. And how good of you to try to help out.

[genou]

What sort of professional help do we need, who do I need to contact to move this forward, who would be a trustee for the next 18 years?

The mother has parental responsibility for the child, and can therefore be administrator of the estate in the child's stead. I can't imagine there will be a problem with her being trustee of the child's inheritance, but you really need to find a solicitor to guide you through this. For example, I don't know to whom /how the title of the house will be transferred.

I believe there is a mortgage protection insurance policy, are there likely to be any circumstances when it doesn’t pay out?

It'll be bog standard life insurance. Normal declarations, normal caveats.

How do we ensure the mother has the right to live in the house with her baby?

Who is to object? I suspect that she will be fully entitled, but I don't know.

Is it really the case that she can’t use the young man’s bank account to continue to pay the bills, that his car has to be sold and the proceeds put in trust? She’s on maternity leave, what will she live on?

Ask the bank. The baby is entitled to the money, she is the baby's guardian, Unless there is a lot there, they'll probably release the cash - but the account, and its associated DDs etc, will fall. Bank's bereavement departments have seen it all.

Why would she sell the car? It will be the child's , but it is clearly for the child's benefit that it be kept. Insuring it might be a bit odd - she would be the keeper, but the car would belong to the child.

As to living expenses - maternity pay? Best bet for benefits is to talk to Citizens Advice.


Now is not the time to raise this, but come 18, the child will be absolutely entitled to the estate.

[pochisoldi]

The assumption here is that the mother has no entitlement to anything from the estate.

The reality is that she is probably a dependent, and could probably use the "Inheritance (Provision for Family and Dependants) Act 1975" (see https://www.legislation.gov.uk/ukpga/1975/63 ) to ensure that sufficient provision is made.

If they had been living together for more than 2 years, living as if married in all but name, then section 1A would apply, which would probably be a lot easier to prove than section 1(e).

In any case, this needs a solicitor who knows what they are doing - as whatever happens needs the consent of the court. and the "legally obvious" solution (money in a trust for the child, with mother as trustee). The Official Solicitor might get involved as well (on behalf of the child) if there is any conflict of interest between the mother and the child (hard to see myself, as generally acting in the mother's interest is also acting in the child's interest, at least in the early years).

PochiSoldi

[Clitheroekid]

What a sad situation.

Under the Intestacy Rules that apply when somebody dies without having made a Will the man’s entire estate would pass to his son. However, as the son is a minor the estate would have to be held in trust for him until he reaches the age of 18.

In practical terms there will need to be a grant of `Letters of Administration' in order for the estate to be managed.
As there is no Will, and therefore no executors, the court will appoint one or more `administrators'.

The right to apply for Letters of Administration adopts essentially the same priority as the Intestacy Rules, i.e. the right to apply vests in the nearest next of kin.

In this particular situation the nearest next of kin is the man’s child. However, because he is a minor the grant has to be taken out by the person having parental responsibility for him. In this case that would obviously be his mother.

Where there is a minor beneficiary involved there must be at least two administrators, and Rule 32 (3) of the Non-Contentious Probate Rules 1987 provides that in this situation the mother can nominate someone to be their co-administrator.

Without knowing anything about the family dynamics it might be sensible to appoint one or more of the child’s grandparents as the co-administrator(s). As the deceased is described as being young it would imply that his parents may only be in their 50s. As the trusteeship would last until the child’s 18th birthday they would still probably be only in their 70s at that point, so they would not be considered too old to accept such an appointment.

There are always inherent difficulties where trustees have an interest in the estate, and in this type of situation there is obviously a potential conflict of interest between the mother and the child. However, at least for the foreseeable future, the mother’s interests would appear to be fairly closely aligned with those of the child, so hopefully there would be no significant problems.

[Gerry557]

Another sad situation. I know of a similar one except there was no life insurance in that instance which made things tricky.

I think a lot will depend on the families involved. Hopefully they can all agree along the same lines to assist the partner and child moving forward. If that is the case then things should progress fairly smoothly.

In my instance there were some differences of opinion and a bit of a power struggle over control of some finances. There were some funds raised to aid the family but then how that should be spent caused tensions.

I think it would be to talk about the way forward and how to deal with what ifs.

I assume the mortgage can be resolved, will there be any spare. Discus finances with the partner. Benefits and or working in the future. Which is all fine when the children are young.

It might get more complicated as they become teens. Teens are all about me anyway. How to deal with a teen that want to evict mummy or sell the house to buy a sports car etc.

Hopefully cool heads can prevail

[UncleEbenezer]

IANAL, but here's a thought process that might be relevant. Fully detached from the personal sad situation, as that's unlikely to be legally relevant in itself ...

1. If the man were alive, he'd have responsibilities towards his baby, regardless of how things stood with the mother.
2. Since he's not alive,
(a) the mother has sole parental responsibility
(b) he won't agree an arrangement for child support with her.

If he were alive and both (a) and (b) prevailed, surely the Child Support Agency would become arbiter of an arrangement for him to support her? In other words, she has a claim on his assets. So, what does his death lose her? Obviously she's lost his capacity to earn, but can she really also have lost all her rights against his assets such as they are?

Oh, and for the mother to be trustee of anything might be a Bad Idea, leading to tensions when the baby is a stroppy teenager. Trustees would be something for her to hide behind.

[MyNameIsUrl]

In the three weeks since my original post we have managed to resolve the immediate ‘admin’ challenges and I’m seeing a solicitor early next month to start to resolve the legal requirements, expecting the mother and me to be administrators of the estate. It remains to be seen if the mother is a dependent, having spent less than a year with the father.

It would help me going into that meeting if I had a better grasp of what a property in trust actually is. If instead of a house the young man had left say 50k in the bank, I can grasp the principle that the money would be held in a bank account in trust and given to the now baby in 18 years time, but I cannot envisage how it works if there is 50k equity in a house (there is no life insurance to pay off the mortgage) and the baby and the mother are to continue living there. Even if the mother could get a mortgage, can arrangements be made to split the ownership to ensure the baby’s share is protected? I’m speculating that protection might be needed over the next 18 years not only as the baby develops a mind of its own, but also that the mother might meet another young man who might have designs on the asset.

Now I’ve had a little time to reflect, I can see that this sad situation – a minor inheriting from an unmarried parent – must sadly be very common, and so the consequences must also be common, with a tried-and-tested approach to ensuring the mother and baby have a roof over their heads. Has anyone any experience to share please?

[Gerry557]

Sorry to hear that things are not going as smoothly as I hoped. No life insurance is a bummer. What is the plan to keep the roof over their head.

Any new man can't have designs on the babies portion but if mother can pay her way it might be an issue if she moved to a new place with a new partner.

The child would likely follow and the trustees would have a decision to make. Possibly sell the house and invest the remaining.

I assume in trust means just that. The trustees look after the property in the child's interests.

Hopefully the more legal minds can confirm

[genou]

It would help me going into that meeting if I had a better grasp of what a property in trust actually is.

The trust is a box, which contains assets. The baby owns the assets, but can't access them directly - the key to the box is in the hands of the trustees, and they only allow access to the box under the terms of the trust ( in this instance those rules will be defaults under the law ). When the baby reaches 18, the trustees give him the key and there are no limits on him opening the box.

But, the house inside this box has a charge over it - the mortgage. Who is currently paying this ? Whoever it is will surely be amassing a claim against the house unless they are doing so out of the goodness of their heart. What has the lender said about the situation? I imagine there are limits on their ability to repossess in the circumstances, but I don't know what they might be.

[SteelCamel]

The first responsibility of the administrators is to pay the debts of the estate - and the mortgage would count as one of those. If there's enough assets in the estate (excluding the house) to pay off the mortgage, that's straightforward - the mortgage gets paid off, then the house and any remaining assets go into the trust. If not, I think the administrators would be obliged to sell the house.

The usual way to proceed would be to "sell" the house to the beneficiaries, so they either pay cash equal to the amount of the mortgage or get a new mortgage of their own, and the remainder is "paid" from their inheritance so no cash actually changes hands. But the trust for the baby will have insufficient assets to pay off the mortgage, and no income to borrow against, so I can't see how that would work in this case.