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Estates of Deceased Persons (Forfeiture Rule and Law of Succession) Bill

I thank my right hon. Friend for setting out that important point. If that were not the case, it could have serious knock-on effects for other cases. The Law Commission received responses to the consultation paper from 31 individuals and organisations. Those included leading academics in the field of succession law; the Society of Legal Scholars, Property and Trusts Section; a number of individual judges, including Lord Justice Sedley, one of the members of the Court of Appeal who had heard the Re DWS case, whose response wholeheartedly endorsed the Law Commission's proposed solution; the Association of District Judges; specialist solicitors from leading firms; the Inland Revenue; the Bar Council; the Law Society; and the Chancery Bar Association. Most of the respondents agreed that the current law was unsatisfactory, that in Re DWS (deceased) the grandchild ought to have inherited, and that a ““deemed predecease”” rule would be the best way of achieving this. The Chancery Bar Association must, however, be singled out for particular mention. It spotted that there was an analogous, albeit rare, circumstance, elsewhere in the law of intestacy, that should be addressed. This arises from the fact that where a child inherits from a parent or other relative on intestacy, that child's interest is held ““contingently”” on the statutory trusts under the intestacy rules. In July 2005, the Law Commission's final report, ““The Forfeiture Rule and the Law of Succession”” was presented to Parliament. The report recommended that a ““deemed predecease”” solution should apply in three situations. First, where a person disclaims or forfeits the right to inherit from a person who has died intestate, the intestacy rules should then be applied as if the killer had died immediately before the intestate. Secondly, where a person disclaims or forfeits a benefit under a will, the will should be applied as if the killer had died immediately before the testator, unless the will contains a provision to the contrary. Thirdly, where a person loses a benefit under an intestacy by dying unmarried and a minor, but leaves children, the property should devolve as if that person had died immediately before the intestate. The Civil Law Reform Bill incorporated provisions to this effect, subject to minor modifications relating to the role of the public trustee, which for reasons I shall explain, need not concern us now. I hope this explanation of the genesis of this Bill makes clear the problems that it is trying to address. The overall point is that in the three circumstances identified— forfeiture, disclaimer and the rights of the children of a minor heir on intestacy—the detail of the law does not produce the desired result. The general policy on intestacy is that once the interest of any spouse or civil partner has been satisfied, the property of the deceased should pass to closer blood relatives before more distant ones: the children of the deceased, for example, should be preferred to siblings of the deceased. Where there is a valid will, the general policy of the law is that the wishes of the testator—the person who made the will—should determine who is to inherit what from the estate of the deceased. That gives effect to the principle of freedom of testamentary disposition, which lies at the heart of our succession law in England and Wales, and which was referred to by my right hon. Friend the Member for East Yorkshire and others. The effect of the Bill will therefore be to change the law in the three areas mentioned, so that it is consistent with the general policy of the law. First, as was highlighted in the 2001 Court of Appeal decision in Re DWS (deceased), where a person forfeits an inheritance on intestacy because he or she has killed the person from whom he or she would have inherited, his or her children will also be disinherited. The forfeiture rule thereby disinherits not only the criminal but also the innocent grandchildren of the victim. This problem is not confined to intestacy. For example, where there is a will that contains a gift specifying who is to inherit, if the first named recipient dies before the testator and that recipient forfeits his or her inheritance, the default gift cannot take effect because the recipient is still alive. Similarly, if there is a will giving a gift to a child of the testator without any further provision, the law implies a term that the gift will pass to his or her children if he or she predeceases the testator. If the testator's child forfeits his inheritance, his or her children—the testator's grandchildren—will not be able to inherit. The same problem arises in both testate and intestate successions where the person who would be first entitled disclaims the inheritance. Anyone claiming through him or her will not be able to inherit. Let me explain the term ““disclaimer”” here, as that was raised by my right hon. Friend the Member for East Yorkshire, and discussed further by my hon. Friends the Members for Christchurch and for North East Somerset in the context of disclaiming gifts under a will. There was a further question as to why this needed to be done. A beneficiary is free to accept or disclaim—that is, refuse—a gift that has been left to him or her in a will. The unwanted gift will form part of the testator's residuary estate—the part of the estate remaining when all the specific gifts have been satisfied— unless, as is less usual, he or she has made a default gift in the event of a disclaimer. If the will does not make provision for the disposal of the estate, it will be distributed according to the intestacy rules. My hon. Friend the Member for Christchurch went on to ask why that should be the case. Figures are not kept on the number of people who disclaim gifts in wills. However, in its consultation paper, ““The Forfeiture Rule and the Law of Succession””—CP No. 172—the Law Commission commented that the usual reasons for disclaimer in will cases will either be to secure beneficial tax consequences or to enable the beneficiary to avoid inheriting onerous property such as a lease with repairing covenants. My hon. Friend then asked whether the disclaimer provision opens the way to evade inheritance tax. The answer is no, because in the example we have before us, the son could achieve the same results as a disclaimer under the Bill by varying the will or the intestacy rules. Deeds of variation can be used to vary the distribution of the estate for inheritance tax or capital gains tax purposes. That is only possible where all the original beneficiaries agree and the tax legislation permits it. These variations will often include disclaimers by some or all of the original beneficiaries, and the Bill simply enables the intended recipient to disclaim without thereby disinheriting anyone entitled to claim through him or her. My hon. Friend the Member for North East Somerset then asked whether a disclaimer of inheritance can instead take the money and give it away. The answer is yes; the money would then be his or hers to do with as he or she wished, but he or she could not disclaim part of an inheritance, or having disclaimed, specify where the inheritance should go. That is for the deceased to say in a will or the intestacy rules, which act as a deemed will, if I can put it in those terms. So a beneficiary of an intestate estate is free to accept or disclaim the inheritance. When the disclaimer is a child of the deceased, the disclaimed interests passes to the child's siblings. Clauses 1 and 2 of the Bill address those issues. There is the rather unusual situation, which was spotted by the Chancery Bar Association—I take my hat off to the assiduous lawyer who noticed this one—in which if a person under the age of eighteen who is prospectively entitled to inherit property under the intestacy rules, perhaps from his or her parent, dies before reaching the age of majority, leaving children but without having married or entered a civil partnership, those children cannot inherit in place of their parent. Right hon. and hon. Members used several interesting possibilities to explain how that could be put into practice, but that happens because the parent did not reach the age of majority or marry or form a civil partnership under that age. In more legal language, the parent did not attain a vested interest. That anomalous outcome, rare as it might be, discriminates against those children. Clause 3 addresses that issue. In all three cases, the Bill would solve the problems by deeming the person who loses the inheritance to have died before the person whose estate is being distributed. That means that on intestacy, the children of the person losing out will be able to inherit under the statutory intestacy rules and, if there is a will, that the actual or deemed wishes of the testator will prevail. In short, the aim of the Bill is to try to ensure that the ““right”” people inherit. The Government support that aim. I shall comment on the differences between the Law Commission's draft Bill, published in 2005, and the equivalent provisions in the draft Civil Law Reform Bill, published in 2009. These issues were raised by my right hon. Friend the Member for Berwick-upon-Tweed, and my hon. Friend the Member for Christchurch touched on them, too. They largely derive from the comments of the Justice Committee and the people who gave evidence to it. Some of the changes are drafting changes, but others were more significant. The question arises of why they should have been left out of the Bill. Although the Justice Committee welcomed the proposal to ensure that minors who inherit under the provision have their inheritance protected, several criticisms were made of the special trust advice chosen by the Law Commission to achieve that aim. On consideration of the responses to the consultation and the evidence to the Justice Committee, it has become clear that the special trust was unnecessary and would be problematic and expensive to operate. The existing law, which already imposes a trust and gives the court power to appoint alternative trustees and supervise those trusts, gives the property of minors adequate protection. We therefore believe that the Bill meets the concerns of the Justice Committee in that regard. The Justice Committee welcomed the reforms and reached two conclusions. First, it stated:"““We welcome this clause as ending the current rule which penalises the children or other heirs of a killer who are themselves not only entirely innocent but are the people whom the deceased ""would probably have wanted to benefit from the estate in any event. We also welcome the proposal to ensure that minors who inherit under this provision have their inheritance protected.””" Secondly, it pointed out:"““We recommend the Government to re-examine the drafting of clauses 15 to 17 in the light of the comments made by the Bar Council and the Law Society. We expect all minors to receive suitable protection under the bill. Equally, we share the Law Society's concern that nothing be done to impair the validity of existing wills.””" The main difference, however, as my right hon. Friend the Member for Berwick-upon-Tweed pointed out, is that the earlier draft Bills contained specific provisions intended to ensure that in forfeiture cases the criminal was prevented from gaining any benefit from the inheritance that would, under the terms of the draft Bill, pass to his or her children. Those special trust provisions attracted a good deal of criticism from witnesses to the Justice Committee and people who replied to the Ministry of Justice's consultation on the draft Civil Law Reform Bill. Two respondents—the Law Society and the Bar—considered that the safeguard provisions were not necessary because legislation already exists that would protect an infant beneficiary's inheritance in forfeiture cases if such protection were to be needed. Both referred to section 116 of the Senior Courts Act 1981, which provides the court with discretion to pass over any prior claims to a grant and appoint someone else if by reason of any special circumstances it appears necessary or expedient to do so. The Bar also mentioned section 114(2) of the 1981 Act, which provides that wherever a minority interest arises under a will or on intestacy, a grant should be made to a trust corporation or to two individuals, unless it appears to the court to be expedient that there should be a sole personal representative. The same two respondents also expressed concern about the limited application of the safeguard provisions, which is restricted to the infant children or more remote issue of the offender, and only then if, as the Bar noted, the infant inherits by virtue of the reform rather than under, for example, a default gift in a will. It considered that there may be cases where court intervention is needed to prevent potential abuse of the inheritance, where those inheriting are infants but are not directly related to the offender. The Bar also objected to the width of the power of the court to allocate any property in which the infant had an interest to the trust, and it raised a fundamental concern about the workability of the provisions, where both the infant and the disqualified person would inevitably benefit from the trust property—for example, where the former matrimonial home was held under the trust, and the infant and the disqualified person were both living there. The Bar concluded:"““On balance, we consider the provision””" to safeguard an infant after forfeiture"““to be unhelpful, and likely to lead to increased expense in the administration of estates in circumstances which are bound to be tragic but are otherwise unpredictable.””" The Government have given particularly careful consideration to those comments, which we have discussed with the Law Commission and with Master Winegarten of the chancery division of the High Court, who was very critical of the special trust provisions. We agree with the Justice Committee that minors who inherit should have their inheritance protected and that all minors should have suitable protection under the Bill. However, it is clear from our more detailed consideration of how the special trust provisions would work that they are unnecessary, problematic and expensive to operate. As my right hon. Friend the Member for Berwick-upon-Tweed pointed out, the Civil Law Reform Bill contained special trust provisions for children. He asked whether this Bill provides protection now that the special trust provisions have been taken out, an issue which I have dealt with. In our view, the existing law, which already imposes a trust to the benefit of minor children and gives the court power to supervise the administration of estates, gives effective and adequate protection.