IHTM11064 - Settled property: What to do where the surviving spouse or civil partner opts for a capital sum instead of a life interest under the intestacy rules

Under the Administration of Estates Act 1925 (AEA25) S47 the surviving spouse or civil partner (IHTM11032) of someone who died intestate (IHTM12001) has the right to require the personal representatives (IHTM05012) to redeem the life interest by paying a capital sum. The right has to be exercised within twelve months of the issue of the grant (IHTM05001) or such longer time as the Court may allow.

When a surviving spouse or civil partner exercises that right

• it is not a transfer of value (IHTM04024) (IHTA84/S17(c))
• under IHTA84/S145 the effect is as if the spouse or civil partner, instead of being entitled to a life interest, had been entitled to a sum equal to the AEA25/S47 capital value
• so you should allow exemption under IHTA84/S18 on that capital sum only, not the part of the estate in which the spouse or civil partner would otherwise have had a life interest

The rules for calculating the capital value of the spouse’s or civil partner’s interest in the residuary estate are prescribed by the Intestate Succession (Interest and Capitalisation) Order 1977 (SI 1977 No 1491) as amended by the Intestate Succession (Interest and Capitalisation) (Amendment) Order 2008 (SI 2008 No 3162) with effect from 1 February 2009.

If you need to check the value offered, you will need to find out

• The date of birth of the surviving spouse or civil partner
• The date of the election to capitalise the life interest

Once you have this information you should refer the case to the Actuarial Group who will be able to advise on the value.