Surviving spouse or civil partner elects to take a lump sum on intestacy (England and Wales)
For deaths on or after 1 October 2014 changes introduced by the Inheritance and Trustees’ Powers Act 2014 mean that the surviving spouse receives an absolute interest in the half share of the residue under the intestacy. Therefore from this date IHTA84/145 and IHTA84/17(c) no longer apply.
For deaths before 1 October 2014 under S.47A Administration of Estates Act 1925 the surviving spouse or civil partner (IHTM11032) of an intestate has the right to require the personal representatives 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 of letters of administration 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, IHTA84/S17(c), and
- the provisions of IHTA84/S145 have the effect as if the surviving spouse or civil partner, instead of being entitled to a life interest, had been entitled to a sum equal to the S.47 AEA capital value.
This means that you should give spouse or civil partner exemption on the capital sum that the surviving spouse or civil partner has received rather than on the part of the estate that the spouse or civil partner would otherwise have had a life interest in.
Where this applies, you should ask the taxpayer to explain how they have arrived at the capital sum and then refer the case to the Actuary for advice.
The rules for calculating the capital value of the spouse or civil partner’s interest in the residuary estate are prescribed by the Intestate Succession (Interest and Capitalisation) Order 1977 (SI1977/1491) as amended.