Private Client
Key Takeaways:
- Contracting Out Agreements Can Override Intestacy Rules: The judgment highlights that intestacy rules are no longer guaranteed to apply where valid section 21 agreements are in place. Such agreements are binding promises and must be strictly adhered to, even in the context of intestacy.
- No Double Dipping: The Supreme Court confirmed that such agreements prevent claimants from drawing simultaneous benefits under the agreement and intestacy provisions.
- Choosing Option A or B: A surviving partner has the choice to elect either Option A or Option B under the Property (Relationships) Act 1967. Where the section 21 agreement does not explicitly address death, the surviving partner may still choose Option B and claim entitlements under intestacy provisions.
- Impact on Inheritance Rights: It is crucial to recognise that entering into a section 21 agreement may affect inheritance rights in the event of a partner’s death. This decision underscores the importance of considering how these agreements interplay with estate and succession planning.
- Not Just for Separation: While section 21 agreements are often viewed as tools for separation, this judgment emphasises their significant implications in the event of a partner’s death as well.
The Supreme Court has now released its judgment in Rimmer v Wilton, which clarifies the significance of a section 21 agreement when one partner dies intestate (without a valid will). The Supreme Court disagreed with the Court of Appeal’s decision that the agreement allowed Ms Wilton to claim under the intestacy rules. They found that clause 5.1 of the agreement, which stated that no claims could be made “under any statute whatsoever,” was broad enough to encompass entitlements under the Administration Act 1969. Additionally, they determined that her lifetime occupancy right under clause 4.4 effectively barred her from claiming entitlements via intestacy.
Frequently asked questions:
- How often should I review my contracting out agreement?
- What does a review of my contracting out agreement mean?
- Does my contracting out agreement effect my will?
