Tony Granger examines the new intestacy rules which became effective on 1st October 2014, and highlights changes made following the Inheritance and Trustees Powers Act 2014.
Over 70% of eligible UK residents do not have a will. In addition, some existing wills may be invalid or out of date due to marriage, divorce, or the death of a spouse. If you do not have a valid will then on your death your assets will devolve according to the rules of intestacy. Following recent reforms, a larger portion of the estate will pass to the surviving spouse outright, and matters are further simplified without a complicated trust structure, which is to be welcomed.
Note that the term ‘spouse’ includes ‘civil partner’.
The changes
The new intestacy rules mean changes for spouses and children where the assets of people who die without wills are shared out. The previous position was that a surviving spouse with no surviving children shared the estate with the deceased’s relatives (parents, brothers and sisters and others) where the estate value was greater than £450,000. Under the revised rules, the spouse could inherit the whole of the deceased’s estate without sharing it.
Previously, where the deceased left a spouse and children, the estate was shared with him or her and the children. For estates larger than £250,000, the survivor received £250,000 as a statutory legacy and a ‘life interest’ in 50% of the residue – children being entitled to the remaining 50% on attaining the age of 18. From 1 October 2014, the surviving spouse receives 50% of the residue outright, not only the income. If no spouse, children or relatives exist, everything goes to the Crown, the Duchy of Lancaster (the Queen) or the Duchy of Cornwall (Prince Charles).
Previous and current intestacy rules:
|
Deceased dies leaving |
Before |
From |
|
Spouse and children |
Spouse receives:
Children
entitled to remaining 50% of residue
at age 18 |
Spouse receives:
Children
entitled to remaining 50% of the residue at age 18 |
|
Spouse, no children,
with surviving parents and/or siblings |
Spouse receives:
|
Spouse receives the whole
estate Parents, siblings
(brothers and sisters) receive nothing |
|
No spouse, but children |
All to children in
equal shares |
All to children in
equal shares |
|
No spouse, children or
relatives |
Everything goes to the
Crown |
Everything goes to the
Crown |
Unmarried Partners
The revised intestacy rules do nothing for unmarried partners, who do not receive anything on intestacy. They may, however, have a claim under the Inheritance (Provision for Family and Dependents) Act 1975. The act specifies four categories of claimants:
- the surviving spouse; cohabitee who lived with the deceased for at least two years;
- children: legitimate, illegitimate or adopted; and any other child, such as a stepchild, supported by the deceased and treated as her or his own;
- others supported by the deceased, such as an elderly relative; or
- anyone receiving regular maintenance from the Inheritance (Provision for Family and Dependants) Act 1975 deceased.
The time limits to bring a claim are very strict, with the Act providing that a claim must be brought within six months of the grant of probate being issued.
Inheritance tax
Inheritance tax (IHT) is payable on intestate estates at 40% of the net estate after deduction of applicable nil rate band – currently £325,000 plus the unused portion of a deceased’s spouse nil rate band.
Practical Tip:
Consider making or reviewing your will. This will give you direction and certainty and ensure that intended beneficiaries benefit from you. IHT savings could be made, and if no relatives remain then a charity could benefit - instead of Prince Charles or the Queen!
