In England and Wales two thirds of people pass away each year without having made a Will. It may be the case that some people just don’t get around to it, some may not realise that getting married can revoke a previous Will. Some people presume that their Wills will provide for all their children without there being express provision in the Will to.
Whatever the reason for not making a Will these people die “intestate” and the rules around who receives what from their estates are governed by the “intestacy rules”. These rules set out the way in which the estate is to be distributed to surviving relatives after the payment of any debts, liabilities, funeral expenses and the costs of administering the estate.
The intestacy rules changed from the 1st October 2014. For any deaths on or after this date these estates will be distributed according to the revised rules introduced by the Inheritance and Trustees' Powers Act 2014 (ITPA 2014).
In summary the main changes introduced by this legislation are as follows:
Where a couple is married without children:
Old rules - the surviving spouse would receive a statutory legacy of the first £450,000 of the estate.
The remaining part of the estate (if any) would then be divided equally between the surviving spouse and the deceased’s spouse’s surviving relatives.
The ITPA 2014 amended the entitlement of the surviving spouse so that the surviving spouse receives all the assets passing on intestacy.
Where a couple is married with children:
Old rules – the surviving spouse would receive a statutory legacy of the first £250,000 of the estate. The remaining part of the estate (if any) would then be split into two halves. One half would go to the surviving spouse as a “life interest” with this half reverting to the children on their death. The other half would go to the surviving children immediately.
The ITPA 2014 amended the entitlement of the surviving spouse so that they take the statutory legacy of first £250,000 of the estate. In addition they take half of the remaining part of the estate outright and this will no longer automatically revert to the children on their death. The children take the remaining half of the estate on a statutory trust.
On the 14th of January 2020 the Lord Chancellor made a statutory instrument to increase the statutory legacy that a spouse will receive under the intestacy rules where the intestate is survived by a spouse with children from £250,000 to £270,000. The order came into effect on the 6th February 2020 and applies only to deaths occurring after the order comes into force. The Lord Chancellor is required by the ITPA 2014 to review the level of the statutory legacy at least every five years.
These new rules can disadvantage some beneficiaries in some circumstances. For example, the children of wealthy families where a parent dies intestate will benefit less under the new rules than before. Also where there are no children, the other relatives of the intestate i.e. parents and siblings will no longer automatically inherit from their estates.
The intestacy rules do however provide a failsafe position in situations where an estate is not disposed of by the Will. Having a Will in place allows the estate to be divided as the person wishes and not according to the intestacy rules. For unmarried and cohabiting couples, an arrangement for which there has been a 25.8% increase over a decade, having a Will is vitally important as the rules for an unmarried surviving partner remains the same as before and they are not automatically entitled to part of the estate.
Please note that references to spouses and marriage made include same-sex spouses and civil partners respectively.
Stephensons offer a Will writing service and our team of expert specialists are at hand to discuss your needs and how best to achieve these. If you haven’t already made a Will contact our team of specialists on 01616 966 229.