Research shows that over 28 million of the UK adult population (58%) are currently without a will despite 92% of the population having a firm idea on who they would like their estate to pass to after they die.
It is a common misconception that once you die your spouse will inherit everything or that your next of kin will decide how your assets are spilt.
The definition of intestacy:
When a person dies without a will (or does not dispose of their entire estate) they are said to have died ‘intestate’. The intestacy rules in England and Wales are rigid and stipulate who inherits the estate and in what proportions. These rules may be contrary to the deceased’s wishes or may be disadvantageous for other reasons (e.g. they may be tax unfavourable).
Who is entitled to what:
Under the current rules if the deceased is survived by a spouse or civil partner and children, the spouse receives the personal belongings, a legacy of £250,000, and one half of the remainder on a life interest trust. The children share the other half of the estate absolutely, eventually receiving the other half on the death of the surviving spouse. This can lead to inheritance tax being paid on the first death, whereas creating a will can avoid any tax being paid until the survivor dies.
If the deceased dies without children, the spouse receives the personal belongings, a legacy of £450,000, and half of the residue. The parents of the deceased (failing which the deceased’s siblings) receive the other half of the residue. This, also, can lead to upfront inheritance tax and could mean that the asset is taxed again on the parents’ subsequent deaths.
Where the above circumstances don’t apply, the below persons inherit in the following order of priority:
1. Spouse or civil partner;
2. Children and then their descendants;
4. Siblings of the whole blood and then their descendants;
5. Siblings of the half blood and then their descendants;
7. Uncles and aunts of the whole blood and then their descendants;
8. Uncles and aunts of the half blood and then their descendants; and
9. The Crown.
Who isn’t entitled under the intestacy rules?
Unmarried couples have no rights to the deceased’s estate under the intestacy rules. This can often lead to costly challenges under the Inheritance (Provision for Family and Dependants) Act 1975 if the unmarried survivor believed that they should have received a financial provision had it not been that the deceased died without a will. Step children also have no rights, nor do friends or any other distant relative of the deceased.
Creating a will enables a person to leave their estate to who they want, in what proportions and avoids unnecessary inheritance tax. Having an up-to-date will ensures your loved ones aren’t left with financial headaches, bitterness, confusion and costly legal battles bought about by the intestacy rules.