The Government promised it would update the Intestacy Rules every five years and so it’s good to see that promise has been upheld. On 6 February 2020, the statutory legacy for surviving spouses and civil partners increased to £270,000.

What does this mean?

As a reminder, dying intestate means dying without a valid will, which is why having a will is still so important, but the initial pressure eases a little more. Under the current law of intestacy, the estate of the deceased is distributed in a particular way depending on who survives, how they are related to the deceased and how many people there are.

An example of this new amount for statutory legacy, imagine you die without leaving a valid will.  Your estate is worth £270,000 (or less), your whole estate would pass to your surviving spouse/civil partner.  However, if your estate exceeds the new amount of £270,000 then your surviving spouse/civil partner would receive the first £270,000 of your estate, but the balance would be split between your surviving spouse/civil partner (50%), and (if you have) children, they would share remaining 50%.

It should be noted that at present, unmarried partners of the deceased have no right to the estate under the laws of intestacy (even if they cohabit).

The rules of intestacy can seem a little complex but as a general understanding those inherit an estate (if no spouse or civil partner) would be….

Why being married helps with IHT

  • IN ORDER:
  • issue on statutory trust
  • parents (joint split if both alive)
  • siblings on the statutory trusts (equally split if more than one)
  • half siblings on the statutory trust
  • grandparents (equally if more than one alive)
  • uncles and aunts on the statutory trusts
  • half uncles and aunts on the statutory trusts.

 

Complicated isn’t it?  There are, of course, many individuals who have no blood relatives and if this is the case, the estate would pass to the Crown.

Intestacy Rules for Statutory Legacy increases

To give ideas of what might happen in certain scenarios, take at look at the following three examples:

Example One

Jonathan and James have a civil partnership.  They have no children. There is an estate of £1,000,000 and if Jonathan died without a will (intestate) James would inherit the whole estate of £1m, with no inheritance tax payable because of spouse exemption.

Example Two

David and Samantha live a wonderful life together and have done for a good number of years, but are not married. David’s estate is a fortunate one, and worth £5,000,000.   They have no children.  What happens David dies without a will (intestate)?

Even though it was presumed that David wanted to leave his estate to Samantha, as they are not married his estate of £5,000,000 would not go to Samantha! At all.  None of it.  If David’s parents were still alive, they would inherit (jointly) the estate and if they had deceased, the estate would then go to David’s siblings (if he had any), and if no brothers or sisters….(and assuming his grandparents had deceased), then it’s over to his aunts and uncles….

Ultimately, this can get extremely complicated.

Example Three

Antonio and Patricia and their daughter Ellie.  Antony (Tony) and Patricia (Patsy) are married.  They have one child, a lovely daughter called Ellie. Tony and Patsy have an estate of £2,000,000. Antonio sadly dies suddenly without a will (intestate).  Who gets what?

Patsy would be entitled to all of Tony’s personal property, as well as the first £270,000 of the estate, and 50% per cent of the remainder (leaving 50% to Ellie).

In this particular situation, the spouse exemption cannot be applied on the entirety of the estate because it is not all being left to Patsy. After the application of the nil rate tax free allowance of £325,000 which Tony is entitled to, inheritance tax of £670,000 would be due on the estate. That’s a lot of money.

This would mean that Patsy would receive £800,000 and Ellie would get £530,000. As the estate included a property, the property may need to be sold. Don’t forget about Capital Gains Tax….

Comments

Simon Davis, president of the Law Society commented on the new Rules:

This increase is very welcome but many people are unaware that under intestacy laws, unmarried partners and close friends cannot inherit,’ 

‘Writing a legally valid will with the help of an expert solicitor ensures people’s estate is inherited exactly as they would choose and can prevent a whole raft of problems landing on loved ones when they are grieving.’

Conclusion

Dying intestate is never easy for the ones left behind.  We all would rather not think about dying, but if you were to write a will, your wishes would be upheld. Your hard earned estate funds would go to the people you wished for.  It needn’t be stressful or upsetting.  It doesn’t have to be expensive or time consuming.  What it does however, is protect your loved ones.  Yes, it’s great that the government are adhering to their promises and have increased the statutory legacy, but if you do have a large estate, it is well worth speaking to an expert in wills and trusts, because it seems unnecessary for your loved ones to pay out vast sums on tax, when it could be wisely and legally organised in a proficient manner.

 

If you’d like to speak to Rob Cartmell regarding this matter, he’d welcome your call.  Please contact him here at your convenience.