Changes to the Rules of Intestacy
Background
When a person dies without leaving a valid Will, the rules of intestacy govern how their assets are distributed. A person who dies without leaving a Will is said to have died intestate.
Commentators suggest that more than 60% of the adults in the UK do not have a Will, meaning that recent changes to the intestacy rules may affect a large number of people.
Old Rules
The previous intestacy rules will apply to anyone who passed away before 1 October 2014, if they had not made a valid Will.
Generally if a spouse died without leaving a Will and there were no children in the relationship, the surviving spouse would receive the first £450,000 from the deceased’s estate, plus half of the balance. The other half of the balance would be split between the deceased’s blood relatives including any surviving parents.
If there were children in the relationship then, the spouse inherits only the first £250,000 from the deceased’s estate, plus a ‘life interest’ in half of any remainder. The other half is split between the children, who inherit at age 18.
Life interest means that the surviving spouse is entitled to receive income from the assets during their lifetime, but not have access to the capital funds. The remaining capital amount would pass to the children upon the death of the spouse.
Changes from 1 October 2014
The rules change with effect from 1 October 2014. For married couples and civil partners, broadly if there are no children then the surviving spouse will now receive the whole estate.
Where there are children in the relationship, then the surviving spouse will receive the first £250,000 plus half of the balance of the estate. The final half of the remaining estate is still split between the children, who inherit at age 18.
These changes remove the life interest element, so that the surviving spouse can dispose of their half of the estate as they wish, potentially disinheriting the deceased’s children.
There is no change for couples who are unmarried and not in a civil partnership, if one partner dies without leaving a Will their partner will still not be entitled to a share. The estate would be divided amongst blood relatives in a set order.
Making a Will
The best way to control the distribution of assets is by making a Will. We would urge all of our clients to ensure they have an up to date and valid will in place; if you have any concerns about this we recommend you contact a solicitor. The structure of a Will may also minimize Inheritance Tax on the deceased’s estate.
For more information regarding tax efficient wills or inheritance tax in general please contact our Tax Director, Jenny Marks.