Dying Without A Will
Dying Without A Will in the UK affects your spouse and children. The position of spouses and children in the situation where a person dies intestate (i.e. without having a valid will) has undergone substantial change as of 1st October 2014 when the Inheritance and Trustees’ Powers Act 2014 (IATPA) came into effect.
Prior to 1st October, if someone died and was survived by a spouse or civil partner, but no children or grandchildren, the surviving spouse would receive the personal belongings of the deceased, the first £450,000 and half of any remaining assets. The other half would go to the deceased’s parents or, if they were not alive, any siblings and their children. From 1st October, the rules changed so that the spouse is now entitled to the entire estate.
For example, if you had been married for 30 years but had no children, and had an estate worth £1,200,000, under the old rules your spouse would have received £825,000. Now your spouse is entitled to receive the whole lot (we have ignored the impact of Inheritance Tax for the purposes of this example).
Secondly, prior to 1st October, if someone died and was survived by a spouse or civil partner as well as children, the spouse would have received personal items, the “statutory legacy” (a fixed sum, currently £250,000) and half the remainder on “life interests trusts” (meaning they were entitled to the income from that amount for life, although there were provisions allowing that interest to be capitalised). The children would take the remaining half, plus the capital of the spouse’s half once the spouse was deceased.
Post 1st October, according to the new rules, the spouse will now receive the statutory legacy, currently £250,000 and half the remaining estate outright. The remaining half will go to the children.
For example, and ignoring Inheritance Tax, if a person has an estate worth £1,200,000, previously the spouse would take £250,000 plus the right to receive the income generated by £475,000. The children would receive £475,000 plus £475,000 on the spouse’s death. Now the spouse will get £725,000 and the children will get £475,000 outright.
There has been no change to the rule that, if you die with no surviving spouse but with surviving children, the children inherit your entire estate.
These changes appear to be positive as they simplify what many people would regard as an over complicated system. Nevertheless it is very important to realise that the intestacy rules still do not make any provision for unmarried partners, or step-children, or many others who think they should have some entitlement to a share of the deceased’s estate. The rules remain a blunt instrument, imposing on all estates a generic division of assets which takes no account of the subtleties and circumstances of real families. The only option for people in these situations is still to claim under the Inheritance (Provision for Family and Dependants) Act 1975, if they are eligible to do so.
The best advice therefore remains the same now as it was prior to 1st October – make a will! In addition, if your estate is likely to exceed £500,000 in value, you should also take separate independent financial advice from an expert practitioner with regards to safeguarding these assets for your children and grandchildren.