Changes to Intestacy rules
Making a Will is one of the most important decisions you can make.
A Will gives you control over how your estate is handled when you pass away, rather than it being left for others to decide.
That’s where Intestacy Rules come into play.
What are Intestacy Rules?
When a person dies with a Will in place their appointed Executors (the people who deal with their estate) are able to apply for a grant of probate. They can distribute the estate in accordance with the wishes of the deceased, ensuring those considered most dear receive what they would have wanted.
When a person passes away without having made a Will, the division of his or her assets are divided according to the rules of Intestacy.
These are a historic set of rules setting out what happens when a person dies without having made a Will. They state who is allowed to apply for the grant of probate, known as the ‘grant of administration’ under the Intestacy rules, where there is no Will.
These Intestacy Rules have recently changed
The Intestacy rules have recently been reviewed by the Law Commission and substantial changes have been brought in by the new Inheritance and Trustees Power Bill.
The changes affect the order of priority between different levels of relatives and generations. These changes came into effect 1st October 2014.
The first change
The first change is that when the intestate (the person without a Will) has died, their residuary estate, or what is left of their estate after all debts and administrative expense have been paid, will go solely to their surviving spouse or civil partner. The only exception is when they also have surviving relatives such as parents, children or grandchildren.
This changes previous legislation, whereby the spouse or civil partner would receive any personal ‘chattels’ (personal possessions) and the first £450,000 of the residuary estate, with any remainder of the estate being distributed in accordance with the Intestacy rules.
The second change
The second change to the law applies when a person dies without a Will and does have surviving relatives.
Previously the spouse or civil partner was entitled to a fixed net sum up to £250,000 and then what is known as a ‘life interest’ in half of anything else remaining in the estate.
This half share was held ‘on trust’. The surviving spouse would not be able to access the property during their lifetime. A ‘life interest’ meant that the surviving spouse or civil partner would only have a right to receive any income received from the half share of the estate held on trust. For example, any cash held on trust could be invested in a savings account or on the stock market.
The surviving spouse would have been entitled to receive the interest or dividends but they would not have any control over where the money is invested and they will not be able to use the cash that has been invested for their own purposes.
This rule has changed with the introduction of the new Bill. The surviving spouse will receive £250,000 plus half of the remaining residuary estate to do with as they wish.
There will be no requirement for it to be held on trust. This makes life for the administrators of the estate a lot less complicated. The remaining half of the residuary estate is then shared out among the deceased’s relatives according to the new rules.
It is important to make a Will
If you do not want your estate to be governed by the new Intestacy rules it is important you make a Will.
More than two thirds of the population currently do not have a Will. They may not realise the assets they have bought or saved during their life time are affected by the intestacy rules.
TThe rules can have unintended consequences which can affect people in different ways.
For example, many people assume some sort of ‘common law’ marriage is in place for long term unmarried couples. This is not the case. Unmarried couples have no rights to each other’s assets on death if there is no Will in place.
If one of the parties in a long term relationship dies without a Will, the surviving unmarried partner will not receive anything under the rules. This can have devastating financial consequences if all the property is held in the deceased’s name. If a large estate is involved it can lead to substantial Inheritance tax being paid.
Another example is if one of the parties in an unmarried couple was previously married but has not yet finalised a divorce. Under the rules if there is no Will when the married party dies their estranged spouse or civil partner will receive a large part of their estate.
A Will can also leave messages to your loved ones, decide who is to look after your minor children if they are not 18 when you die, leave gifts to charity or bequeath important items such as jewellery to specific people.
We can help you
If you do not yet have a Will or need to up-date an existing Will, please get in touch or make an appointment with one of our specialist solicitors. Ask for Sarah Mochan and Charlotte Fox on 0121 705 7571 (Solihull office) or Ruth Nolan and Hayley Palmer on 01564 779393 (Dorridge office).
Why should I make a Will? (Wills & Probate)
Making or amending a Will if you are divorced (Wills & Probate)
Wills and Business Assets (Wills & Probate)
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