It is estimated that currently between 60% to 65% of people in England and Wales do not have a Will in place and therefore they will die intestate. This means their Estates will be distributed in accordance with the intestacy rules.
What are the intestacy rules?
Intestacy rules govern what happens to a person's Estate when they die. The intestacy rules are governed by The Administration of Estates Act 1925.
Under these rules, there is a particular order of priority of who may benefit from the deceased's estate. In simple terms, the order of priority is as follows (provided that they have survived the deceased).
- Spouse/Civil Partner
- Children (or grandchildren etc.)
- Siblings (or their children)
- Half Siblings (or their children)
- Aunts and Uncles (or their children)
- Half Aunts and Uncles (or their children)
- The Crown
Although the rules try to be fair, they will not suit everyone's circumstances. It should be noted that the above the list does not provide for the diverse range of modern families we see today, including cohabiting couples who are unmarried, stepchildren and blended families etc.
How do the intestacy rules work?
If there is just a surviving spouse and no children of the deceased, then the entire Estate will pass to the surviving spouse.
However, whilst there is a common misconception that everything will pass to the surviving spouse in all intestacies, this is not the case if the deceased had children. If there is a surviving spouse and surviving children of the deceased, the surviving spouse is entitled to:
- personal belongings such as cars, household contents, jewellery etc;
- fixed Statutory legacy sum (explained below); and
- half of the remainder of the Estate.
The surviving children are entitled to the other half of the remainder of the Estate in equal shares.
If there is no spouse and just surviving children of the deceased, then the entire Estate will pass equally between the children.
If there is no surviving spouse and no surviving children of the deceased, then the people who will benefit from the Estate will be determined by the order of priority listed above.
Increase in statutory legacy
Under the intestacy rules, the surviving spouse of the deceased (when there are also surviving children) is entitled to a statutory legacy (a fixed sum of money).
This fixed sum is reviewed by the Lord Chancellor and on 26 July 2023 the statutory legacy sum was increased from £270,000 to £322,000 (19% increase). This fixed sum was last revised in October 2014 with only an 8% increase from £250,000 to £270,000. The recent increase in the statutory legacy sum is due to rising inflation and the rise in living costs.
However, with continuing rising inflation, the statutory legacy sum plus half of the remainder of the Estate may not be sufficient for the surviving spouse's lifestyle. It should also be noted that the statutory legacy sum only benefits surviving spouses and therefore would not apply to cohabiting couples.
Why do you need a Will?
If you want to avoid the intestacy rules governing the distribution of your Estate, it is important that you put a Will in place so that your wishes can be followed on your death. Preparing a Will also enables you to consider tax planning options with a professional advisor.
For example, for a married couple, if the whole Estate passes to the surviving spouse on the first death, then this would be spouse exempt for Inheritance Tax purposes and would benefit from not having the Estate taxed at the current rate of 40%. Under the intestacy rules, one half of the Estate could pass to children, so the whole Estate would not benefit from spouse exemption. If the non-exempt part of the Estate exceeded the available Inheritance Tax allowances, tax would be payable and it may be necessary for assets to be sold to fund the tax bill.
It is of particular importance for those in cohabiting relationships to consider making a Will, and approximately 55% to 60% of couples in England and Wales are currenting in a cohabiting relationship. Without a Will, a surviving cohabiting partner will have no protection and will not be entitled to anything from the deceased's Estate; there is no such thing as 'common law spouse', even if you have lived together for a number of years.
On the other hand, even if you are estranged from your family (including being separated but not divorced from a spouse), the order of priority of who will benefit will not be impacted by the deceased's relationship with them during their lifetime. Therefore, having a Will setting out who you would like to benefit is always something to consider.
Additionally, having a Will in place will allow you to decide who you would like to benefit from your Estate including family, friends, charities etc and highlight any particular items you may wish to leave specific individuals. You will also be able to choose your executor, who is the person appointed to administer your Estate. Without a Will, no person is automatically entitled to deal with the Estate, and the person/people who are entitled to benefit from the Estate would then need to apply (following the order of priority as set out above).
Even if you have a current Will in place, it is fundamental that you review this every few years and with continuously changing circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.