Settling estates without a Will
The intestacy rules automatically apply to the distribution of estates on death where there is no will. There are three different sets of rules in the UK: one for England and Wales, a similar set for Northern Ireland and a different set for Scotland.
The rules for England and Wales have just received a slight modification, with the change made highlighting an aspect of intestacy of which many people are unaware: a surviving spouse or civil partner does not always inherit all of their deceased husband, wife or civil partner’s estate.
From 6 February 2020, the English and Welsh rules said that if the husband, wife or civil partner of the deceased survives 28 days, and the deceased had ‘issue’ (broadly, children and their lineal descendants), then:
• The surviving spouse would receive:
o The personal chattels of the deceased (car, clothing, jewellery, etc.);
o £270,000 outright (increased from £250,000); and
o One half of the residue of the estate.
• The children or other direct bloodline descendants (‘issue’) would receive the other half of the residue.
The outright inheritance limit does little to solve a problem that some families potentially face in dealing with the family home.
If the property is not owned in joint names (as joint tenants), then a survivor may not inherit the family home outright. In some cases, intestacy can even mean that there is an inheritance tax bill to meet on first death, something most estate planning aims to avoid.
Intestacy rules for non-married couples
Intestacy deals only with married spouses and civil partners and relations. If you live as a couple but are not married or in a civil partnership, intestacy could leave the surviving partner with nothing.
How to take control
The message is clear: if you have not made a will, you should make one. And if you have made one, make sure you know where it is and that it is up to date. There are several stages in life when it is important to review your Will, for example, buying a new home, having children, getting married or divorced to make sure that the Will reflects your current wishes.
A recent study by Royal London found that more than half of the UK do not have a Will.
What benefits can a Will offer?
An up to date Will can ensure that your estate is passed on to the people you want when you die. The arrangements can also be set up to tax efficiently so that more of your estate’s value is kept for their benefit.
In a Will, you can also determine important instructions such as who should look after your children and arranging payments in accordance with your wishes, such as regular payments for schooling etc. rather than as a lump sum.
We also recommend that you consider setting up a Lasting Power of Attorney which will give another person the right to manage your affairs if you are unable to do so due to mental incapacity or simply can’t do so as you are in another country, or indeed ‘lockdown’, at the time. There are two types of Lasting Powers of Attorney, one covering property and financial affairs, the other health and welfare. It is important to consider setting up both.
The key is to be prepared – having a Will and a Lasting Power of Attorney in place can help the executors who will be tasked with distributing your estate on death or help family members who would otherwise have to apply to the Courts for authority to act on your behalf. It is important to discuss your wishes with them.
Being prepared and keeping up to date helps to avoid distress, disputes, delays or unintended consequences, such as the need to sell the family home to divide up the estate.
How can Origen help?
Our advisers are very experienced in helping clients to manage their investments so that they are structured efficiently for Inheritance Tax purposes and to meet the wishes of each client and their family. If you wish to review your finances, we would be very happy to help you and if you need to update or write a Will or a Lasting Power of Attorney, we can provide guidance and refer you to a legal contact to help you meet your needs. CA5229 Exp:04/2021