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Intestacy and Why You Should Make a Will

June 16th 2009

What is Intestacy?
When a person dies without a Will (or without a valid Will), they are said to have died intestate and their money and other property (known as their estate) will be dealt with according to a set of 80 year old statutory provisions known as the Intestacy Rules. These rules provide that your estate is divided between your surviving relatives. Who benefits and in what amount depends broadly on the value of your estate and whether you are survived by a spouse, or civil partner, children, parents or siblings. Surviving spouses receive a fixed figure known as a statutory legacy, at a higher level if there are no children and a lower level if there are children. The limits hadn’t changed since 1993. So the changes on 1st February 2009 which saw the statutory legacy limits increased are welcome. But do they provide a fairer distribution of assets between family members?
 

The main concern for those who want their spouse or civil partner to be financially secure after their death is that under the Intestacy Rules a spouse is not automatically entitled to receive all of the estate, although it is a common misconception that your spouse will inherit everything. This is often seen as inequitable and unfair for the survivor, and can lead to serious financial hardship at an already difficult time.
 

Key Changes
There has been a small but significant change to the statutory legacy limits, as follows:

  • £250,000 (formerly £125,000) where there is a surviving spouse or civil partner and children; and
  • £450,000 (formerly £200,000) where there is a surviving spouse or civil partner and parents or siblings, but no children.


If the deceased has children, the survivor would now receive a lump sum of £250,000, the deceased’s personal effects and the right to income from half of whatever is left. The children would receive the remainder.
If the deceased has no children then the survivor would now receive a lump sum of £450,000, the deceased’s personal effects and half of whatever is left.
The statutory limits only apply where the estate exceeds the minimum amount, i.e. either £250,000 or £450,000. For smaller estates, the spouse would inherit the entire estate.
 

Lessons Learnt
Perhaps a ring on the finger and a Will would be worth it after all? The Intestacy Rules aim to protect the interests of the deceased person’s family by ensuring assets pass to their nearest surviving relatives. The rules can however be arbitrary. Unmarried co-habitees for example may not benefit. Does this reflect the prevailing family structure we see in today’s society where marriage does not necessarily precede the birth of a child in a relationship? For those who are neither married nor in a civil partnership, creating a Will remains the only way of ensuring that your partner is financially provided for.
 

Remind me again why I need a Will

  1. Unmarried partners still get nothing under the Intestacy Rules, no matter how close they are and regardless of the length of time they have been together, or the number of children they have. There is no such thing as a common law spouse in our society.
  2. You may expose your estate to claims from disappointed beneficiaries if the Intestacy Rules leave financial dependants out in the cold. Such claims are costly, time consuming and potentially deeply damaging to the relations between those people you leave behind.
  3. Even if you are married, stepchildren of the deceased will receive nothing under the Intestacy Rules, no matter how close you are.
  4. Marriage automatically revokes a Will so unintended intestacies (potentially resulting in more tax) will arise if you have not re-made your Will after marriage.
  5. A Will allows you to appoint a guardian for your children. Every parent should consider this. The Intestacy Rules give no scope for dealing with this important issue.
  6. Wills can save your heirs significant amounts of tax.
  7. Making a Will allows you to include charities, friends and godchildren who otherwise can not benefit on intestacy and even exclude people if appropriate.  

Summary
Despite the changes, the Intestacy Rules are still inflexible and are going to be subject to a fundamental review by the Law Commission.
 

In the absence of a Will, the changes to the Intestacy Rules do offer married couples, and those in a civil partnership, more security.
 

However, guardianship is not dealt with in the absence of a Will and the changes still offer no comfort for co-habitees who have not formalised their relationship, either through marriage or a civil partnership. The fixed nature of the Intestacy Rules mean that the outcome of a distribution will continue to depend very much on relationships and individual circumstances.
 

The message remains clear. Do not leave the financial provision of your loved ones to chance! If you would like further information please give us a call on 0113 287 8200 or e-mail advice@prosperis.co.uk