Intestacy: The statutory legacy increases – what does this mean?

28 January 2020

The UK government has confirmed that the amount a surviving spouse or civil partner is entitled to receive in England and Wales where a person dies intestate (without a valid will) and leaving children will be increased. 


The statutory legacy will be increased by £20,000 from £250,000 to £270,000. The changes will come into force on 6 February 2020.

What happens on intestacy?

Under the rules of intestacy, the estate of the deceased is distributed in a particular way depending on who survives, how they are related to the deceased and how many individuals there are. 

The rules are complicated and in general there is a “pecking order” of who inherits: spouse, children, parents, siblings, grandparents, aunts/uncles. The rules tend not to take into account modern relationships and make no provisions for cohabitees, step-children, or close friends. 

Three examples of what can happen in an intestacy situation are:  

Jack and Jill (married) 

Jack and Jill are married. Jack dies without a will and leaves an estate of £2,000,000. 

What happens?
Since there are no children, Jill (the spouse) will inherit the whole estate ie £2,000,000. Due to the spouse exemption, no inheritance tax will be payable. 

 

Jack and Jill (unmarried)

Jack and Jill have been cohabiting for a number of years but are not married. Jack always said he would leave his estate to Jill, but he dies without a will. His estate is worth £2,000,000. 

What happens?
Jill would not be entitled to anything! If Jack’s parents were still alive, they would inherit the estate (equal distribution if both were alive), and if not, the estate would be distributed between Jack’s brothers and sisters. 

 

Jack and Jill and their son John 

Jack and Jill are married. They have one son, John. Jack dies without a will and leaves an estate of £2,000,000.

What happens?
The spouse would be entitled to all of the deceased’s personal property, the first £270,000 of the estate, and 50% per cent of the remainder (leaving 50% to be divided equally between the children).

In this particular situation, the spouse exemption cannot be applied on the entirety of the estate because it is not all being left to Jill. After the application of the nil rate tax free allowance of £325,000 which Jack is entitled to, and on the basis that no other exemptions or nil rate bands could be used, inheritance tax of £670,000 would be due on the estate. 

This would mean that Jill would end up with £800,000 and John would end up with £530,000. If the estate included a property, the property may need to be sold. 

The way the intestacy rules work mean that in this situation inheritance tax was payable on Jack’s death, which is something which could have been delayed if Jack had made a will. 

If Jack and Jill had been unmarried, then John would inherit the entire estate (subject to inheritance tax). The only way that Jill would have benefited would be to consider a claim against the estate for reasonable provision under the Inheritance (Provision for Family and Dependants) Act 1975. 

 

Why not to rely on the intestacy rules… 

Whilst the increase in the fixed statutory legacy is welcomed, this should not stop you from making a will and/or reviewing your current will regularly. 

As you can see from the examples above, the intestacy provisions do provide for family but this may not be in the way you intend and may result in inheritance tax being paid, claims against the estate and disgruntled beneficiaries. 

In addition to placing additional stress on your loved ones at a time of grief, relying on the intestacy rules may mean that those who you wish to benefit on your death will not do so in the way you intend (ie unmarried couples or friends) and it may even mean that those who you may not necessarily want to benefit will do so (for example, estranged siblings or parents). 

The best way of combating the intestacy provisions is by making a will and choosing who you want to benefit and how. 

Further information

For further information on the issues raised in this blog, please contact a member of our private client team.

Latest blogs & news

HMRC no longer reviewing Family Investment Companies

Good news – The “secret” specialist HMRC unit set up in 2019 to examine the tax avoidance risks has been wound up after finding no evidence of correlation between the use of FICs and non-compliant behaviour.

#FreeBritney - How her sad case would never happen in the UK

Deputies are typically appointed because individuals cannot make decisions for themselves due to illness, like Alzheimers or dementia, old age or perhaps as a result of a catastrophic personal injury or medical negligence. 

Financial Abuse – how to spot the signs

There are several reasons why someone may need the assistance of a financial deputy, stemming from incapacity due to an accident or a consequence of old age. There is however a darker side to this type of work that Court of Protection lawyers are seeing more and more of. This relates to those who have suffered some form of financial abuse and/or undue influence.

Managing compensation after a spinal injury

After a spinal injury the long-term impact on your life and that of your families can be significant. You may need a care package, a new home or adaptations to their existing accommodation, therapies and specialised equipment.

Death in the digital age – continuing your online life

The pandemic has changed the world – there is no doubt we are all “online” far more now than before. Social media now extends into every aspect of our lives, from those notorious repetitive baby pictures to those ‘should never have been posted university photos‘. We collect and share moments of our lives in the digital world.

Should I set up a joint lasting power of attorney for my mother?

In the latest edition of the Financial Times Money Q&A, Jemma Garside, senior associate in our private client team answers a question: "Should I set up a joint lasting power of attorney for my mother?"

I am an attorney – can I make gifts on behalf of a donor?

Subject to any restrictions or conditions in the Lasting Power of Attorney (“LPA”), a property and affairs attorney can make gifts on the donor’s behalf to the donor’s friends, family members or acquaintances on customary occasions. 

Going through a divorce? Don’t forget to update your Will!

Going through a divorce process is stressful. There are lots of things to think about and one of these is likely to be what you should do to protect your hard-earned money.

I’m an attorney under a Lasting Power of Attorney – what happens next?

A donor must have the mental capacity to make a Lasting Power of Attorney (“LPA”) for property and affairs and health and care. The completed LPA is then sent to the Office of the Public Guardian (the “OPG”) for registration. Each page of the registered LPA will be stamped with ‘VALIDATED-OPG’.

Business LPAs - How to safeguard against a future incapacitated partner, director or shareholder?

As a business owner/shareholder, what would happen to your business if you were unable to make decisions – would someone be able to authorise payments or enter into contracts and keep the business running? 

Lasting Powers of Attorneys for business and professional affairs

Lasting Powers of Attorney (LPAs) are vitally important documents. Our previous blogs have touched upon what LPAs are and top tips for anyone planning on putting an LPA in place. Most individuals should at least put in place a financial LPA to cover their home and personal finances. It is however a good idea in some cases to have a second financial LPA.

Don’t make an awful year even worse…Separation and Capital Gains tax

The last 12 months have put an awful lot of pressure on the family unit and sadly this has led to a spike in separation and divorce amongst married couples. With the end of the tax year fast approaching (last day Monday 5th April – Easter Monday) it is timely to consider the tax consequences of separations.

ACC Guidance update – when does a deputy need COP approval for legal work?

Whilst managing the property and affairs of another person a Deputy appointed by the Court of Protection may come across issues that require them to pay for legal advice and assistance on their behalf. Examples could include purchasing a property, challenging a care plan or obtaining advice about a dispute. 

Nothing like bad succession planning to ruin a good reputation

Partner and head of our Private Client team, James Ward, writes about the importance of entrepreneur's putting in place a succession plan to safe guard their reputation. 

Ten top tips of Lasting Powers of Attorney (“LPAs”)

LPAs are important, and are steadily growing in popularity as individuals realise how necessary they are to support friends and family in the event that they lose mental capacity. Our previous blog gave an overview of how LPAs work and the requirements for making them. This time, we focus on our ten top tips for LPAs.

What are Powers of Attorneys?

A Power of Attorney is a very important estate planning tool, especially when an individual loses capacity. Whilst the term ‘Power of Attorney’ seems to be thrown around a lot, it is often misunderstood or not used correctly. In fact there are several different kinds of powers of attorney that can be used for different purposes.

Estate Planning 2021 – Looking beyond COVID-19

As we find ourselves in another national lockdown, the New Year presents an opportunity for individuals to review their assets and conduct some succession planning.

Discretionary investment management and Lasting Powers of Attorney

Phoebe Alexander and JIm Sawer blog about lasting powers of attorney and engaging Discretionary Investment.

“Hello, can you hear me?” – video-witnessing of wills to be made legal in England and Wales

Big news was announced by the Government at the end of last month: legislation will be introduced to allow remote electronic witnessing of wills – including for some that have already been made – in a significant amendment to the long-standing requirements. However, it will only be temporary.

Capital Gains Tax – Take steps now to avoid a likely “tax grab”?

Chancellor  Rishi Sunak has asked the Office of Tax Simplification to review Capital Gains Tax (“CGT”). CGT is charged on the profit/increase in value on sale or gift of assets. The rates are 18%-28% on disposals of residential property and 10%-20% on other assets.  There’s an annual exemption of £12,300 per taxpayer. Disposal of your main residence is tax free and “Entrepreneurs Relief” may see the first £1million of the gain on the sale of a business charged to CGT at the lower rate of 10%.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility