Estate Planning & Tax bulletins
The new intestacy rules
The intestacy rules (the ‘Rules’) apply to the distribution of the estate of someone who has died without making a Will. The numbers used in the Rules had not changed for many years (since 1993) and were becoming woefully out of date. Earlier this year (2009) they were finally upgraded. Some advisers to the Government had in fact suggested that the numbers should be higher than the new figures, but the upgrade is nevertheless welcome to reflect current average values.
The rules now apply as follows (and in this list the term ‘spouse’ means a surviving husband, wife or civil partner):
1. If you leave a spouse and children, the spouse gets your personal effects and the first £250,000 of the estate (previously £125,000). The rest of the estate is divided into halves. Half goes to the children (or the issue of children who have predeceased), and if beneficiaries are under 18 money is held for them until that age (these provisions being known as the ‘statutory trusts’). The other half is used to provide an income for the spouse for life, and is then held on the statutory trusts.
2. If you leave a spouse and no children but parents or siblings (or their issue), the spouse gets your personal effects, the first £450,000 (previously £200,000) and half of the remainder. The other half goes to the parents or siblings (or issue).
3. If you leave no spouse but children (or their issue) the whole estate goes to the children (or issue) on the statutory trusts.
4. If you leave a spouse and no children, parents or siblings (or their issue) everything goes to the spouse.
5. If you leave no spouse and none of the other relatives mentioned in 4 above, the estate goes to the first set of relatives on a prescribed list (which goes down as far as half-blood uncles and aunts or their issue, some of which may take some tracing!).
6. Failing all of that your estate goes to ‘the Crown’, i.e. the government.
You should bear in mind how jointly held property affects matters. If it is held on a joint tenancy with the spouse, it passes to the spouse outside of and in addition to the assets passing under the Rules. If it is held on a tenancy-in-common, your share is dealt with under the Rules.
If the Rules reflect what you would want to happen to your estate in the event of your death then, fair enough, you don’t need a will purely in relation to the distribution of assets, although even then you may wish to put one on place to deal with other matters such as:-
(a) Who you would want to deal with your estate (‘Executors’).
(b) Who you would want to act as guardians to young children.
(c) At what age young beneficiaries would inherit (18 unless you state to the contrary).
However we would suggest that the Rules will not accord with the way in which most people would want their estates distributed. So the message is clear – to avoid the intestacy rules make a will.
Michael Rapps 1 October 2009