Intestacy: the common misconceptions
06 Apr 2023
Estate Planning, Private Clients, Uncategorized
When a person dies without leaving a Will, they are said to have died intestate. As they have not provided directions as to who inherits their assets, their estate is distributed in accordance with a set of rules known as the ‘rules of intestacy’. The rules of intestacy set out who is entitled to inherit an intestate estate in order of priority.
The rules have been described as being too rigid, and people often have misconceptions about them which can result in disappointment and potential issues within the family. We discuss some of these misconceptions below in further detail.
“Everything will go to my spouse/civil partner”
Many married couples assume that if they die without a Will, everything they own will automatically pass to their surviving spouse or civil partner but this is not always the case. Under the current law, if you are married or in a civil partnership and have children, then your spouse or civil partner receives the first £270,000, all of your personal possessions, and half of the residuary estate. The other half of the residuary estate passes between your children equally when they reach the age of 18.
Certain assets are however not dealt with by the rules of intestacy (or a Will) when someone dies. Assets owned jointly as joint tenants (such as a joint bank account or a property, which is discussed further below) instead pass automatically by law to the surviving owner outside of the rules of intestacy and do not count as part of the £270,000. The only assets that pass by the rules of intestacy are those that you own in your sole name, or jointly as tenants in common.
Whilst it may not seem a problem for your children to inherit, it is worth noting that if everything had passed to your spouse or civil partner, the estate would not have to pay inheritance tax. This is because transfers of value between spouses or civil partners are exempt from inheritance tax, and this is known as ‘spouse exemption’. If there is a proportion of your estate being passed to your children, inheritance tax would be payable on anything above the available nil rate band (currently £325,000).
It is also important to note who is considered ‘your children’ for the purposes of the rules of intestacy. Unfortunately, your stepchildren or foster children do not count as children unless they have been formally adopted. Therefore, if you have children of your own as well as stepchildren, only your own children will inherit your estate.
“The house will automatically go to the surviving co-owner”
This depends on how your property is owned. If you both own your property as ‘joint tenants’, it automatically passes to the surviving co-owner by law. If however, you both own your property as ‘tenants in common’, each of you own a defined share of your property which does not pass automatically to the surviving co-owner. Instead, your share passes under the rules of intestacy. This could result in your share of the property being passed to someone you did not intend it to be passed to.
“All of my children will be looked after”
There are no provisions under the rules of intestacy to be able to appoint a guardian for minor children in the event that both parents die before their children. In this situation, family members would need to apply to the Court or Protection to be granted guardianship which is likely to be a time-consuming and expensive process.
There is also a potential issue of your children being excluded if you died without a Will and your surviving spouse or civil partner inherited most of your estate. This is because there is nothing stopping your spouse or civil partner from making a Will which leaves their estate (including what they inherited from your estate) to individuals other than your children.
“My unmarried partner will be taken care of”
Only legally married couples or those in a legal civil partnership inherit under the rules of intestacy. Unmarried partners or individuals who are divorced do not inherit under the rules of intestacy.
What do you need to do to avoid these issues?
The solution is simple – make a Will.
With ever-changing family dynamics and it being increasingly common for couples to cohabit without marrying, the rules of intestacy have been criticised for not adapting to modern-day circumstances.
Having a valid Will in place ensures your loved ones are able to benefit in the way you want them to. It is the only way your assets can pass in accordance with your wishes after you have died. A Will also allows you to appoint your executors (i.e. those you trust to carry out your wishes and administer your estate), set out any funeral wishes, appoint guardians for minor children and also provides an excellent opportunity to consider the value of your estate and carry out any inheritance tax planning.
For more information and advice on avoiding the issues highlighted above, making a Will and inheritance tax planning, please contact Nikita Mayani, a solicitor in the Private Client team at email@example.com.