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Laws of Intestacy - what happens if you die without making a Will?

If you die without making a valid Will you have died 'intestate'.

By not making a Will, you have left the decision as to how your estate is to be distributed to the Laws of Intestacy.

The Laws of Intestacy are unlikely to be inheritance tax (IHT) efficient. Assets left to your spouse or civil partner are generally free of inheritance tax (IHT) but assets left to other family members may give rise to an inheritance tax (IHT) charge on the your estate if the value exceeds the inheritance tax (IHT) nil rate band at the time.

The rules of intestacy also mean that your estate may not be distributed in accordance with your wishes. Exactly who would receive your estate largely depends on your domestic circumstances at the time of death.

A good financial planner will always advise you to make a Will and ensure that it reflects your current wishes and circumstances.

You could also consider the use of trusts to help ensure that your estate is distributed to your intended beneficiaries in a timely and tax efficient manner. This can mean placing new or existing life insurance or pension policies in trust or using more complex arrangements such as bypass trusts, discounted gift trusts or loan trusts. Please refer to our trust information page for further information on how trusts can be used in financial planning to arrange your financial affairs.

At Expert Financial Solutions Ltd we are experienced in estate planning and the use of trusts and Wills to help you plan for your future.

The following common scenarios show how the laws of intestacy can work: -

Scenario 1

1. Your spouse / civil partner would receive: -
   
   a) personal chattels (eg. contents of the house), plus
   b) the first £125,000 of your estate absolutely, plus
   c) life interest (income only with no access to capital) in 50% of the residue.
   
   
2. Your children receive:
   a) half of any excess over £125,000 outright*, plus (*This may have inheritance tax implications.)
   b) the other half of the excess when your spouse / civil partner dies.

Scenario 2

The estate of a married person or a person with a civil partner; there are NO children, but with parents and / or brothers and sisters.

1. The spouse / civil partner would receive: -
   
   a) personal chattels (eg. contents of the house), plus
   b) first £200,000 of your estate, plus
   c) half of any excess over £200,000 outright.
   
   
2. The parents* or failing a parent then brothers and sisters (nephews and nieces step into parent’s shoes if the parent is dead) receive: -
   
   Balance i.e. half of any excess over £200,000 outright.
   
   * Returning family assets to a parent (particularly if they are elderly) is unlikely to be inheritance tax (IHT) efficient as it will be included in their taxable estate.

Scenario 3

A married person or a person with a civil partner, there are NO children, and no parents, brothers or sisters.

The spouse / civil partner would receive the whole estate.

Scenario 4

A single, widowed or divorced person (excluding separated people)

The whole estate goes to: -

the children (if any),
otherwise to the parents* (if alive),
otherwise to the brothers and sisters (or their children),
otherwise the grandparents* (if alive),
otherwise the uncles and aunts (or their children),
otherwise to the Crown.

* These scenarios in particular, are unlikely to be inheritance tax (IHT) efficient.

Notes:

1. An adopted child is treated as the legitimate child of the adopter(s).
2. A child legitimated takes any interest as if born legitimate.
3. An illigitimate child takes any interest provided there is satisfactory proof of parentage.
4. The property of a man or woman who is divorced does not go to the ex-spouse or ex-civil partner under the intestacy rules.
5. Under the Law Reform (Succession) Act 1995, a spouse or civil partner does not take a share in intestacy unless he or she survives the deceased for 28 days. If the spouse or civil partner does not survive this period, distribution will take place as if there was no surviving spouse or civil partner.
6. A marriage revokes a previous Will unless the Will states that it was made on anticipation of marriage.

In summary it is good financial planning to make a Will and to review it regularly to ensure the provisions reflect your current wishes. Also consider the use of trusts to help ensure that your estate is distributed to your intended beneficiaries in a timely manner and where necessary provision is made for the care of children.

Please refer to the Important Information page on our website.

July 2008

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