New research suggests that 61% of people in the UK still do not have a Will. That is a lot of people who will be relying on the Intestacy Rules to deal with their Estate on their death.
In the UK, when someone dies intestate (without a Will in place) there are strict rules to be followed to distribute the Estate. Firstly, the surviving spouse (or civil partner) receives anything that was jointly owned, such as the matrimonial home or joint bank accounts, provided that these are held jointly and not as tenants-in-common. Next, the Intestacy rules must be followed depending on the deceased’s circumstances.
After jointly owned assets, the spouse will inherit the rest of the Estate only if they survive 28 days and there are no children or remoter issue (such as grandchildren). If children or remoter issue exist, the spouse receives the personal chattels, the first £270,000 (after IHT and costs) and only one half of the remainder. The other half of the remainder goes to the children/remoter issue.
The situation is worse for an unmarried couple. On death, the surviving partner receives nothing, no matter how long they have been together or if they have children. Instead, everything passes to the deceased’s children (or remoter issue). If there are none, the Estate passes to the deceased’s parents, then their siblings (and their children), then onwards through the family tree as far as the deceased’s parents’ half brothers and sisters (and their children). Ultimately, if no relatives exist, the Estate goes to the Crown, but don’t expect them to attend the funeral!
A further aspect is that any assets left to a minor remain in Trust until they attain age 18. At age 18 they receive their inheritance absolutely, with no control or restrictions. Effectively, the Law is trusting an 18-year-old to deal with their inherited funds sensibly.
But by simply having a Will, this whole situation can be avoided. Your Will sets out your final wishes, to whom your Estate should pass and any controls or protection you wish to add. Constructed carefully, your Will can also be used to save IHT.