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Update on Intestacy: Statutory Legacy increased (but here’s why you still need to make a Will)28th January 2020 Wills, Trusts & Estate Planning
Unlike with some of our European counterparts, in England and Wales there is no legal obligation to leave your estate to any particular person (although there is scope for this to be challenged by certain disappointed beneficiaries). This is a core principle within English law, known as testamentary freedom, and dates back to the Roman era.
However, when a person passes away without exercising this freedom having failed to make a valid Will, they are said to have died intestate. As a result, their estate must be distributed in accordance with the rules of intestacy. This can lead to undesirable consequences as the rules specify a strict order of who can be a beneficiary of the intestate’s estate. Consequently, the true wishes of the deceased may not be followed and their loved ones can be excluded from benefitting from their estate. Not only that, but the intestacy rules do not offer the same inheritance tax planning opportunities that can be achieved with a Will.
The current intestacy rules are based on the following categories, whereby the highest surviving relative will take priority:
- Spouse/civil partner;
- Brothers and sisters;
- Uncles and aunts.
Where a person dies intestate leaving a spouse/civil partner and children, then the surviving spouse/civil partner will inherit all of the personal property, the “statutory legacy” and half of the remainder of the estate. The government have recently announced that for deaths after 6th February 2020, the statutory legacy will increase from £250,000 to £270,000.
Generally, the increase will be welcomed. However, it is important to note how the law surrounding intestacy still fails to make provision for unmarried couples and cohabitees, despite this type of family making up over 18% of the UK.
Furthermore, where the estate passing to children exceeds the available nil rate band, inheritance tax will be chargeable at a rate of 40%. This tax bill will undoubtedly come as a surprise for those surviving spouses/civil partners who were expecting to inherit an inheritance tax free estate. Moreover, where there is a surviving spouse/civil partner and the value of the estate does not exceed the statutory legacy, the children of the deceased will inherit nothing at all.
For further reading on the importance of Wills, my colleague Alison Parry recently wrote a blog which highlights the potential litigious implications of dying without making a valid Will.
Although it can feel like quite a daunting process, making a Will is vital for ensuring that your affairs are in order and that your wishes will be followed after your death. If you wish to discuss making a Will, or if you need assistance dealing with the estate of somebody who has passed away without making a Will, then please get in touch with us on 0345 827 666 or through our online enquiry form.