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Intestacy
Intestacy is where a person dies without a valid will in place to dispose of all or part of their estate, leaving it to the operation of law and the Courts to determine who inherits their assets and in what proportions. Despite the complete loss of control over assets that would imply, a surprising amount of people are running the risk of intestacy: 12% of over 75s and 22% of 65–74-year-olds in the UK have not made a willi.
The intestacy rules first seek to have the deceased’s spouse or civil partner taken care of, alongside any children if there are any. Under the intestacy rulesii a surviving spouse or civil partner receives all of their partner’s estate, unless there is any “issue”, which would include surviving grandchildren as well as children, irrespective of whether they are adult.
Under the intestacy rules a surviving spouse or civil partner receives all of their partner’s estate, unless there is any “issue”, which would include surviving grandchildren as well as children, irrespective of whether they are adult
Where there is issue, the spouse or civil partner is entitled to what is known as the “statutory legacy”, which is currently £270,000, the deceased’s personal chattels (things you can touch and move) and half the residue of the estate; the issue, including any in the womb at the point of death, will split the remaining half of the residue equally between them, with the assets held on trust for any minors. It should be remembered however, that any property or bank accounts which the surviving spouse or civil partner held with the deceased will pass to them automatically under the ”survivorship”.
There is a set order of who may inherit in intestacy, which runs as below. It is possible for challenges to be made however, if individuals can convince the courts that adequate financial provision has not been made for them. It is easy to see how intestacy can lead to a great deal of emotional fallout as well as financial uncertainty for those left behind.
Order of inheritance under intestacy:
- Surviving spouse or civil partner (not ex-spouse)
- Children, not step-children unless adopted
- Grandchildren
- Remoter issue (great-grandchildren)
- Parents
- Siblings
- Half-siblings
- Grandparents
- Uncles and aunts
- Half uncles and aunts
The intestacy rules highlight how fiendishly complex an area of wealth management inheritance can be. These are just the start too, as there is a whole raft more concerning when the intestacy rules kick in.
The intestacy rules highlight how fiendishly complex an area of wealth management inheritance can be
One key way intestacy occurs is a will being made, but it not being valid for one reason or another, or gifts failing because the provisions gifting them were poorly drafted. Home-made wills are often the culprit.
i Just Group, 2021
ii As provided by s46 of the Admin of Estates Act as amended by the Inheritance and Trustees Powers Act 2014
- A large proportion of people die intestate in the UK, even quite wealthy individuals included
- Intestacy will see assets distributed according to set rules with no regard to what the deceased’s wishes might be
- Whole or partial intestacy can arise in a number of situations, so it pays to have your arrangements reviewed from time
While it is certainly possible to draft a simple will effectively, those with significant assets or any complexity involved should certainly seek professional advice to ensure it is adequate. The chaos that can ensue when wishes are not properly expressed can be immense.
High net worth individuals should have their wills regularly reviewed to take account of changing circumstances and amendments to the tax regime. Undertaking a regular review of your affairs with a wealth manager will also help surface any opportunities to reduce Inheritance Tax on your estate too.