Dying without a Will used to mean that your estate passed to your loved ones …Now it could all end up with your spouse!
Joking aside, the law is set to change for those who don’t currently have a Will in place, which could (and should,) lead to a huge surge in young families ensuring that they have adequate testamentary provision in place.
In the absence of a Will, the laws of ‘intestacy’ apply to an estate. This has historically seen a rather broader approach to family dynamics where the estate was of a certain value; not only providing for a spouse, but children, parents, siblings or nieces and nephews. The old misconception of “It will all go to my spouse” could not have been further from the truth for some individuals.
The old rules:
Where an individual’s estate was over £250,000.00, the spouse would receive that sum (known as a ‘statutory legacy’), together with personal items. The balance thereafter would be split as to half outright for the children and half upon a lifetime trust for the spouse – allowing them the income of the sum for their lifetimes, but thereafter, the capital would pass to the children.
If an individual dies with no children, the figure of the statutory legacy increases to £450,000.00, with half of the balance also passing to the spouse and the remaining half passing to parents (if still living) or to siblings.
The new rules:
Under the new rules (from 01 October 2014), the Inheritance and Trustees Powers Act 2014 sees the ‘statutory legacy’ (now referred to as a ‘fixed net sum’) subject to regular review; every 5 years at least. Where there are children, they will continue to inherit one half of the balance, but the other half passes to the spouse outright.
The abolition of the lifetime interest trust, means that future marriage, and possibly step-children, could see the deceased’s own children with far less of the estate than under the ‘old’ rules. In a worst case scenario, they would only see their original ½ share in the balance of the first estate, even after both parents die. Through a Will however, it is perfectly straight forward to ensure that the spouse is adequately provided for, whilst protecting the children’s long-term interests.
Likewise, where there are no children of the marriage, the spouse will now inherit the entire estate. The surviving parents, siblings or even Nieces and Nephews will receive nothing, and when concerning a newly married couple, or a particularly large estate, this could see such wealth passing away from the very family the deceased may have wished to benefit.
Moreover, when concerning married couples of mixed nationality, the intestacy rules could also have serious tax implications.