Be of sound mind – make a Will

What happens if you die with no valid Will? Maybe you believe that things will sort themselves out. They will – but probably not in the way you would have wanted. Minesh Patel, Managing Director of EA Financial Solutions, explains how the law of intestacy works now.

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You may think you know what happens if someone dies without a Will, as it may have happened to someone in your family. But if you don’t keep up with changes in the law, you could be in for a shock. The first of October marks the first anniversary of a law that had dramatic consequences for anyone who died without a Will. Both married couples and those in civil partnerships have felt the impact of The Inheritance and Trustees Powers Act, but ironically the biggest effect has been on those who do not have children.

Previously, the rules concerning intestacy (the state of an individual who dies without having made a Will) were as follows. If a couple had no children, then the first £450,000 plus half of any remaining sum went to the surviving spouse. The other half of the remainder was divided between the blood relatives of the deceased.

Last year’s ruling changed all that. Now, the surviving spouse will receive the whole of the deceased’s assets, with nothing due to their wider relatives. In other words, surviving parents or siblings will have no claim on the deceased’s assets if a Will has not been made that stipulates otherwise.

What if there are children?

A further change directly affected married and civil partners with children. Under the previous regime, the surviving spouse took the first £250,000 of the deceased’s assets. Any children then received half of any remaining sum, either immediately or held in Trust until they reached the age of 18. The other half of the remainder also went to the children, but the surviving spouse would hold a ‘life interest’ in this sum. This meant that they could extract an income from this sum, but not the capital (for instance, they could keep the sum in a savings account and just draw off any interest).

However, the concept of a ‘life interest’ no longer applies. The surviving spouse will receive the first £250,000 and be fully entitled to half the remainder. The children will only receive the other half of the remainder, and cannot gain control of this until they reach the age of 18.

This example shows how it works:

Bob is married to Marion and they have two children. Bob dies without making a Will, leaving an estate of £750,000.

Under the old rules, Marion would receive £250,000, and the children acquire between them £500,000 (which they can access once they are 18). Marion can take a regular income (life interest) from up to £250,000 of the capital owned by the children.

However, under the current rules, Marion now receives £500,000, and the children acquire between them just £250,000, which they can access once they reach the age of 18.

What about unmarried partners?

Nothing has changed here, but it always bears repeating: couples who are neither married nor in a civil partnership have no claims under the intestacy rules. A surviving partner has no default entitlement to any of their deceased partner’s assets. All the assets go to the children, if there are any; if there are no children, then the assets are divided among the deceased’s blood relatives. This can lead to extreme complications if some of the assets are shared – for instance, if the cohabiting partners had bought a property together.

The idea of a ‘common law’ husband or wife has no foundation in law. The deceased will be treated as a single individual.

The recent rule changes once again underline the importance of making a Will, to ensure that your wishes above all are taken into account upon your death.

Watch out for Write A Will Week soon at unbiased.co.uk! Be sure to check back in a couple of weeks for more tips and insights on writing your Will and leaving legacies.

Remember, a financial adviser will keep up with changes in the law that could affect you, so you never get caught out.

Find the advisers you need to help you organise your estate and write your Will. A financial adviser and a solicitor can both help.

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Minesh Patel is a Chartered Financial Planner. He established EA Financial Solutions Independent Financial Advisers in 2001. He specialises in retirement planning, investments and mortgages.