You will regret having no Will

What happens if you die intestate – that is, without making a Will? You might assume that things will sort themselves out, but recent changes in the law could mean an outcome you just don’t want. Minesh Patel, Managing Director of EA Financial Solutions, explains the consequences of having no Will.

Scrooge Pension

If you haven’t yet made a will, then you might want to look up a little piece of legislation called the Inheritance and Trustees Powers Act 2014. It has far reaching consequences for married couples and those in civil partnerships, with the biggest impact felt by those who do not have children. To put it another way, it means that what you may assume will happen on your death, might not.

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.

With the Act, this all changed. The law now states that 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?

The law particularly affects 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:

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

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

However, under the new rules, Mary 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 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.

You can find a solicitor to help you make your will at unbiased.co.uk.

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