Where there’s no will…….there’s new intestacy rules from October 2014

There are not many people who readily consider death and its effects on their family and finances. As financial planners, this is something that, like taxes, is certain and needs to be addressed in the course of our planning considerations with clients. The first question we would ask is ‘Have you made a will?’ You will see in the context of this blog that we would always anticipate that clients would have up to date wills that would reflect their current circumstances.


If you die without a will in England & Wales, you are known as an ‘intestate person’ and your estate will be disposed of according to the Intestacy Rules. This means that the state will determine how your property is distributed on your death. After many years, the Intestacy Rules are changing.


The Gov.uk website has a useful tool to help you determine how your estate would be distributed if you died without a will: https://www.gov.uk/inherits-someone-dies-without-will
Chapters Financial is not responsible for the content of external websites


The changes to the Intestacy Rules which are being brought in by the Inheritance and Trustees’ Powers Act 2014 will take effect from 01 October 2014 and will have a significant effect on the way in which the estates of intestate persons are distributed.


Each of us is different and we have detailed below some of the possible scenarios and outcomes.


If you are married or in a civil partnership and you have children


Under current rules, if you are married or in a civil partnership and you have children, your spouse or civil partner will inherit £250,000 absolutely, and all of your personal belongings. Your spouse would also be entitled to a life interest in half the remaining estate. A ‘life interest’ means that your spouse would be entitled to the income from this half of the estate, but they would not be entitled to the capital. Your children are entitled to the other half of the remaining estate at age 18 and to the rest of it when the life interest ends on the death of the second spouse.


It is clear that this method of distributing the estate could cause significant problems for the surviving spouse. This could be in terms of access to sufficient capital to meet their ongoing needs or even the ability to stay in the family home if this was in the deceased’s sole name.


From October 2014, these rules will change, with the surviving spouse still receiving all the personal belongings and £250,000 absolutely. However, instead of simply receiving an income from half of the remaining estate, the surviving spouse will now inherit this half outright. The children will still inherit the other half of the remaining estate at age 18.




If you are married or in a civil partnership, with no children


If you have no children, the current Intestacy Rules dictate that the surviving spouse will receive £450,000 absolutely plus personal belongings and half of the remaining estate. The deceased’s parents, or the deceased’s siblings, will receive the other half.


From October 2014, the surviving spouse will inherit the entire estate.


If you are unmarried and in a relationship


It is important to note that the Intestacy Rules do not recognise unmarried (“common-law”) partners. If you die without a will whilst in a relationship (but not a marriage or civil partnership), your partner would not inherit any of the assets or property that are held in your sole name.


Make your wishes heard…make a Will 

Both of the above changes are improvements from the point of view of the surviving spouse. However, the Chapters Financial perspective has not changed – the Intestacy Rules and the strict order in which the estate is distributed only highlight the vital importance of making a will to ensure that your estate is dealt with according to your wishes. If you don’t, the state will choose for you. And, if you have no surviving relations, your entire estate will go to the Crown.


Summary
Chapters Financial strongly recommends that our clients should have an up-to-date, valid will. We don’t offer a will writing service – however, we have a panel of professional local solicitors who we can refer clients and enquirers to.


If you would like support and advice on your estate planning then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own circumstances, please contact the Chapters Financial team in either Guildford or Woking.


Vicky Fulcher Dip PFS
Trainee Financial Planner


Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.