By Eva Powell
Intestacy Rules Changes – October 2014
You may recall our earlier blog post “Why you should make a Will”. In that blog we set out the benefits of making a Will – the main one being that you are in control of how your estate is divided should you pass away, instead of it being subject to the Intestacy Rules. The Intestacy Rules are the rules in place that govern what happens to your estate should you die without making a Will; new rules came into effect as of 1st October 2014.
These changes mark the first overhaul of the Intestacy Rules since 1926. While the rules in relation to the estates of married couples have been simplified, unmarried cohabitees still have no rights where a partner has died without making a will. This is despite widespread calls for changes in the rules to reflect changing family structures.
Under the new rules children of married partners may now receive less and distant relatives are less likely to inherit. The changes also close a loophole that meant adopted children missed out on inheriting from their natural parents’ estate.
The rules will apply to those with an estate of over £250,000 in assets. With the rise in housing prices this means that, in practice, many more people are likely to be affected. It is therefore important to understand these changes and how they may affect you.
Married couple or civil partnership without children
Under the old rules, the first £450,000 of the deceased’s estate would go to the spouse along with half of the remainder. The further remaining half would then be divided between blood relatives. This usually meant parents and siblings but distant relatives could also inherit in some cases.
From 1 October 2014, the entire estate will go to the surviving spouse or civil partner.
For example, under the new rules, where a husband dies leaving an estate of £1million, his wife will now receive the entire £1 million. Under the old rules she would have received £450,000 plus half the remainder, and the rest of the estate would have gone to surviving blood relatives such as the husband’s parents.
Married couple or civil partnership with children
The first £250,000 would go to the spouse as well as all the belongings of the deceased. How the rest of the estate was divided was somewhat complicated, with half the remainder going to the children and the other half going to them when the surviving spouse dies. While alive, the spouse kept a ‘life interest’ in half the money above £250,000 meaning they were entitled to use any property or receive it’s income until their own death, upon which it would pass back to the children.
The new rules remove the complicated ‘life interest’ rules meaning the spouse will still receive the first £250,000 and personal belongings, but now will receive half of the remaining balance outright. The remainder will still go to the deceased’s children.
Unmarried with no children
The partner would receive nothing and the entire estate would go to the deceased’s blood relatives, with the first in line being parents, then siblings, then nieces and nephews.
The changes to the Intestacy Rules offer no further protection to unmarried cohabitees, meaning the partner will still receive nothing if there is no will.
For example, Joe and Alice have lived together for 30 years but have never married. Joe dies leaving an estate of £500,000. Joe’s parents have died and his one sibling, Denise, has also died. Denise had one child Maria, with whom Joe rarely had contact. However, under the intestacy rules, Maria would inherit all of Joe’s estate while Alice would not be entitled to a penny.
Unmarried with children
Without the existence of a valid will, the partner would receive nothing. The estate would go to blood relatives with children being first in line
As above, the partner will not be entitled to inherit from the estate which will instead pass to the deceased’s children.
For example, David and Sophie are unmarried cohabitees. David has a son, Tom, from a previous marriage, and Sophie has a daughter, Isabelle, from an earlier relationship. Sophie and Isabelle have lived with David for 10 years. David dies suddenly without having made a will. Tom inherits all of David’s estate as a result while Sophie and Isabella receive nothing.
Additionally, the new rules close a little-known loophole which meant children lost their right to inherit from their natural parents’ estate when they turned 18 if they were adopted by another family before that age.
Despite these changes, it remains that the only way to ensure your estate passes in accordance with your wishes is to make a will.