Intestacy: Law Changes & the Importance of Having a Will
If you die without a Will, you are known as dying "intestate". Particular laws apply to such a situation.
The Inheritance (Provision for Family and Dependants) Act 1975 and The Trustee Act 1925 were previously the statutes governing the law of intestacy. However changes recently came into force (on 1 October 2014) with the passing of the Inheritance and Trustees Powers Act 2014 ["ITPA"].
In summary the main changes are:
- Where a couple are married, assets pass upon the husband or wife's death to the surviving spouse in all cases where there are no children or descendants
- The definition of 'personal chattels' was simplified [See below]
- Provisions are put in place to protect children from losing an inheritance from a parent in the event that they are adopted after the death of that parent
- The rules that previously disadvantaged unmarried fathers when a child died intestate have been amended. The important factor now is biological ties
- Trustees of the estate are given greater powers to use income and capital for the benefit of beneficiaries (subject to any express provisions in the trust document)
What are 'personal chattels'?The ITPA introduced a new definition of personal chattels. This applies to the property of anyone who dies intestate after 1 October 2014.
The new definition of personal chattels is:
'Personal chattels means tangible movable property, other than any such property which:
- Consists of money or security for money
- Was used at the death of the intestate solely or mainly for business purposes
- Was held at the death of the intestate solely as an investment
Note: Part two is a new addition under IPTA to make it clear that business property should not automatically pass to the surviving spouse.
Common personal chattels:
- Collections (e.g all the wine in the deceased's wine cellar)
What is the entitlement of a surviving spouse?If someone dies intestate and there are no children or other descendants, the whole estate passes to their spouse.
If there are children or other descendants:
- The surviving spouse takes the personal chattels
- The surviving spouse then receives a statutory legacy of £250,000 from the estate, plus half of any remaining balance. (The major change is that the half of the remaining estate received by the spouse is theirs absolutely to save or spend as they like. Previously they only had a life interest in the sum and so there were some restrictions on its use)
- The surviving children or descendants equally share the other half of the remaining estate
For example:Homer has a wife Marge and three children, Bart, Lisa and Maggie. Homer died in June 2045. He did not make a Will. At the time of his death, all his children were over 18 years old. He had no grand-children. Homer left a gold-plated donut, an unused cross-trainer and a painting of Snowball II. His estate was worth £850,000.
Marge will receive Homer's personal chattels (the gold-plated donut, unused cross-trainer and painting). She will receive a statutory legacy of £250,000 from the estate.
The remaining estate will be £600,000. Marge will receive half of this (£300,000). The children will then share the residue (£300,000) equally between themselves, so each will receive £100,000.
Why it is important to make a Will
- You will have far greater control over what happens to your money, property and any special or valuable possessions if you write a Will
- In your Will, you can ensure that any special friends receive items that hold particular sentiment; without a Will, these personal chattels will automatically pass to your spouse who of course without your instructions may not realise who you wished to have certain items
- If you have no family, a Will is essential to make sure that your estate does not become property of the Crown; for example even if you do not wish to leave items to friends, you may prefer a charity of your choice to benefit from your money rather than the taxman!
- A Will makes your wishes clear to your family who are left behind. This helps to prevent disputes between relatives who may each have their own views regarding what you might have liked
- A Will makes dealing with your estate easier for your family, as named executors are appointed and given the necessary authority to administer the account (for example the authority to distribute money held in your bank accounts after your death)
- If you have children under the age of 18 at the time of your death, a Will allows you to make provisions for their care, including making financial provisions for them
- If you are unmarried, a Will enables you to ensure that your partner benefits from your estate; without a Will, they would not receive anything under the laws of intestacy
- A Will allows you to set out your wishes for your funeral, which can make arrangements easier for your surviving family at an undoubtedly upsetting time for them
As set out above, there are many benefits to making a Will. It is however important that you ensure that your Will is regularly updated to reflect any changes (such as re-marriage or new children born into the family) so that it reflects your current wishes.
Make sure that you have your say in what happens with your belongings and hard-earned money after your death - don't miss your last opportunity to communicate your wishes!