What is intestacy?
Intestacy describes a situation in which a person has died without leaving a valid will. If that happens, there are statutory rules which set out what happens to a person’s money, property and possessions and how inheritance tax is charged on those assets. Those rules are very fact-specific and they do not always operate in the way that people might expect.
Knowing how intestacy rules work may benefit you if, for example:
- you or someone you know is thinking about whether to write a will
- someone you know is unable to write a will, or
- someone you know has died without a will
How do the intestacy rules work?
In situations where someone dies without a will, any individual authorised to deal with that person’s assets and affairs (i.e. their estate) is known as an ‘administrator’. Those individuals are the deceased’s personal representatives. A personal representative may apply to the Probate Registry for a grant (of letters of administration), which is a court order which is used as evidence of their authority to deal with the estate as administrator. However, getting a grant is not always necessary to administer an estate.
Statutory rules govern who is authorised to act as a personal representative and who may apply for a grant. Those rules set out an order of priority; the same order of priority which applies to working out who are the beneficiaries of the estate (i.e. who may inherit).
Who benefits from the deceased’s estate?
The intestacy rules set out an order of priority. The current rules mean that;
If the deceased is survived by their spouse and their children, the spouse receives:
- the deceased's personal belongings
- a legacy of £270,000 (known as 'the statutory legacy')
The residuary estate, if any, is then divided equally between the spouse and the children. The money will be held in a trust if the children are under 18 years old.
If the deceased is survived by their spouse and no children:
- the spouse is entitled to the entire residuary estate
If the deceased is not survived by a spouse:
The whole estate will pass to a single person or class of persons in the following order of priority (this is where it becomes a bit “Harry Potter”):
- children and then grandchildren and great-grandchildren
- siblings of the whole blood and then their children, grandchildren and great-grandchildren
- siblings of the half blood and then their children, grandchildren and great-grandchildren
- uncles and aunts of the whole blood and then their children, grandchildren and great-grandchildren
- uncles and aunts of the half blood and then their children, grandchildren and great-grandchildren
- the Crown
As you can see the rules of intestacy do not reflect modern family relationships. There are a number of reasons to have a will in place, not least to ensure that your estate passes to your loved ones and to avoid any family disputes. While many people hesitate to have a will prepared, as they do not like to think about death, the below examples show the issues that can arise as a result.
- Ms Smith was divorced and living with her boyfriend who helped her run one of her businesses. She had two adult children and owned a number of businesses both in the UK and abroad. She died without a will. Under the rules of intestacy the children are entitled to apply for Letters of Administration. While Ms Smith was close with her children, they did not get along with her boyfriend and have no intention of allowing him to stay in the property or continue to work in the business. As there is no will the boyfriend would need to make an application to the court should he want to benefit from her estate.
- Mr Jones was separated from his wife, but they were not divorced. He had a young son from a separate relationship, and the mother died before Mr Jones. His estate is worth approximately £250,000 and therefore under the rules of intestacy his entire estate will pass to his estranged wife, and his young son will receive nothing.
- Mr Collins is originally from Uganda. He is legally married to two wives and as both marriages took place in Uganda the UK considers both marriages to be valid. Mr Collins dies without a will and both wives consider their needs to be greater than the other and therefore they both make applications to the court.
With the rise in blended families cases like the above are going to become more frequent, and emphasise the importance of planning for the future.
Harriet Edwards and Sorcha McGillycuddy are both associates in the private client team in the Kingston office. They advise on a wide range of private client matters to include estate administration, wills, lasting powers of attorney and trust administration.