"I don't need a Will..." Granted, this opinion seems to be held by the majority of the UK, with statistics suggesting that around 60% of the adult population do not hold a Will. But what happens to your estate if you die without leaving a Will? Why do people think that their estate doesn't merit a Will being put in place?
Turning to the latter question, we often find that people underestimate the value of their assets and often cite that they 'have nothing to leave' as a reason for not putting a Will in place.
Initial inspection of the finances, more often than not, reveals that the person does own a property - yes, this may be subject to a mortgage - but that person also has a life insurance or assurance policy in place. This would discharge any debt and leave a valuable asset, even before we consider any other funds that the person's estate might include; for example savings and shareholdings, and where any payment from a pension fund or death in service benefit may be applied. So, all of the sudden, the person who has 'nothing' now has an estate to pass on!
The next reason commonly cited for not having a Will prepared is that people believe that their spouse or partner would 'get everything in any event'. It is true that where assets are held jointly, as 'joint tenants' they do pass by survivorship to the surviving co-owner; however, we often do not hold all of our assets jointly with our spouse or partner, whether this be for personal or practical reasons. For example, accounts such as ISAs can by their very nature only be held by an individual, or historical reasons behind when and why an asset was obtained may mean that the same is held in the name of only one party.
So, what is the position if you die without a Will?
In short, the answer is that the distribution of your estate will be covered by the Intestacy Rules.
For deaths occurring after 1 October 2014, where the deceased leaves a spouse or civil partner and surviving issue (children/ grandchildren etc):-
- The spouse or civil partner receives all personal chattels absolutely;
- The spouse or civil partner receives a statutory legacy of £250,000 free of inheritance tax (IHT) and costs plus gross interest from death until payment. If the residuary estate is worth less than £250,000, the spouse or civil partner receives everything and the issue receive nothing; and
- The rest of the residuary estate is split equally into two halves. The spouse or civil partner takes one half absolutely and the issue take the other half on the statutory trusts.
For deaths after 1 October 2014, where the deceased leaves a spouse or civil partner and no issue:-
- The spouse or civil partner inherits everything.
If the person who dies is not survived by a spouse or civil partner, (it is important to note that a long term partner does not fall within the definition of spouse or civil partner) then, where there are other surviving blood relatives, the estate passes to the deceased's:-
- Issue (children/ grandchildren etc) on the statutory trusts, or if there are none;
- The deceased's parents, equally, if both alive, or if not, then;
- The deceased's brothers and sisters on the statutory trusts, or if none;
- The deceased's half brothers and sisters on the statutory trusts, or if none;
- The deceased's grandparents (equally, if more than one alive), or if none;
- The deceased's uncles and aunts on the statutory trusts, or if none;
- The deceased's half-uncles and aunts on the statutory trusts.
In the event that there are no surviving blood relatives then the estate passes as bona vacantia to either the Crown, the Duchy of Lancaster or the Duke of Cornwall.
As is hopefully illustrated above, the Intestacy Rules can therefore result in a rather unsatisfactory distribution of the estate, particularly where a couple are unmarried and the deceased is survived by blood relatives - for example it could be that the children inherit everything!
Whilst this article does not intend to provide a detailed explanation of all the nuances which occur in dealing with an estate under the Intestacy Rules, it is worth flagging that there is no such thing as a common law spouse. Even though assets are held jointly between a couple, unless they are married or in a registered civil partnership there are still Inheritance Tax implications on the transfer of property on death.
Taking into account all of the above, we would recommend that you do review your affairs and put a Will in place if you have not already done so. You may be surprised to find out what you do have to leave and have more of an interest in where it will go.