The new intestacy rules
What is Intestacy?
When a person dies without leaving a will, that is known as intestacy. If you die intestate then there’s a set of rules that determine how your assets are divided up called the Intestacy Rules. On 1 October 2014 the Inheritance and Trustees Powers Act 2014 introduced significant changes to those intestacy rules. These will affect many people who have personal assets, e.g. cash, property, shares, etc., exceeding £250,000. So what do you need to know?
The Old Rules
The old intestacy rules used to give a problem to the surviving spouse/partner for those both in and out of marriage. Those out of marriage were in the worst position because there were no rules to allow assets to automatically be transferred to the surviving partner. For a married spouse with children, all assets over £250,000 were put in a life interest trust for the children, leaving the surviving spouse with a potential asset shortage should the worst happen because they would not be able to access the funds in trust. And for those married without children assets of £450,000 were automatically transferred with anything over that value being being divided 50:50 between the surviving spouse and the deceased's most direct relatives. So what are the intestacy rules now?
The New Rules
The complex life interest system has now been abolished. The surviving spouse still takes the first £250,000 of the deceased’s estate but they are also now fully entitled to half of the remainder. The children receive half of anything that exceeds the first £250,000 (once they’ve attained the age of 18). And for those married couples without children the news is even better. The surviving spouse is entitled to the entire remainder and nothing will be due to deceased's close relatives.
What about unmarried partners? Unfortunately the intestacy rules remain unchanged for the unmarried, meaning surviving spouses are still left with no protection.
Tips on dealing with the new rules
Tip 1. Check out how an estate will be divided under the intestacy rules by using the government’s online calculator.
Tip 2. The intestacy rules only apply to assets held personally. Property in joint names is not affected. Joint property automatically reverts to the surviving partner/spouse.
Tip 3. Make a will. This is the only way of making your intention clear and ensuring that everyone you want to be provided for after your death is dealt with as you intended.