Good news for those who will potentially inherit more, but, the reality is that the Government rules rarely operate in the way people expect.
The government rules are called the intestacy rules. They apply when someone dies without having made a Will. They may also apply where a Will is found to be invalid (if it is not prepared or signed properly), or has been revoked by marriage or entering into a civil partnership or the Will is legally valid, but there are problems with the terms of it e.g. the sole beneficiary has predeceased and the Will does not provide for a substitute.
There are different rules depending upon your family situation. In this article I concentrate on the rules for someone who is married or in a civil partnership, and has children, whether from that relationship or a previous relationship. Where one party to the marriage or civil partnership dies on or after 6th February 2020, their surviving spouse or civil partner is entitled to receive the first £270,000 of the estate (known as the Statutory Legacy), personal chattels e.g. car, household and personal effects, and half of the remaining estate outright. The children who include illegitimate and adopted children (but not step-children) receive the remaining half of the estate in equal shares, and if any children are under the age of 18, their inheritance will be held in trust until they reach that age.
Prior to 6th February, the Statutory Legacy was £250,000. The increase is the result of 2014 legislation requiring the Lord Chancellor to review the amount at least every five years, or where a substantial increase in inflation has taken place.
It should be pointed out that if the estate does not exceed £270,000, then the surviving spouse or civil partner will inherit the whole estate, with the children inheriting nothing. Jointly owned assets such as joint bank accounts and jointly owned property held as joint tenants, will pass by survivorship to the joint co-owner, therefore bypassing the intestacy rules.
Research by Royal London in October last year estimated that approximately 57% of UK adults do not have a Will in place. With so many people relying on the intestacy rules, it is important that the government ensures that the amount spouses/civil partners receive keeps pace with inflation. The review should have taken place last October. Presumably, the reason for the delay was due to Parliament's other priorities last Autumn!
Whilst the intestacy rules are an important fall back, they are no substitute for making a valid Will setting out your wishes as to who should inherit your estate on death.
Those who decide to rely on the intestacy rules need to be aware that if you are separated from your spouse or civil partner, but not divorced, your spouse will still be entitled under the intestacy rules.
Any children whether from previous or current relationships will be provided for equally under the intestacy rules and will inherit their entitlement at 18.
The intestacy rules prioritise your spouse and children above anyone else. They do not provide any entitlement for unmarried partners or cohabitees, nor close friends or charities.
Sometimes inheriting under the intestacy rules can cause problems for your beneficiaries, meaning that a vulnerable person who may be in receipt of means tested benefits and care may lose their entitlements. Thinking this through in advance and incorporating a trust into your Will can make sure your inheritance benefits the beneficiary in the most effective way possible.
Depending on the values involved, the fact that children are inheriting on first death may cause an inheritance tax liability for your estate, and potentially your surviving spouse's estate.
Despite the increase in inheritance for spouses and civil partners, it still remains the case that the only way for you to take control of who will inherit your estate on death, is to prepare a Will. There will be some cases where the intestacy rules provide the same result, but why would you take the risk?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.