News and insights from our Private Client team
What happens if I have no will?
- AuthorJoseph Stoehr
If you don’t have a will yet, you’re not alone. It was recently estimated that somewhere between 50% and 60% of adults in the UK do not have one. Many assume their loved ones will automatically inherit their estate - but that’s not necessarily the case and it can lead to unintended consequences.
If someone dies without a will (or without one that is valid), the intestacy rules dictate what happens to the deceased’s assets.
The intestacy rules are best described as an attempt to make “one size fit all”. It may work for some people in certain circumstances, but for many families it can cause significant issues that could have been avoided if legal advice had been sought and an appropriate will drafted.
A general issue with the intestacy rules is that the deceased individual does not have the choice as to where their estate goes and who is appointed to sort matters out. This can lead to the estate falling into the wrong hands, practical difficulties and tax consequences.
If the intestacy rules do not make reasonable provision for a spouse/civil partner or anyone who is financially dependent on the deceased, then a claim may be brought against the deceased’s estate. Such claims are notoriously time-consuming, costly and distressing for all involved.
The following sections outline the intestacy rules as they apply to deaths from October 2014, and some further issues that can arise as a result.
What happens to our jointly owned assets if I die without making a will?
Any assets owned jointly with someone else will pass to the surviving joint owner, unless appropriate steps have been taken to avoid that. This includes, for example, joint bank accounts and properties owned as joint tenants. If such assets pass other than to a spouse or civil partner, Inheritance Tax may be incurred that may have been otherwise preventable.
What happens to my surviving spouse/civil partner if we have no children?
If an individual is married or in a civil partnership then, on death, all their personal possessions (which includes furniture, clothes, books, vehicles and pets) pass to their spouse/civil partner.
If there are no children, the spouse/civil partner will also inherit the remainder of the estate (property, cash, shares etc) after funeral expenses, liabilities, tax and testamentary expenses have been settled.
A will may be necessary if someone wants to ensure a particular asset or possession goes to someone else, or would like to make, for example, cash gifts to nephews/nieces or charities.
If an individual were separated or in the process of divorce/dissolution when they died, their estranged spouse/civil partner would still inherit. It is critical for those who have separated or are divorcing to take advice and make a will.
What would my surviving spouse/civil partner and our children inherit if I don’t have a will?
As above, all personal possessions pass to the surviving spouse/civil partner. He/she then receives the first £250,000 in value from the remaining assets, following which the balance is split in two: half to the spouse and half between any children of the deceased (including adopted children but excluding stepchildren).
If an individual’s estate is close to or exceeds £250,000 (including, for example, life insurance that would be paid to the estate) then advice should be taken to consider if the provision made by the intestacy rules is appropriate, given that children may inherit.
If the main asset were the family home, the intestacy rules could result in the children owning part of it. That could place the spouse/civil partner’s continued occupation at risk, as circumstances such as a child’s divorce, bankruptcy or their own financial needs may force a sale. It also leaves the spouse/civil partner at risk of being financially pressured by children or left in financial difficulty having to buy them out.
If minor children inherit, then any funds in their favour are held on statutory trusts which are often considered inflexible. The deceased will not have chosen the trustees of such trusts, which may lead to unsuitable people acting and in control of the funds. Minor children would receive their inheritance absolutely when they reach 18.
If any child were to die before the deceased, the share they would have inherited would pass, on trust or absolutely at age 18, to any children they have (i.e. grandchildren of the deceased).
What happens if my partner and I die simultaneously without leaving a will?
If a married couple were to die simultaneously without valid wills, the intestacy rules may result in the combined estate or majority of it passing to the family of the last to die. If the order of death cannot be established, the younger is deemed to die last. This could mean the estate of the elder passes to the younger and it all then passes to the younger’s children/relatives, and the family of the elder miss out.
This can again result in litigation and cause problems, especially if a married couple each have children from former relationships or wish to benefit different people following their death. In such circumstances, it is important that appropriate wills are put in place.
What will my partner receive if we live together but are unmarried?
The intestacy rules are almost always inappropriate for unmarried people who live together or who are otherwise financially intertwined. An unmarried partner will not inherit personal possessions or any part of the deceased’s estate. The estate will instead be inherited by the deceased’s children, grandchildren, parents, siblings, nephews/nieces etc, roughly in that order of priority.
An unmarried partner may inherit any jointly-owned assets, provided the assets were held with the deceased as joint tenants, and remained so held. If the couple’s home were held as tenants in common or solely owned by the deceased, the surviving partner would not inherit, and their continued occupation may be at risk. They may have to either move out or buy out the family members who have inherited under intestacy rules.
If the unmarried partner were financially dependent on the deceased, for housing or otherwise, then they may have to claim against the deceased’s estate on the basis that the intestacy rules do not make reasonable financial provision for them. The ensuing litigation can be costly, time-consuming and cause conflict with the deceased’s family, especially if the deceased’s children stand to otherwise inherit under the intestacy rules.
If an individual’s estate (including jointly owned property, life policies payable to their estate, and any large gifts made in the last seven years) is close to or exceeds £325,000 (the current Nil Rate Band allowance) then Inheritance Tax advice should be sought.
It is important to emphasise the need to take advice. The temptation may be to prepare a will that simply leaves assets to the unmarried partner to ensure they are looked after. There is, however, no guarantee those assets will thereafter end up with the children, should there be any. The surviving partner may re-marry or have children of their own and benefit them or other family members, either by will or by operation of the intestacy rules on their death. Passing assets to an unmarried partner may also mean the deceased’s estate does not qualify for the new Residential Nil Rate Band allowance. This allowance currently shelters up to £150,000 (rising to £175,000 from April 2020) per person from Inheritance Tax and so advice should be taken to avoid unintentionally giving this up.
This type of situation may be resolved by using trusts in a will, to ensure the family are appropriately looked after, the assets are appropriately controlled and protected, and tax is mitigated.
What else could happen if I don’t have a will?
There are many other situations where the intestacy rules are inappropriate, some of which are worth briefly touching upon.
If you have no spouse or children
If an individual has no spouse or children, their parents may inherit. This may be undesirable if the parents are financially secure as the inheritance will increase the size of their own estate for tax purposes. Essentially, the risk is that the assets may be taxed when they pass to the parents and taxed again when the parents then die. With Inheritance Tax currently at 40% above the available allowances, family wealth can be quickly depleted if steps are not taken to protect it.
The intestacy rules may mean estranged children or relatives could inherit. This may re-ignite tension between family members at an emotional time and there may be cost and complications in having to trace the whereabouts of individuals. It is important that proper advice is taken if anyone is to be excluded from inheriting.
Divorcing or bankrupt relatives
If a beneficiary is divorcing, the inheritance could end up as a matrimonial asset (or at least argued over). Similarly, if a beneficiary is bankrupt, the inheritance would pass to the trustee in bankruptcy to satisfy creditors. Trusts in wills can help to protect the inheritance in such circumstances to avoid it being dissipated outside the intended family.
Qualifying family members
The intestacy rules distinguish between, for example, half- and full-blood siblings (i.e. siblings who share one common parent or two, respectively) whereas the individual may wish to treat them equally. Similarly, the definition of children for the intestacy rules only extends to biological and adopted children, and so stepchildren or foster children would not inherit. A will should be put in place if an individual would want to benefit any such persons.
Minor or disabled relatives
The final situation worth mentioning is minor or disabled children and relatives. Under the intestacy rules, any such beneficiaries would inherit outright (or at 18 if presently minors). They may, therefore, inherit money or property they cannot suitably manage. The inheritance may also interfere with any means-tested benefits. The use of trusts in wills can again protect the funds, enabling them to be appropriately managed for such beneficiaries.
If an individual would like to leave a donation to charity after their death, they should consider making a will. If a certain amount is gifted to charity (currently 10% of the net estate) under a will, the estate can secure a reduction from 40% to 36% in the rate of Inheritance Tax that may otherwise apply. For some estates, this can mean that both the charities and beneficiaries receive more.
What happens to my estate if I have no family?
Finally, if someone dies without a will and without any blood relatives, their estate is classed as ‘Bona Vacantia’ (ownerless property) and passes to the Crown (or to the Duchy in certain counties). Where an individual has no family, or their family do not survive them, setting out in a will exactly what their wishes are (for example, gifting a charity or friends), will avoid a Bona Vacantia situation.
Roythornes is currently supporting Will Aid, a special partnership between the legal profession and nine other charities. During the month of November, we will draft a standard will for you free of charge and, in return, we invite you to make a donation to Will Aid. For more information, please visit: https://www.willaid.org.uk/