Spouses Receive More Upon Death Under Rule Changes
23 I 09 I 09
Sarah Cash
As intestacy rule changes come into force,
Sarah Cash (Associate at Hugh James) examines the impact and
discusses the importance of keeping an up to date will.
If a person dies
without making a will, the law sets out clear intestacy rules as to
how the estate is distributed amongst the deceased's family. Under
these intestacy rules the spouse of the deceased automatically
receives a fixed amount from the estate. After the spouse has
received their entitlement, the rest of the estate is divided
between other family members.
On 1st
February 2009 the intestacy rules changed to increase the amount
left to the spouse: from £125,000 to £250,000 where there are
children; from £200,000 to £450,000 where there are no
children.
These changes are welcomed as these
amounts have not been increased since 1993. However, people
should not be misled into thinking that these changes mean they do
not need to make a will.
The intestacy rules can
lead to a number of difficult issues, for example:
- Unmarried couples -
are not entitled to receive anything on the death of their partner.
It is possible for unmarried partners to bring a claim against the
estate, but this can lead to acrimonious and costly
litigation.
- Matrimonial home – if in
the deceased spouse's sole name, it may have to be sold to satisfy
the entitlements of other family members.
- Inheritance tax - may be
due if the value of the estate passing to the beneficiaries (apart
from the spouse) is worth more than £312,000 (2008/2009 tax
year).
- Children - are likely to
receive very little, unless the estate is worth several hundred
thousand pounds.
- Children - are entitled to
receive their inheritance at age 18. This is a young age to inherit
and this poses all sorts of dangers. Most wills seek to increase
the age of inheritance to 21 or 25.
- Guardians - appointment of
guardians for children under 18 is reliant upon suitable volunteers
rather than the express choice of the deceased.
- Other family members –
have a right to benefit where there are no children. This may not
be such a good thing. For instance, elderly relatives may have no
need of the funds and indeed an inheritance at this stage may upset
their own inheritance tax planning.
- Administration – the
beneficiaries of the estate are responsible for its administration,
but they may not be able to deal with large sums of money, property
or, in some cases a business. By making a will there is the
opportunity to appointment suitable executors.
In summary, failure to make a will leaves
too much to chance. To ensure your estate is distributed
according to your wishes and in a tax efficient manner, you should
not rely on the intestacy rules, but should seek advice to execute
a suitable will.