Following the announcement in the Pre-Budget Report in October 2007 of the introduction of transferability of the nil rate band on the death of the first spouse/civil partner, some may have taken the view that the need for making a seemingly complex Will for inheritance tax purposes or even making a Will in the first place, has been diminished.

It is our view here at Lee & Priestley LLP that there are still valid reasons for considering the trust structure within Wills but for the time being, within this article, we aim to look at the need to put a Will in place to avoid the potential uncertainty of the intestacy rules.  

With the complexities of our family lives ever increasing through divorce, remarriage, co-habitation and so on we feel that more than ever individuals should give certainty and clear direction to their loved ones on how their assets should be dealt with following their death.

On an individual dying without leaving a Will a set of rules, known as the intestacy rules, govern how that person's assets are dealt with.   The aim of this article is to give a brief synopsis of how those rules can work.  The starting point is based on the question as to whether that person was married or a registered civil partner at the time of their death.   If so, and on the proviso that the surviving spouse/civil partner survives for a period of 28 days, and the deceased's estate is worth no more than £250,000, then the entire estate, plus personal items, will pass to the surviving spouse/civil partner.

This may reflect fully what the deceased person may have wanted, however, there is no scope here for either cash or specific gift legacies to other family members or close friends.  A further issue may arise where the deceased's estate is worth in excess of £250,000.  At this point the intestacy rules bring in the potential for other family members to benefit.  The intestacy rules stipulate that the surviving spouse/civil partner will receive the first £250,000 plus personal effects.  Over and above this, any children of the deceased, or their issue, will take one half of the remaining sum on reaching 18 years of age.   The surviving spouse/civil partner will then be given a life interest in the remaining half of the estate which will then pass to the children of the deceased, or their issue, on the death of the surviving spouse/civil partner.  This may or may not have been what the deceased would have wanted but it is our feeling here at Lee & Priestley LLP that such decision should be made by the person themselves in order to reflect their true intentions.   The intestacy rules continue thereafter to potentially cater for wider classes of family members if there are no children and the deceased's estate is worth in excess of £450,000.

We will now briefly look at this position where the deceased dies without being married or within a registered civil partnership.  The first question then asked is whether the deceased was survived by any children or their issue.  A point to note here is that issue means children, but does not include step-children, though illegitimate and adopted children are included within this class.   It also includes grandchildren and great-grandchildren and so on.  If there are surviving children/issue then they will take in equal shares.   Issue will only benefit however if their parent has predeceased.

If there are no surviving children or issue, then the intestacy rules look to surviving parents, if none have survived then to surviving siblings of the whole blood or their issue or again, if none have survived, to surviving siblings of the half blood or their issues.  From then on the intestacy rules move toward wider family members.

It can be seen from the above that there is significant scope for the intestacy rules to deal with a person's assets following death contrary to what the deceased would have wanted. For instance, step-children not being included could have a significant impact on a family unit and create issues that had never presented themselves before and the significant point to remember is that the deceased will not be there to resolve such issues.   This could then give the rise to ongoing conflicts within the family which ultimately may need to be resolved via the legal system at potentially significant cost to the estate.  For reasons such as this, the need to make a Will has never been more important.  As outlined at the start, as the complexities of relationships within families increase, the need for an individual to bring an element of control to that situation, via a Will, is as crucial as ever.

Should you require any further information on the intestacy rules, as the information above is only intended as a guide, or indeed information on putting a Will in place, then please do contact a member of the Private Client Team.

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