A Nod Towards Inflation: UK Government Increases The Statutory Legacy For Spouses & Civil Partners

When an individual dies without holding a valid Will or without disposing of the entirety of their residuary estate in their Will, the intestacy rules determine the distribution of the individual’s estate.  Our Wills, Trusts and Probate Experts explore the intestacy rules, which are comprised in statute and often do not reflect the Deceased’s wishes, and how this can cause practical difficulties for the family.

The statutory legacy has been fixed at £270,000 since 2020, but following the UK Government passing the Administration of Estates Act 1925 (Fixed Net Sum) Order 2023, this has been increased to £322,000 from 26 July 2023.

Given the substantial rise in inflation since 2020, this is a welcomed progression of the law but a stark reminder that your loved ones are left in the hands of statutory law in terms of the distribution of your estate.

The application of the intestacy rules can cause many difficulties for your family and loved ones, and the following examples highlight the importance of making a Will to ensure your assets pass in the manner you desire.

• Insufficient provision for spouse. Whilst the statutory legacy increase will help alleviate this issue to an extent, the intestacy rules may leave your spouse with insufficient resources if the residuary estate is shared with the children. 
• Separated from your spouse/civil partner. Some spouses or civil partners may be separated despite not having formally divorced or dissolved the civil partnership. Without a Will to state otherwise, the spouse or civil partner will still be a primary beneficiary of your estate.
• All biological and adopted children benefit equally. For some families, this may be the Deceased’s wish. However, if one child had received substantial lifetime gifts from the Deceased, this will not be factored into distribution under the intestacy rules, which can lead to family disputes. There may be other reasons why you would like your children to benefit unequally, for example, due to their financial stability, if their assets are at risk on divorce, or if one child had provided more emotional or practical support to you. You may not want certain children to benefit at all, for example, due to estrangement. The intestacy rules do not account for this.
• Children who are not biological or adopted will not benefit at all. Many individuals have stepchildren that they would want to benefit from their estate. Under the intestacy rules, stepchildren are not classified as children of the Deceased, and they would not benefit. This could cause family disputes and time and costs trying to resolve the situation.
• Children owning the family home. If the Deceased owned the family home either solely or as tenants in common, the home or the Deceased’s share of the home will be subject to the intestacy rules. This means that where the house is worth more than the statuary legacy of £322,000, the children may end up owning a proportion of the property.
• This puts the spouse at risk in terms of the security of their home (which can be particularly difficult if the children are from a previous relationship) and could create family disputes if some parties want to sell their share in the future.
• Children inherit outright at age 18. All beneficiaries under the intestacy rules benefit on turning 18. Many feel that their children are not mature enough to manage or be trusted with their inheritance at this age, and there are circumstances where it would be beneficial for the inheritance not to form part of your child’s estate, for example, if the child is in receipt of means-tested benefits, are a vulnerable person or are at risk of divorce or bankruptcy.
• Your spouse/civil partner will receive all personal possessions. Again, this may be contrary to your wishes, particularly if you have children from a previous relationship who may not receive those possessions on the death of your spouse/civil partner.
• Personal Representative. The individual/individuals who will be responsible for administering your Estate or any Trusts for minors is determined by statute. This can mean that the persons you trusted, whether that be family, friends or a professional, will not necessarily be the ones who end up administering your estate.
• Tax Planning. The operation of the intestacy rules could inhibit the availability of Inheritance Tax planning, such as Business Property Relief and the Residence Nil Rate Band. 

Whilst the increase in the statutory legacy is a welcomed change, the application of the intestacy rules is wrapped up with difficulties. It is important to get a Will in place to ensure that your assets pass to your chosen individuals in the most appropriate and tax-efficient manner.

You can ensure that suitable people are appointed as Executors to administer your estate and prevent your loved ones from potential disputes and difficulties.