Statutory legacy increases from £250,000 to £270,000 for spouses and civil partners

The portion of your estate that your spouse or civil partner will inherit if you fail to make a Will is set to change on 6th February 2020 – but allowing your estate to pass on intestacy is unwise.

If you are married or in a civil partnership and you don’t make a Will, your spouse or civil partner will inherit under the rules of intestacy. Currently, for those with children, this amount is fixed by law as £250,000 plus 50% of the balance of the estate. Those without children will inherit the entire estate.

From 1st October 2014, the Inheritance and Trustees’ Powers Act 2014 introduced new rules that required the Lord Chancellor to review the  statutory legacy at least every five years. The Government has made good on this promise and a Statutory Instrument detailing the amount of the increase was laid out in the House of Commons yesterday. The figure is in line with the consumer price index and will come into force on 6 February 2020.

The Inheritance and Trustees’ Powers Act 2014 implemented the majority of reforms recommended by the Law Commission Report ‘Intestacy and family provision claims on death’ published in 2011. The Act sought to modernise and simplify the law to create a fairer and more comprehensible set of rules governing the distribution of estates of deceased persons and to amend the law relating to the powers of trustees.

The rules of intestacy: unsatisfactory for most

Under the current intestacy rules, if you die with no children your spouse or civil partner will inherit your entire estate.

If you die leaving children, your surviving spouse or civil partner takes the first £250,000 plus 50% of the remaining part of the estate. Your children inherit the rest.

Under the new rules, the initial £250,000 will increase to £270,000. Whilst the change has been welcomed by the legal profession, experts are anxious to stress that relying on the laws of intestacy rather than making a Will is unwise.

Firstly, unmarried couples don’t inherit under these rules at all. This can leave loved ones without provision, giving them no option but to go to Court for an order under the Inheritance Act. Even if they successfully claim, there is no guarantee that the outcome will be what the Deceased would have wanted. Indeed, for unmarried couples, claims made under the Act are limited to ‘maintenance’ only.

Secondly, the majority of wealth for most couples lies in the family home. It is rarely desirable or intended that the survivor should co-own property with their children – and this can lead to arguments and discord down the line. Further, leaving your estate to pass by intestacy means losing out on various Inheritance Tax and estate planning benefits otherwise available to those who take the time to draw up a Will. It also means that if you are married or in a civil partnership, a large portion of your estate becomes exposed to care fees, creditors or new partners following your death. Consequently your children or grandchildren may not see a penny of your hard earned wealth!

“The intestacy rules are a blunt instrument that will not work for many people. Most notably, no provision is made for a person’s cohabitant under the rules. This is obviously a serious issue for the many people in England and Wales who live together without being married or in a civil partnership. Likewise the intestacy rules may not give the result that would be wanted by some people who have remarried and have children from the first marriage. Many people also wish to leave a gift to charity in their Will and the intestacy rules do not make provision for this.”

“In addition, the law of England and Wales places a great deal of emphasis on testamentary freedom – the freedom to make a Will in whatever terms the testator wishes. This idea is the primary legal principle that underpins this area of the law and reflects a deeply rooted belief. A Will is the means by which a person can exercise his or her testamentary freedom, rather than relying on the default position provided by the intestacy rules.”

~ Law Commission Consultation Paper 231

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