Monro Wright & Wasbrough LLP
The Lord Chancellor has increased the fixed amount, also known as the “statutory legacy”, that a spouse or civil partner will receive under the intestacy rules where the intestate is survived by their spouse or civil partner and issue from £250,000 to £270,000.
The order came into effect on 6 February 2020 and will only apply to deaths occurring after this date.
The Lord Chancellor’s review is a result of the Inheritance and Trustees’ Powers Act 2014 which amended the intestacy rules, as set out in the Administration of Estates Act 1925, to introduce a requirement to review the statutory legacy payable to spouses or civil partners where there are issue (that is, direct descendants of the deceased, including children, grandchildren, great-grandchildren, and adopted children) at least every five years. The amendment was made in order to address concerns that inflation eroded the value of the statutory legacy over time.
The Lord Chancellor can set the statutory legacy to any amount, including an amount higher or lower than the previous amount, but they must report their reasons to Parliament and the order must be approved by each house of Parliament. Unless otherwise decided, the statutory legacy should be increased by reference to the Consumer Prices Index, rounded up to the nearest £1,000.
What is an intestacy?
An intestacy arises when a person dies without having made a valid Will or has failed to dispose of all their property by a Will. The intestacy rules contained in the Administration of Estates Act 1925, as amended by the Inheritance and Trustees’ Powers Act 2014, apply to decide who is entitled to an individual’s property when they die without disposing of it by Will.
An intestacy can arise where the deceased:
Did not make a Will
Many people simply do not get around to making a Will or decide not to make a Will because they believe that the intestacy rules will work in their favour.
Made a Will which was subsequently revoked, either intentionally or by accident
A Will can be revoked by the testator (that is, the person who made the Will) by physically destroying it with the intention to revoke it.
If the testator subsequently marries or forms a civil partnership after executing a Will, the Will is automatically revoked (unless it includes a provision that the testator is making the Will in expectation of marriage or civil partnership to a specific individual and does not intend the Will to be revoked).
Made an invalid Will
In order to make a valid Will, a testator must have the necessary mental capacity and intention and must observe the formalities for the valid execution of Wills laid down in the Wills Act 1837. There are further formalities where the testator is blind, illiterate, unable to sign or unable to understand English.
Who inherits the residuary estate of a person who dies intestate?
The distribution rules on an intestacy depend on who survives the deceased.
Where the deceased dies leaving both a surviving spouse or civil partner and issue, the residuary estate (i.e. the net estate after all funeral, testamentary and administration expenses, taxes and any debts of the deceased have been paid) is divided as follows:
- The spouse or civil partner receives the “personal chattels” absolutely. “Personal chattels” are defined as tangible movable property owned by the intestate, other than money, property used for business purposes or property held as an investment. This normally includes personal belongings, such as paintings, furniture, jewellery and so forth.
- In addition, the spouse or civil partner receives a statutory legacy. This is the amount subject to the Lord Chancellor’s recent review and has increased from £250,000 to £270,000 for deaths that occur on or after 6 February 2020. If the residuary estate is worth less than the statutory legacy, the spouse or civil partner inherit everything (and the issue receive nothing).
- The remainder of the residuary estate (if any) is split into two equal parts. The spouse or civil partner takes one half and the issue take the other half.
Where the deceased dies leaving a surviving spouse or civil partner but no issue, the spouse or civil partner inherits everything.
Where the deceased dies without a surviving spouse or civil partner, their residuary estate passes in the following order:
- Their issue, but if none,
- Their parents, equally if both alive, but if none,
- Their brothers and sisters, but if none,
- Their half-brothers and half-sisters, but if none,
- Their grandparents, equally if both alive, but if none,
- Their uncles and aunts, but if none,
- Their half-uncles and half-aunts.
Where the deceased dies leaving no surviving spouse or civil partner or issue and no other relative in the categories set out above, their estate passes as “bona vacantia” to the Crown, the Duchy of Lancaster or the Duke of Cornwall.
The ordinary permanent residence of the deceased defines which of the three would be entitled to take their estate. If their residence was in the old County Palatine of Lancaster (i.e. before the local government reorganisation in 1974), it is the Duchy of Lancaster. If they died resident in Cornwall, it is the Duke of Cornwall. In all other cases, it is the Crown. The Crown, Duchy or Duke may provide for dependants of the deceased and for others who the deceased might reasonably have been expected to make provision.
The Lord Chancellor’s decision to increase the statutory legacy reminds us of the importance of writing a legally valid Will to ensure your estate is inherited exactly as you wish and to prevent any uncertainty or disputes arising during an already sensitive time for your family and friends. Please contact our Private Client team for more information when we can happily provide assistance with succession planning, including providing a quote for drawing up a Will.
Written by Sam Alder, Associate Solicitor, Private Client Department.