Intestacy, the increased Statutory Legacy and why it is still important to make a Will

On 6 July 2023, the Government announced that there will be an increase to the Statutory Legacy by way of the Administration of Estates Act 1925 (Fixed Net Sum) Order 2023.

The Statutory Legacy is the initial sum to which a surviving spouse or civil partner is entitled, should an individual die without leaving a valid Will and with a spouse or civil partner and children.

Currently that sum stands at £270,000 but will be increased to £322,000 from 26 July 2023.

What is the Statutory Legacy?

If you die without making a valid Will, you are deemed to have died “intestate” and all the property which forms your estate will pass on according to the statutory provisions commonly known as the Intestacy Rules.

If you die intestate, and you are survived by a spouse or civil partner and by your child/children, the Statutory Legacy takes effect. As a result of the Government’s announcement, this amount will now increase to £322,000 from 26 July 2023.

The division of the remainder of the estate (over the Statutory Legacy) is determined by the Intestacy Rules.

The Intestacy Rules

After the Statutory Legacy (i.e. the initial £322,000), the Intestacy Rules set out a strict order as to who may benefit and by how much.

The rules are complicated, however in summary, they prioritise spouses and children, with potential benefit for parents, siblings, nephews/nieces, grandparents, and aunts/uncles.

Why it is still important to make a Will

It might be the case that you consider that the application of the Intestacy Rules reflects your wishes for your estate and loved ones, and therefore conclude that you need not make a Will.

There are, however, a number of important reasons why it is beneficial to formalise your wishes in a Will. For example:

• Choice: a Will allows you to choose exactly who is entitled to distributions from your estate, and by how much. It also allows for flexibility and allows for your loved ones, who are not family members, to inherit.
• Executors: being an executor can be a burdensome, yet very important task, as they will be in control of the administration of your estate. By creating a Will, you are able to choose who you deem to be best suited to carrying out your wishes. In the absence of a Will, another set of statutory rules determine who will become your estate’s executor.
• Guardians: if you have young children (i.e. under the age of 18), you can elect for specific guardians to assume parental responsibilities in your place. The Intestacy Rules do not cater for this.
• Unmarried couples: unmarried couples, or those not in a civil partnership, do not benefit from the Statutory Legacy at all, nor are they catered for by the Intestacy Rules. By making a Will, you can ensure your partner can benefit from your estate.
• Tax management: it is possible to create tax-efficient arrangements in your Will to reduce the amount of inheritance tax (“IHT”) your estate will have to pay. For example, generally anything that passes to a spouse or civil partner benefits from the “spouse exemption” from IHT, whereas any share passing under the Intestacy Rules to children is chargeable to a 40% IHT rate.

If you would like further advice on the benefits of, or indeed in the preparation of, your Will then please contact Matthew Barnett, or another member of the Private Client team.

 

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