From 26 July 2023, the Statutory Legacy increased in England and Wales from £270,000 to £322,000.
The Statutory Legacy is the sum a surviving spouse or civil partner is entitled to receive when a person dies intestate (without a valid will), leaving surviving children (whether or not those children are over 18).
What does intestate mean?
The new legislation brought into force by the Government increases the previous Statutory Legacy of £270,000 by £52,000, amending the provisions applying as to how a person’s estate is distributed where they die without a will – known as the Rules of Intestacy.
The Rules of Intestacy provide a strict structure for how a person’s estate will be divided, which will vary depending on whether they were married and had children, and if so how many.
The Rules can be complicated in some family arrangements, but essentially favour a person’s spouse/civil partner, followed by their children and thereafter remoter family members such as siblings and nieces and nephews. Co-habitees and so-called ‘common-law spouses’ (which do not exist in English Law) are not accounted for by the rules.
Statutory Legacy is now £322,000
The increased Statutory Legacy means that a spouse will receive the first £322,000 of the estate. If the estate has a value equal to or less than the Statutory Legacy, the spouse will essentially receive the entire estate. If the estate has a value greater than £322,000, any value over and above this sum will be divided so as 50% to the spouse and 50% to the children.
Who gets which share?
Example 1 – Married with no children
Mark and Estelle are married. Mark dies without having made a will and leaves an estate worth £1,000,000.
As they were married Estelle inherits the entire estate and no inheritance tax (IHT) is payable.
Example 2 – Co-habiting with young children
They both have lived together for many years and share two young children. Mark dies without having made a will and leaves an estate worth £1,000,000.
As they were unmarried, the whole estate passes to Mark’s children who will receive their inheritance at 18. Significant IHT will be payable.
As Estelle has not been provided for by Marks’s estate, she may need to make a claim against the estate for financial provision (these claims are outlined further below).
Example 3 – Married but with children
Mark and Estelle are married and have two young children. Mark dies without having made a will and leaves an estate worth £1,000,000.
Estelle receives £322,000 by way of statutory legacy. Of the remaining £678,000, half passes to Estelle and half passes to the children who will receive their inheritance at 18. The children’s share may be subject to inheritance tax depending on how the estate is constituted.
Can you change what everyone receives?
If the beneficiaries of the estate are all over the age of 18, have capacity, and are in agreement, they can enter into a Deed of Variation, which varies how the estate is to be distributed and can also write back the tax position of the estate. There is a strict statutory deadline for these Deeds to be entered into and advice must therefore be sought as soon as possible.
What if you can’t agree?
If the beneficiaries of an estate do not all agree to vary its distribution (i.e. an adult child does not agree to give up a part of their share in favour of their deceased parent’s cohabitee), the ‘disappointed party’ can seek additional provision from the estate under the Inheritance (Provision for Family Dependants Act)1975 (the 1975 Act).
Only specific categories of persons can pursue a claim under the 1975 Act, and there is a strict time limit in which to do so. If successful, however, a 1975 Act claim can override the Rules of Intestacy (or any will) to make provision for the claimant.
Claims under the 1975 Act can however be complex, stressful, time-consuming and costly for all involved. But they do offer a potential solution where adequate provision for dependants has not been made.
Should you make a will?
Having no will or an out-of-date will may mean that those you care about may not be provided for, for example, if you are in a long-term relationship but unmarried. Equally, those you do not wish to benefit (such as estranged family members) do benefit.
In addition, IHT may be payable. Furthermore, individuals may be forced to seek redress through the court system at a time of great stress and bereavement.
All of this can be avoided by the use of a professionally drafted will which is regularly reviewed.
For all your will, inheritance and probate needs, contact any of our offices nationwide at 01162 858080 or email [email protected].