Many lawyers enjoy writing articles where they can use the words “common misconception”. Two of the commonest misconceptions are that:
If you are married and die without a will, your wife/husband will automatically inherit everything; and
A “common law” wife/husband has pretty much the same entitlement as a formally married person
If you die without a will, you are “intestate”. If you are married with children, your wife/husband will inherit your personal belongings, a cash legacy of £250,000 and will have a life interest in half of what’s left (“residue”).
The other half of the residue passes to your children at 18 and, when your wife/husband also dies, they’ll then also take the other half of your estate. If you are married without children, the cash legacy increases to £450,000 plus half the residue outright. The other half passes to your parents/brothers and sisters; if there are none, everything is passed to the surviving wife/husband.
But from 1 October 2014, things are going to change when the Inheritance and Trustees’ Powers Act 2014 comes into force.
From that date, if you die married with children, there’s no more worry over cumbersome trusts: half the residue will pass to your wife/husband outright and half will pass to your children. If you’re married without children, everything passes to your wife/husband; the rest of your family no longer gets a look in.
These changes reflect some of the recommendations of the Law Commission which was asked to look into how far the intestacy rules – for the most part unchanged since 1925 – mirrored the make up and psyche of modern society. But the new rules don’t – and can’t – avoid the impossibility of finding a one-size-fits-all solution to intestacy.
The only effective solution to intestacy is to make a will.
The Law Commission acknowledged that many people are in relationships that are a marriage in all but formality. Nevertheless, no changes to the law were made in this respect.
If you’re not married and die without a will, your partner receives nothing. This may leave them with no option but to bring a court action for reasonable financial provision from your estate under the Inheritance (Provision for Family and Dependents) Act 1975. This will cause cost and distress just when your partner least needs it (easily avoided by making a will). In most cases, your partner will automatically inherit any assets held in joint names, will or none.
Or you could, of course, get married. The tax benefits alone make it financially - if not emotionally – a wise move. If you have left a will passing everything to your unmarried partner, the balance of your estate over £325,000 is chargeable to Inheritance Tax at 40%. And on his/her subsequent death, the same assets might be charged to tax again. If you were married, there’d be no tax at all on the first death.
But remember, if you do marry, any existing will is automatically revoked so you’ll need to make a new one.
For more information about the Inheritance and Trustees’ Powers Act 2014, and advice about wills, trusts and succession, please contact Jim Sawer.