Create or update a will to avoid the complexities of the intestacy rules

Posted on: May 21st, 2019

A will would be suitably drafted to deal with how assets are distributed after death, at that moment in time. The will would include suitable provisions to ensure that certain beneficiaries (a person who receives a gift of money or other assets from the deceased’s estate) inherit.

However, it is always advisable to review a will after a couple of years to ensure that there are no changes to beneficiaries, and that those beneficiaries are still alive, or there are suitable provisions to cover their deaths.

If a will is no longer suitably drafted, there is a risk that the personal representatives may have to deal with complexities of the intestacy rules. Personal representatives are those who administer a deceased person’s estate and include the following:

  • If there is a will that names the personal representative, they are know as the executor; and
  • If there is no will (or if there is no executor named in the will, or if the executor is unable or unwilling to act), they are known as the administrator.

Where a person has died without a will, or where a will fails to be effective because, for instance, the sole beneficiary predeceased the deceased, that person would have died intestate.

If some assets have failed to be disposed of under a will, that would result in partial intestacy. This means that the administration of the intestate estate would be in accordance with the Administration of Estates Act 1925 (the Act). The provisions of the Act could result in the personal representatives experiencing various issues when administering the estate. This could raise problems for the personal representatives as the intestate estate is distributed in accordance with Section 46 of the Act, which sets out an order of entitlement, depending on which family members are living. Some of the problems that could arise are discussed below.

Unknown beneficiaries

The personal representatives are personally liable for any incorrect distributions. A beneficiary who was entitled to a payment could take action against the personal representatives if they have not received their inheritance.

Therefore, to avoid any potential legal action, personal representatives may need to spend additional time and expense to investigate the deceased’s family and trace all potential beneficiaries.

Extra complications could arise if the deceased had a complex family, such as children with different partners who are not known to the personal representatives.

Property

The estate may include real estate assets like the family home. Most wills would have provisions on how these assets are to be dealt with.

However, in the absence of a valid will, the Act could cause complications if the deceased did not intend for the property to be sold. For example, if there are multiple beneficiaries who are entitled to a share in the estate, this may result in the personal representatives having to sell those assets to cover those payments due to the beneficiaries. This would have to be done regardless of the deceased’s wishes, as they may not have wished for the home to be sold due to the occupation by vulnerable people.

Tax implications

As there is no control on distributing the estate because of the strict order of entitlement set out in the Act, any inheritance tax planning undertaken in the deceased’s will could be significantly undone, especially for large estates.

There are various exemptions and reliefs that are available to an estate which apply depending on the identity of the beneficiary and the nature of the property.

These exemptions, if applicable to that value could enjoy up to 100% tax relief, could mean that an estate that was previously not liable to tax is now taxable. For example, an Estate which under the will passes everything to a spouse or civil partner, would enjoy a tax exemption under Section 18 of the Inheritance Tax Act 1984. However, if the spouse or civil partner predeceases the deceased, the tax exemption would no longer apply and could result in the estate becoming taxable.

In conclusion, dying intestate raises a number of complexities and issues that would be avoidable by drafting a will. It is worth reviewing a will, especially where there is a sole beneficiary, as the death of all beneficiaries would result in the will failing and the deceased dying intestate.

For more information on drafting a will or reviewing your existing will, please contact the Wills, Trusts & Probate team.