An update to the Intestacy Rules has taken place, with the Statutory Legacy having been increased to a sum of £322,000 as of today, the 26th of July 2023.
When it comes to Estate Planning, the Intestacy Rules are some of the most important aspects to understand. Intestacy is the situation in which an individual passes away without a valid Will. The distribution of their Estate is then in accordance with the Intestacy Rules, which are a set of rules established by the government to dictate who receives what from your Estate. If the deceased has a spouse or civil partner and children, then the Statutory Legacy is involved.
Simply put, the Statutory Legacy is a fixed sum that is entitled to the spouse or civil partner of the deceased. The remainder of the Estate is split in half, with the spouse or civil partner receiving 50% and the children receiving the other 50% between them.
Previously, the Statutory Legacy provided a fixed sum of £270,000 to the spouse or civil partner since the 6th of February 2020, however as of the 26th of July 2023, this figure is now £322,000. This means that any spouse or civil partner of someone who dies leaving children with the Estate intestate following this date is entitled to the first £322,000 of their partner’s Estate, with the division of the remainder staying the same.
The reason behind the increase is to keep in line with inflation. Schedule 1A of the Administration of Estates Act 1925 (amended in 2014) states that a 15% increase in the Consumer Price Index (CPI) from the base rate warrants a review of the Statutory Legacy sum, so that the value is never too inconsistent with the cost of living. Therefore, when the CPI indicated inflation of 15.023% in November 2022, from the base rate in November 2019, the sum was reviewed. The increase of £52,000 was chosen because by the ‘current month’ of June 2023, the increase had risen to 19% which, rounded to the nearest £1000, reached an increase of £52,000. For couples owning a property in a high-value area as tenants in common, the fact that the Intestacy Rules may not leave everything to the spouse could leave the spouse in financial difficulty (possibly having to sell their home) in order to fund the child’s inheritance.
“The review is really important to maintain the value it provides to the partner of the deceased,” says Lisa-Marie Keefe.
“However, from a property perspective I can see how it can still be deemed low as there is such inconsistency with housing prices across the country.
According to RightMove, the average house price in Buckinghamshire is £510,712, and in Central London £1,659,500. In areas such as this the Statutory Legacy could be deemed of insufficient value. In contrast, in Tyne-and-Wear, the average house price is £197,174, so the Statutory Legacy would be more beneficial.
Of course, this only proves a problem if the deceased does not own the property as joint tenants or they do not have a valid Will. If the deceased dies as a tenant in common without a valid Will, the surviving spouse may find themselves in a position where they either have to sell the property to fulfil the intestacy requirements or consider having their children or other family members added as joint owners, which is obviously not ideal.
Even though the Statutory Legacy has increased, there is always still a greater argument to have a Will in place to prevent any such issue arising on death.”
