A long-held tenet of testamentary law in England and Wales is that a testator, being a person completing a will, has the freedom to pass their assets to whom they choose.
This admirable arrangement is not replicated in some countries where probate law limits the proportion of one’s estate that can be passed according to the testator’s wishes.
Anyone in this country who does not have a will places their estate at the mercy of rules created by the government, and which are known as the intestacy rules. The perception that applying these rules to one’s estate would give effect to one’s wishes in any event is misguided.
There are circumstances, set out below, by which the intestacy rules would give rise to a distribution of one’s estate which is unlikely to match the individual’s wishes. As well as assets passing into unwanted hands, there could also be a sting in the tail in the form of an avoidable inheritance tax bill.
The intestacy rules do not recognise long-term partnerships or cohabiters. This means that the rights of a long-term partner or cohabiter who has opted against marrying or entering into a civil partnership has no greater claim under the intestacy rules than a short-term partner.
The position becomes increasingly complicated where the couple have children. In these circumstances, the children would inherit the estate of the partner who has passed away. This position could be rectified if the children decide to vary their inheritance so that their surviving parent receives their share.
However, there is no obligation on the child to do so. If the child is under the age 18, they are barred from making this variation.
Where an unmarried couple do not have children, the long-term partner remains empty handed. Instead, the deceased’s parents inherit their child’s estate. The long-term partner would again be reliant on the goodwill of the recipients of the estate, in this case the parents, to vary their inheritance and provide for their child’s long-term partner.
Should the parents decide that they would prefer to retain their inheritance the bereaved partner would need to bring a claim against the estate, a process that, as well as potentially inciting strife at a delicate time, is likely to be lengthy and expensive while offering no guarantee of success.
Assets passing to one’s parents under the intestacy rules are likely to be inefficient in terms of IHT planning. This is because the assets would be chargeable to IHT in the child’s estate and then again as part of the parent’s estate.
The parent has the option of varying their inheritance to avoid this double taxation of the same assets, but they must do so within two years of their child’s death. Perhaps more saliently, the parent must also have the mental capacity to make the variation.