George Hay Chartered Accountants were one of the first accountancy firms in the country to obtain a licence to carry out non-contentious probate work. In our monthly column, we give you an insight into the process and provide an update on what is happening in the world of probate and estates.
We always advise our clients to have a Will drafted. The Will appoints Executors and enables you to determine who inherits.
Sometimes the Will reflects what would have happened if there had been no Will, anyway, but it is definitely easier to administer an Estate with a Will in place.
The rules of intestacy: What happens?
Where intestacy applies, there are no Executors appointed; instead, a single beneficiary, or multiple, can volunteer to become the personal representatives of the Estate.
Any assets held as joint tenants automatically pass to the survivor. This would include joint bank accounts and property held as joint tenants (not property held as tenants in common).
The title deeds for your property, which can be obtained from HM Land Registry, will detail how any property you own is held.
How the Estate is distributed depends on the deceased’s personal circumstances. If they were married or had a civil partner, and no children, the surviving spouse/partner would inherit everything.
If the deceased had children, the Estate would be split as follows:-
Effective 26 July 2023, £322,000 to the spouse (previously £270,000).
One half of the balance to the children.
One half of the balance into a trust where the spouse can, say, live in a property or receive the income but not the capital. On the spouse’s death, the capital will pass to the children.
If there is no spouse or children, then the assets pass in order to:-
|Parents||but if they are not alive|
|Full Siblings||but if they are not alive and have no children|
|Half Siblings||but if they are not alive and have no children|
|Grandparents||but if they are not alive|
|Uncles & Aunts||but if they are not alive and have no children, then intestacy fails|
Where this is the case, the assets pass to The Crown under what is known as ‘Bona Vacantia’.
Full details of the rules are available on our website here.
It is also possible for an Estate with a Will to end up as an intestate estate if there are no surviving beneficiaries under the Will.
Sometimes it is not obvious whether distant relatives are still alive and considerable costs can be incurred, for example, if needing to engage genealogists.
Deed of Variation / Deed of Family Arrangement
We have written before that it is possible for a Will to be rewritten under a Deed of Variation (sometimes known as a Deed of Family Arrangement).
What this means is that one or more beneficiaries of a Will, providing they are over 18, can vary their inheritance and pass it to somebody else.
It may come as something of a surprise, but you can actually vary a Will that did not exist in the first place.
Any beneficiary, aged over 18, who inherits as a result of intestacy can vary their inheritance in exactly the same way as they can if they had inherited under a Will.
There are various reasons why somebody may not want to accept their inheritance. The two most common are:-
- Varying to ensure a surviving spouse inherits more, thereby reducing Inheritance Tax on the first death.
- Varying because the recipient has their own Inheritance Tax problem, as a result of having a large Estate themselves. By entering into a Deed of Variation, the assets are deemed to be left by the deceased and do not count as a lifetime gift by the person varying their inheritance, so the 7 year rule does not apply.
As an example, we recently dealt with a case where somebody died quite young owning a couple of rented properties.
They did not have a Will, a spouse nor children and so everything was inherited by his elderly parents, who already had a substantial estate, under the rules of intestacy.
By entering into the Deed of Arrangement, the assets were passed directly to the two siblings of the deceased, and mum and dad do not need to live 7 years.
As with all matters of this nature, it is important to take professional advice as it can be all too easy to make costly errors.
Authored by Director of GH Probate Ltd., Barry Jefferd.
Our Probate service is provided through GH Probate Limited. GH Probate is the trading style of GH Probate Limited. Registered in England and Wales number 9630102. Registered Office: St George’s House, George Street, Huntingdon, Cambridgeshire PE29 3GH.
Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales.