What are Statutory Legacies?
What are They?
When a loved one passes away without leaving a valid Will, their estate is distributed according to the intestacy rules. One key part of these rules is the Statutory Legacy.
The Statutory Legacy is a fixed sum of money that a surviving spouse or civil partner is entitled to receive from the estate of their partner when they die without making a valid Will and where there are surviving children. In England and Wales, the Statutory Legacy increased to £322,000.00 on 26 July 2023. The sum is intended to provide financial protection to the surviving spouse or civil partner.
How Does it Work?
If someone dies without making a Will and is survived by a spouse or civil partner and children, then the Statutory Legacy is the first part of the estate to be distributed to the surviving spouse or civil partner. After this fixed sum has been paid then the remainder of the estate is distributed as follows:
Half goes to the surviving spouse or civil partner.
The remaining half is shared equally among the children. Step children will not receive anything.
If there are no children, the surviving spouse or civil partner will inherit the entire estate of the deceased.
It’s important to note that cohabiting partners (those who are not legally married or in a civil partnership) are not entitled to the Statutory Legacy under the intestacy rules. This can often lead to disputes or a claim under the terms of the Inheritance (Provision for Family and Dependents) Act 1975.
Why is the Statutory Legacy Important?
For families dealing with the loss of a loved one, knowing that a statutory legacy provides some financial security for the surviving spouse or civil partner can be a small comfort. However, relying solely on intestacy rules can result in unintended consequences, especially in complex family situations, for blended families or where the value of the estate is greater than £322,000 and assets are invested in property or a business for example.
Imagine a situation where..
You own a property with your spouse or civil partner, you both have a child from a previous relationship and two children of your marriage. You own your property in Wimborne, as tenants in common in equal shares, valued at £600,000. You have individual savings of approximately £50,000 each. You have just inherited from your late aunt’s estate and having repaid your mortgage now have additional cash of £200,000.
You then die suddenly, without having written your Will. In your estate, you have half the house at £300,000, your savings of £50,000 and the balance of your inheritance of £200,000.
The first £322,000 of your estate will now pass to your surviving spouse or civil partner. The balance of your estate is the divided as to 50% to your surviving partner and 50% between your three children. Your step child, who you have bought up as your own, is not entitled to anything.
£114,000 would be due to your three children in equal shares. You partner would receive £322,000 plus the £114,000.
Now imagine the same scenario, but this time the house is in your sole name. You die, and within your estate you have your house £600,000, your savings, £50,000 and your inheritance of £200,000. The first £322,000 goes to your partner. And then £264,000 is then due equally between your three children and your partner.
If your partner, has limited assets of their own, they may now find themselves in a position where the property has to be sold to pay the balance due to the children and to free up capital to be able to cover living expenses.
If there was a Will, you could have made provision for your partner to continue living in the property for the rest of their lifetime, and then leave the property to your children. You could have left the cash assets to your partner, so that they had access to funds to cover living costs and to be able to provide for the children going forward. Or you could have include legacies to your children so they still had some funds following your death.
How Can You Plan Ahead?
The best way to ensure your estate is distributed according to your wishes is to create a legally valid Will. Doing so allows you to:
Choose who inherits your estate
Provide for your stepchildren or unmarried partner
Appoint guardians for your minor children
Potentially reduce your Inheritance Tax liability
At MJP Law Limited, we advise individuals and families on all aspects of estate planning, including Wills, trusts and intestacy. Whether you’re looking to create a Will or need guidance after the death of a loved one, our team is here to help.