If you were to die without leaving a valid Will, then you are said to have died intestate. Your estate will be distributed in accordance with the laws of intestacy, a law which is nearly 100 years old. The rules of intestacy provide a strict order as to who will inherit from you depending on your legal relationships with people, for example, whether you are married or have biological children. Unfortunately, the intestacy rules are rather outdated, and do not cater for modern families. The rules do not recognise relationships such as step-children or unmarried partners, so often those people you would have liked to benefit won’t be considered and will be left with nothing.
The Intestacy Rules
If you are married or in a civil partnership, then your spouse or civil partner keeps all of your assets and belongings, (which might include property) up to the value of £322,000 as well as all of your personal possessions. The remainder will then be shared as to 50% to your spouse or civil partner and 50% to be divided equally between your children.
This would not be an ideal situation for those who have children from previous relationships, since their new spouse will get a look in first and if your estate is below the £322,000 threshold, then your children could be left with nothing.
If you are not married, then your children will inherit everything equally between them. If a child has sadly died before you, then their share would be split between their own children.
Age of Vesting
When your children are set to inherit under the Rules of Intestacy, then they will become entitled to their inheritance on their 18th Birthday. This will be off-putting for some who may have concerns about a young person receiving a large inheritance at this age. If you were to write a Will, then you can choose the age in which you would want your children to inherit, such as 18 or 25.
The definition of children
In Law, for the purposes of applying the intestacy rules the term children includes all of your biological children as well as legally-adopted. It does not include foster children nor stepchildren. This may therefore include an illegitimate child or children to whom you are estranged from and who you would not want to benefit. If you were to write a Will, then you could specify which of your children were to inherit and in what proportion. You could also include stepchildren or foster children too.
Bereaved Minors Trusts and 18-25 Trusts
A child can not legally inherit until at least the age of 18. Up until this age, their inheritance will be held in Trust and will be looked after by Trustees. More often than not, the Trustees will be your next of kin or the children's surviving parent or guardian. These may not have been the same people you would have chosen and the only way you can choose Trustees for your children is by including them in your Will.
A Bereaved Minors Trust can only be set up by a parent, either via Will or intestacy or the Criminal Injuries Compensation Scheme. The Trust will therefore only become effective following the death of a parent. A qualifying Bereaved Minor's Trust can have tax advantages but to qualify as this type of Trust, the child must inherit at age 18.
The 18-25 Trust helps overcome the concern of a child inheriting at the age of 18 and are similar to Bereaved Minors Trusts and are created in the same way. But this time, the beneficiary must become absolutely entitled by the age of 25 years rather than 18 years. The Trust is taxed slightly differently to the Bereaved Minors Trust in as much as it receives the same treatment up until the beneficiary reaches 18 and after this time there are fewer tax benefits.
Co-Habitees
As you will have seen, the rules of intestacy do not cater for co-habitees, regardless of how long you may have lived together. If you and your partner share children together, then your children will inherit but your partner will not. This could leave your partner in a very difficult position and they could find themselves in a situation of having to make a claim against their own children's inheritance.
If you have young children one of the most important considerations is who would look after your children should you die when they are still young. If you write a Will then you can decide who will be appointed to look after your children. If there is a surviving parent still alive when you die you may want them to look after your children but there may be reasons why you might not. You will also need to consider who would look after your children if both you and their other parent have died. As long as you have parental responsibility you will have the power to appoint guardians for your children. If you do not have a valid Will in place when you die it will often come down to the local authority to make a decision about where your children should live and this may involve them having to go into care, whilst this is decided.
Write your Will
The best way to make your wishes known regarding your children’s inheritance is to make a Will. Not only can your Will clearly set out who should be appointed to manage your children’s inheritance, you can also advise when they receive their inheritance (you may understandably feel that 18 is too young to inherit) and you can provide directions to your trustees (the people who will look after their inheritance) on what they should do with the funds whilst your children are under age.
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