A client’s guide to intestacy

A person is said to die intestate when they die without leaving a valid will. It can also refer to when someone leaves a valid will that does not dispose of their entire estate. This is known as a “partial intestacy”.

The process of administering an estate where the deceased did not leave a will is not more difficult than if they had left a will. The process is almost identical in both cases and is explained below.

Where someone dies leaving a valid will, the executors appointed in the will apply for and are named on the 'Grant of Probate' as the people having authority to deal with the assets of the estate.

Where there is no will, the grant which is applied for is a 'Grant of Letters of Administration'. The person to whom the grant is issued is known as the Administrator. The grant is issued by the Probate Court and names the Administrator(s) as the person(s) having the authority to deal with the assets of the estate.

Usually, a person who is entitled to the deceased’s estate, known as a beneficiary, applies for the grant and is appointed as Administrator (see section 8 below). There is an order of priority in relation to who can apply. If you would like to apply to be the Administrator of someone’s estate please contact us for further advice.

Generally a grant is needed to give the Administrators authority to deal with the assets of an estate. It may not be required in some circumstances, for example:

• where assets are jointly owned and on the death of one of the co-owners the asset passes automatically to the survivor(s)
• where the value of the estate does not exceed £15,000

To obtain a grant it is necessary to complete the necessary forms for HMRC, which is something that we can help you with. These forms are an inheritance tax account which give details of the assets and liabilities of the deceased at the date of death. In addition, the PRs will have to swear an Oath for the Probate Registry. Again, we can assist you with the preparation of this Oath and explain to you how to swear it. .

If no inheritance tax is due on the estate a short form of account (IHT205), known as a Return of Estate Information is usually completed.

If inheritance tax is due on the estate or if certain other factors apply, a longer form, called an IHT400 has to be completed. It is necessary to give full details of all the assets and liabilities of the estate at the date of death, plus details of relevant life time gifts and various other matters to give a full picture of the financial position of the deceased at the date of death. This involves writing to various banks, building societies, investment managers, utility companies and many others to get the necessary information and is something that we can do on your behalf. 

If the inheritance tax is payable on the estate some of the tax due (see section 7 below) has to be paid on the submission of the inheritance tax account to HMRC. A receipt for tax paid is issued and then the oath and will (if there is one) are sent to the Probate Registry.

How long it takes to obtain a grant depends on how quickly all the information for the inheritance tax account can be assembled. If we receive instructions soon after the death has occurred, generally we aim to obtain the grant within approximately three months of the death. If the estate is very complicated it can take longer.

Inheritance tax is charged at 40% on the estate above the nil rate, or tax free, band. At present the nil rate band is £325,000. The main exception to this rule is that gifts to spouses, civil partners and charities are exempt from inheritance tax. Everyone has a nil rate band available for use on their death. In the case of spouses or civil partners, if the nil rate band is not used in whole or in part on the first death, the unused portion can be transferred and added to the nil rate band available on the second death. This is known as the transferrable nil rate band. This is something that PRs must apply for on the second death and they will need to supply certain pieces of information. We can assist you with this application if we are helping you with the administration of the estate.

If inheritance tax is due on the estate the total inheritance tax bill is calculated when the inheritance tax account (the form IHT400) is completed. The proportion of the total tax bill which is applicable to land, property and business assets can be deferred and paid by instalments (the instalment option). The proportion applicable to the rest of the estate (for example on bank accounts or shareholdings) has to be paid on submission of the inheritance tax account.

The instalment option for payment of inheritance tax provides for tax to be paid over 10 years by instalments. The first instalment is payable on the last day of the sixth month after the date of death. The instalment option ceases if the asset to which the tax relates is sold. All outstanding tax on that asset then becomes payable.

The Revenue charges interest from the first day of the seventh month after the date of death on all outstanding inheritance tax, whether or not any assessments for the tax have been issued. Currently the rate of interest is 3%.

Inheritance tax can be complicated and it is advisable for you to seek expert advice. Problems can be caused by the tax (or at least part of it) being payable in order to obtain the grant of probate. In some cases PRs find it impossible to find the money to pay the tax in advance, as without the grant of probate then cannot sell the assets of the estate and so cannot raise the funds for the tax. If you find yourself in this position let us know and we will be able to advise you further.

The distribution of an intestate’s estate is governed by statute law and depends on which members of the deceased’s family have survived the deceased. These are known as the “rules” or “laws of intestacy”.

If the deceased is survived by their spouse or civil partner and their children, the spouse or civil partner receives the deceased’s personal belongings, a legacy of £250,000 (known as ‘the statutory legacy’) and a life interest in half of the remainder of the estate (‘the residue’). The deceased’s children will be entitled to half of the residue absolutely and then receive the other half on the death of the surviving spouse or civil partner.

If the deceased is survived by their spouse and their parents or siblings but no children, the spouse or civil partner receives the deceased’s personal belongings, a statutory legacy of £450,000 and half of the residue. The parents of the deceased, or if they have also died, the deceased’s siblings, receive the other half of the residue.

If the above two scenarios do not apply, the whole estate will pass to a single person or class of persons in the following order of priority:

1. spouse or civil partner;
2. children and then grandchildren and great-grandchildren;
3. parents;
4. siblings of the whole blood and then their children, grandchildren and greatgrandchildren;
5. siblings of the half blood and then their children, grandchildren and greatgrandchildren;
6. grandparents;
7. uncles and aunts of the whole blood and then their children, grandchildren and great-grandchildren;
8. uncles and aunts of the half blood and then their children, grandchildren and great-grandchildren; and
9. the Crown.

Divorced spouses, cohabitants or step children (unless adopted) have no rights in the intestate’s estate. However, such persons may make a claim against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 if they do not receive adequate financial provision from the deceased’s estate. If you want further information about such claims then please contact our Contentious Probate and Trusts Team.

Alternatively, the beneficiaries under the rules of intestacy can agree to vary the distribution of the estate in order to provide for someone who is not entitled to benefit. This is done by a Deed of Variation. For inheritance tax and capital gains tax purposes, the terms of the variation are deemed to be terms of the intestacy. If you would like to
discuss making a Deed of Variation then please contact a member of the private client team.

The deadlines referred to in this guide are summarized below, together with some additional important dates which may be relevant in some cases:

• first instalment of instalment option tax payable on the last day of the sixth month after the date of death
• interest payable on outstanding inheritance tax from the first day of the seventh month after the date of death
• penalties may be imposed for accounts submitted more than twelve months after the date of death.
• inheritance (Provision for Family and Dependents) Act 1975 claims should be made within six months of the grant being issued
• deeds of Variation must be made within two years of the date of death to be effective for inheritance tax and capital gains tax purposes
• a claim to transfer an unused nil rate band of a spouse or civil partner must be made within 24 months of the end of the month in which the surviving spouse or civil partner died