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A third of us die without a will. Apart from being a problem for your family, the only winner will be the state

Dying intestate – without writing a will – risks leaving your estate in the wrong hands and a larger slice with the taxman than necessary.

The Law Society says one in three people in the UK die intestate, and half of all people over the age of 45 have not made a will. Caroline Wallis, wealth protection partner at solicitors Boyes Turner, says: “It’s far better to make a will at any stage of life than let the intestacy rules come into play which can prove pretty disastrous in many types of situations. This remains a vital part of financial planning to reduce the risk of leaving unintended bequests to the state or distant family members.”

The good news for people who fail to make a will is that the rules governing an intestate death changed to their benefit in February, allowing more of their estate to be given to their spouse or civil partner.

Previously, if you did not have children £200,000 of your estate was awarded to your spouse should you die without a will. This figure has now been increased to £450,000. The remainder of an estate is then halved between your parents and your spouse. Should your parents be dead it is divided between your siblings and your spouse.

If you do have children, £250,000 (previously £125,000) of your estate will be awarded to your spouse before the remainder is divided between your children. Should the assets be worth more than £250,000 the rest is shared according to a stringent formula.

“These are positive changes as they recognise that estate values are far higher now,” Wallis says. “They give extra protection for the surviving spouse, but making a will is still vitally important for many people.”

Even with the increases in the limits a spouse or civil partner receives, they could still lose a substantial slice of the assets and income built up by their joint efforts.

People living with their partner outside marriage or civil partnership are most at risk. If there are no close relatives then the entire estate goes to the crown under intestacy rules, regardless of any unmarried partner who may have lived with the deceased – risking leaving your partner homeless unless you own the property jointly.

This could mean extensive legal costs for your beneficiaries, as they may have to hire legal help to contest the state’s decisions.

Despite recent changes to taxation, wills are still a useful way to safeguard the interests of your family. “They are really about estate planning these days rather than tax planning,” Linda Packard, director of probate specialist Kings Court Trust Corporation, says. “While they are used to avoid tax, people have more complicated lives these days and it’s about trying to be fair to everyone in your family.”

Dying intestate rules out gifts to charities or bequests to friends, or the ability to give one child more than another – or deal with more complex, but common, family arrangements such as stepchildren. You may also want to outline personal wishes, such as funeral arrangements or who should inherit particular property or items of worth.

Wallis says: “If you’re making a will later in life the first thing to think about is your spouse’s state of health and how they will cope if they have to go into a nursing home and whether the value of the estate means looking at some IHT [inheritance tax] planning.”

Trusts can also be written into a will to avoid nursing home or residential home fees that might be payable by a surviving spouse. “You would use a property trust, transferring your share of the property into this, and in the terms you would give a life interest to your surviving spouse making it more difficult for the state to claim it for nursing home fees,” Packard says. “And you can use a nil-rate band trust to make provision for your children or stepchildren.”

Writing a will with a solicitor costs between £150 and £200. You can buy do-it-yourself kits from stationers such as WH Smith or the Post Office for between £5 and £20, but these can be difficult to complete accurately, particularly if your financial affairs are complicated. Completing the forms wrongly could mean your will is invalid, leaving your estate ruled by the laws of intestacy or open to challenge.

Living Wills

An advance decision, sometimes called a living will, is a set of legally binding instructions that a person draws up to set out what they would like to happen if they lose the capacity to make or communicate healthcare decisions, for example if they are injured in a car crash or suffer an illness such as dementia.

Jo Cartwright, a spokeswoman for Dignity in Dying, says: “They may wish to refuse life sustaining treatment in this case, and want life support to be removed. So they would put in place an advance decision – which can just be a written statement – to make their decision known. This can be lodged with a doctor and a copy kept with a family member.”

She adds that this could be used as a standalone document or to compliment the lasting powers of attorney (LPA), which you can set up to cover your health and welfare as well as financial affairs. An LPA is a legal document giving decision making powers on healthcare, property and finance, to a friend or family member. Like an advance decision, this can also be put in place in advance of a loss of capacity and enacted at a later date.

Go to the government’s site for more information; you can get an advance decision pack from dignityindying.org.uk costing £25, or by calling 020 7479 7737.

The law in Scotland

For people with Scottish roots or other connections, the situation regarding wills is more complicated, writes Neasa MacErlean. While Scots can leave their land and buildings to whoever they like, there are provisions ensuring that spouses and children get a share in their “moveable” property – cash, shares and other assets. These inheritance rules apply in Scotland to people who die without a will and also overrule a will that tries to exclude spouses or offspring.

If there is no will, a Scottish widow or widower would get the first £300,000 of a house as well as the first £24,000 of assets such as furniture, and then £42,000 of cash if there were children or £75,000 if there weren’t.

Then there are so-called “legal rights” which apply whether there is a will or not. The widow or widower would also be entitled to claim “legal rights” to half of any other moveable assets, or a third of those assets if there were children.

The estate of a Scot who died in London, say, would be governed by Scottish law if it was clear that he intended to live in Scotland again. If, however, he had made England his permanent home, all his estate – including any assets in Scotland – would then be governed by English law.

Life after death: Where your money goes if you die without a will

I am single Your estate will be shared equally among any children you have. If you don’t have children it will be divided between your parents, and if your parents are dead between your siblings.

If you have no immediate family, half-brothers or half-sisters followed by grandparents and then any aunts or uncles will inherit. If you have none of these, everything will go to the crown.

I live with my partner, but we are not married Things might have moved on when it comes to equality for unmarried couples, but not as far as dying without a will is concerned. The Treasury will treat you as though you are single so your estate will be distributed in the same way as above. This is why it is particularly important to draw up a will if you want your partner to inherit.

I am married If your estate – including your home – is worth less than £125,000 (£250,000 from 1 February), your spouse will inherit everything. If it is worth more and you have any children, from this marriage or a previous one, your spouse will get the first £125,000 (£250,000 from 1 February) and life interest in half the remainder. The children share the rest. If there are no children your spouse will get the first £200,000 (rising to £400,000 on 1 February) and half the remainder. Your parents will share the rest. If your parents have died, any brothers, sisters, nephews and nieces will share the rest. If there are none your spouse inherits everything.

Source: www.makingawill.org.uk