Statutory legacy increase 2023 – what does this mean?

When someone dies without making a Will, they are said to have died intestate. Their estate therefore passes in accordance with the intestacy rules which set out who should inherit the deceased’s estate in these circumstances. This depends on what surviving family members the deceased person had.

Where someone dies intestate leaving a surviving spouse or civil partner and children, there is a statutory (fixed) legacy to provide for the surviving spouse/civil partner. Since the 6 February 2020, this statutory legacy had been fixed at £270,000. Prior to this the statutory legacy was £250,000 since 11 October 2014. The surviving spouse/civil partner therefore receives the value of the statutory legacy from the estate, as well as all of the deceased’s personal belongings. The remainder of the estate is then divided in half, so that the surviving spouse/civil partner receives one half, and the surviving children (or other descendants) receive the other half.

As of 26 July 2023, the statutory legacy has been increased to £322,000. This means that where someone dies intestate, on or after that date leaving a surviving spouse or civil partner and children, the surviving spouse or civil partner will receive a statutory legacy of £322,000 and half of the remainder of the estate, and the surviving children (or other descendants) will receive the other half of the remainder of the estate.

If someone died intestate with a surviving spouse or civil partner prior to 26 July 2023, the statutory legacy to the surviving spouse or civil partner remains fixed at the previous lower level of £270,000.

Under the Inheritance and Trustees’ Powers Act 2014, the Lord Chancellor is required to review the level of the statutory legacy at least every five years.

So, what does this look like in practice?

Example – Andrew and Laura

Andrew and Laura are married and have two children. William dies on 27 July 2023 without having made a Will and the net value of his estate is £1,000,000.

As Andrew and Laura were married, Laura will receive a statutory legacy of £322,000, as well as all of Andrew’s personal belongings. The remaining £678,000 of Andrew’s estate will be divided into two, and Laura will receive one half of this, and the children will receive the other half shared equally between them.

The statutory legacy to Laura, and the half of the remainder of the estate which passes to her will be exempt from Inheritance Tax under the spousal exemption. The half of the remainder of the estate which is received by the children may be subject to Inheritance Tax.

But what about unmarried couples?

The statutory legacy only applies to the surviving spouse or civil partner and therefore if a couple are not married and one of them dies without having made a Will, there is no provision for their surviving partner.

Example – Steve and Kate

Steve and Kate are not married, they live together and have two children. Kate dies on 27 July 2023 without having made a Will and the net value of her estate is £1,000,000.

As Steve and Kate were not married, no provision is made for Steve under the intestacy rules, and the children would therefore receive her entire estate.

Steve may therefore need to consider making a claim against Kate’s estate for financial provision.

As the children receive the entire estate, there is likely to be a significant amount of Inheritance Tax payable.

And if you do not have children?

Example – Mike and Lisa

Mike and Lisa are in a civil partnership but have no children. Mike dies on 27 July 2023 without having made a Will and the net value of his estate is £1,000,000.

As Mike and Lisa were in a civil partnership and have no children, Lisa will receive Mike’s entire estate, and this will be exempt from Inheritance Tax under the spousal exemption.

How Pinney Talfourd can help

For more information, please contact our Private Client department here.