Dying Without a Will and IHT: How the Intestacy Rules Affect Your Family's Inheritance Tax Bill
Dying intestate (without a will) means the Administration of Estates Act 1925 decides who gets your estate — not you. Cohabiting partners get nothing. Step-children are excluded. Charities cannot receive a legacy to trigger the 10% IHT rate reduction. NRB trust planning is impossible. A will costs very little — intestacy can cost a great deal.
Intestacy Rules and IHT: What Goes Wrong Without a Will
The intestacy rules in England and Wales
Under the Administration of Estates Act 1925 (as amended), where a person dies without a valid will (wholly intestate), their estate passes as follows: (1) If the deceased is survived by a spouse or civil partner and no children (or children who predeceased the deceased without issue): the entire estate passes to the surviving spouse absolutely. (2) If survived by a spouse and children: the spouse receives the personal chattels plus a statutory legacy (currently £322,000, uprated periodically) plus half of the residue. The children share the other half of the residue equally on a statutory trust — held on trust until age 18 (or earlier marriage). (3) If no surviving spouse: the estate passes entirely to the children (or their issue, under the Inheritance Act rules of distribution). (4) If no children or spouse: the estate passes in a prescribed order: parents, siblings, grandparents, uncles and aunts.
IHT on the intestacy estate: the spousal exemption
Where a spouse survives and receives the full estate (no children, or the entire estate passes to the spouse under intestacy), the spousal exemption applies — no IHT is payable on the first death. On the second death (the surviving spouse's estate), IHT applies in the usual way. The Transferable Nil Rate Band (TNRB) is available: the unused NRB from the first intestacy death is available to the survivor's estate. However: (1) under intestacy, there is no NRB trust planning — the spouse receives the full residue, not just the NRB amount. The opportunity to use the first spouse's NRB on the first death (via a will trust) is lost. (2) The RNRB may be available on the second death, but the TRNRB from the first death (up to £175,000 transferred) depends on whether the conditions were met at the first death.
IHT where children inherit under intestacy
Where a spouse and children both inherit under intestacy: the spouse's share (statutory legacy £322,000 + half residue) is exempt from IHT under the spousal exemption. The children's half residue is subject to IHT in the usual way — it counts against the NRB, and any excess above the NRB is taxed at 40%. On intestacy, there is no control over how much the children receive and how much uses the NRB — the intestacy rules determine the split mechanically. By contrast, a will can structure the legacy to children to use the NRB precisely — directing exactly £325,000 to a trust for children (using the NRB) and the rest to the spouse (spousal exempt). Intestacy does not allow this optimisation.
The RNRB and intestacy
The Residence Nil Rate Band (RNRB — up to £175,000) is available where a qualifying residential property passes to a direct descendant. Under intestacy, the family home may pass entirely to the surviving spouse (spousal exemption — no RNRB needed or available on the first death). On the surviving spouse's subsequent death, the RNRB and TRNRB (transferred RNRB from the first death) can be claimed — but only if the property (or its replacement) passes to a direct descendant at that point. The risk: if the surviving spouse remarries and the property passes to the new partner, the RNRB and TRNRB can be lost permanently. Under intestacy, there is no mechanism to ensure the property passes to children on the first death to capture the RNRB — unlike a will that can direct the property to children on the first death.
Cohabiting partners and intestacy
Under English intestacy rules, an unmarried cohabiting partner (however long the relationship) inherits nothing. The entire estate passes to the children (if any) or, failing that, to other relatives under the intestacy order. The cohabiting partner receives nothing — regardless of the length of the relationship, whether they have children together, or whether they were financially dependent on the deceased. From an IHT perspective: a gift to an unmarried cohabiting partner in a will would be a PET (not exempt under the spousal exemption). However, the partner receives nothing under intestacy — which may mean the estate passes to children (at least preserving family beneficiaries) but the partner must apply to the court under the Inheritance (Provision for Family and Dependants) Act 1975 for financial provision, which is expensive and uncertain. Cohabiting couples must both make wills.
Partial intestacy and the interaction with a will
A partial intestacy arises where a valid will exists but does not dispose of the entire estate — for example, where the residuary clause fails (because the named residuary beneficiary predeceased the testator and there is no substitution) or where the will was not updated after a divorce (nullifying gifts to the former spouse). The intestacy rules then apply to the undisposed-of residue. Partial intestacies are common where wills are not regularly reviewed. From an IHT perspective, a partial intestacy carries the same risks as full intestacy for the undisposed property: the distribution is determined by statute rather than by tax-efficient will planning.
Frequently Asked Questions
Does dying without a will mean paying more IHT?
Not always — but it frequently leads to a less IHT-efficient outcome than a well-drafted will. The key disadvantages of intestacy for IHT: (1) no NRB trust planning (the NRB is not deliberately used on the first death via a trust — the estate passes to the spouse or children mechanically); (2) no charitable legacy to trigger the 10% reduced rate; (3) no RNRB optimisation (the property may not pass to direct descendants on the first death); (4) for cohabiting couples, the partner receives nothing (which may mean the estate avoids IHT if it passes to children, but destroys the family unit's financial security). A will allows the testator to control these variables; intestacy eliminates that control.
What is the current statutory legacy amount under intestacy?
The statutory legacy under the Administration of Estates Act 1925 (as amended) is currently £322,000 (uprated from £270,000 in 2020). This is the fixed sum the surviving spouse or civil partner receives first from the intestate estate where the deceased is also survived by children. The statutory legacy is exempt from IHT under the spousal exemption. The half residue above the statutory legacy that passes to the surviving spouse is also exempt. The other half residue (passing to children on the statutory trust) is subject to IHT above the NRB.
Can intestacy be rearranged to improve the IHT position?
Yes — family members who receive an entitlement under intestacy can enter into a deed of variation within 2 years of the death, redirecting their entitlements to improve the IHT position. For example: children who inherit under intestacy can vary their entitlements to redirect assets to the surviving spouse (bringing them within the spousal exemption), or to charity (triggering the 10% rule), or to a discretionary trust (for flexibility). The deed of variation is treated for IHT as if the deceased had made those distributions directly — allowing post-death IHT optimisation even on an intestacy. The deed must be properly executed and contain the necessary IHT election statement.
Can step-children inherit under intestacy?
No — the intestacy rules in England and Wales refer to 'children' in the biological or adoptive sense. Step-children (children of a partner or spouse, not legally adopted by the deceased) have no entitlement under intestacy. If the deceased dies without a will and has step-children they wished to benefit, the step-children receive nothing — the estate passes to biological children, the surviving spouse, or other relatives. Step-children can only inherit where the testator has made a will specifically including them as beneficiaries. Blended families and step-family relationships are one of the most common reasons why not having a will leads to unintended and distressing outcomes.
What happens if there is no surviving spouse or children under intestacy?
Where the deceased has no surviving spouse or civil partner, and no surviving children (or their issue), the estate passes in a prescribed order under the Administration of Estates Act 1925: (1) parents (if surviving); (2) full siblings (or their issue); (3) half siblings (or their issue); (4) grandparents; (5) full uncles and aunts (or their issue); (6) half uncles and aunts (or their issue). If none of these relatives survive, the estate passes to the Crown as bona vacantia. Each category only inherits if no one in the preceding category survives. For IHT purposes, gifts to siblings, aunts and uncles, or grandparents are chargeable — they do not qualify for the spousal exemption, RNRB, or most reliefs (unless they are themselves disabled or the assets attract BPR/APR).
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