Dying Without a Will and Inheritance Tax: How Intestacy Wastes IHT Planning Opportunities
The intestacy rules distribute your estate in a fixed way — statutory legacy of £322,000 to your spouse, the residue split between spouse and children. You cannot use a NRB trust, cannot leave 10% to charity for the 36% IHT rate, and cannot specifically direct the family home to children to maximise the RNRB. A will is the foundation of IHT planning.
Intestacy vs Will: IHT Planning Comparison
| Aspect | Dying Intestate (no will) | With a Will |
|---|---|---|
| Control over distribution | Fixed by law — statutory legacy (£322,000) to spouse; residue split equally between spouse and children | Fully directed by you — any amount to spouse, children, grandchildren, trust, charity |
| NRB discretionary trust | NOT possible — intestacy rules cannot direct assets into a NRB trust | Possible — up to £325,000 into a discretionary trust on first death, using NRB and keeping assets for future generations |
| RNRB optimisation | Limited — statutory legacy and fixed distribution may not optimise RNRB for passing home to grandchildren | Fully planned — will can direct home directly to grandchildren (or step-grandchildren, adopted) to maximise RNRB |
| Charitable legacy (36% IHT rate) | NOT possible — intestacy rules cannot direct assets to charity | Possible — leaving 10%+ of net estate to charity reduces the IHT rate from 40% to 36% on the rest |
| Survivorship clause | NOT available — intestacy rules apply the commorientes presumption (s184 LPA 1925) | Possible — a 30-day survivorship clause prevents a double probate where spouses die close together |
| Children receive assets directly | Children receive their share at age 18 — no trust protection, no phased payments | Can create trusts for children with later ages (21, 25), phased payments, and trustee discretion over spending |
Frequently Asked Questions
How do the intestacy rules distribute an estate for IHT purposes?
When a person dies without a will in England and Wales, their estate is distributed according to the intestacy rules under the Administration of Estates Act 1925. The current rules (as amended from November 2023) apply as follows: (1) If married/civil partner with children: the surviving spouse receives personal chattels plus a statutory legacy of £322,000 (updated November 2023), plus half the remainder absolutely; the other half of the remainder passes equally to the deceased's children at age 18. (2) If married/civil partner with no children: the surviving spouse inherits the entire estate. (3) If no surviving spouse/civil partner: the estate passes to children, or if none, to parents, then siblings, then more remote relatives under the statutory order. For IHT, the distribution to the surviving spouse is exempt (unlimited spousal exemption under IHTA 1984 s18). However, the share passing to children on the first death triggers IHT if the children's share exceeds the available nil-rate band. Example: estate of £1.5m, statutory legacy £322,000 to spouse, residue £1,178,000 — spouse gets £589,000 (residue half) and children get £589,000. Children's share: £589,000 minus NRB £325,000 = £264,000 taxable; IHT at 40% = £105,600. A will directing the entire estate to the surviving spouse (IHT-free) would defer all IHT to second death.
Can dying without a will cause IHT to be paid that a will would have avoided?
Yes — the intestacy rules can trigger IHT that proper will planning would have avoided or deferred. The main scenarios: (1) Estate above £322,000 with a spouse and children: the children's share under intestacy may exceed the NRB (£325,000) and be taxable, whereas a will could pass everything to the spouse (IHT-free) and defer all IHT to second death. (2) No surviving spouse: the estate passes to children. If the estate is above the NRB (£325,000) and the deceased has no surviving spouse, there is no spousal exemption available — IHT is due on the excess. A will could have included charitable legacies to reduce the rate or NRB trusts to optimise the position. (3) RNRB not optimised: the Residence Nil Rate Band (£175,000 per person) requires the family home to pass to direct descendants. Under intestacy, the home may be caught within the statutory legacy going to the spouse rather than directly to children/grandchildren, which could reduce the available RNRB in complex family structures. A will can specifically direct the family home to the children.
What is the statutory legacy under the intestacy rules in 2026?
The statutory legacy is the fixed sum paid to the surviving spouse or civil partner before the residue is split. The statutory legacy has been £322,000 since November 2023 (increased from £270,000). It is reviewed periodically under the Administration of Estates Act 1925 s46(1)(i). If the estate is worth less than £322,000 in total, the surviving spouse inherits everything under intestacy (there is nothing left for the children's share). If the estate is worth more than £322,000 and there are children, the spouse receives the statutory legacy plus personal chattels, and then the residue is split 50:50 between the spouse and children. The statutory legacy is paid to the spouse as an absolute (outright) gift — the spouse can spend it, invest it, or give it away. It does not go into a trust automatically. The spouse's half of the residue is also paid outright. Only the children's half-share of the residue is held on trust for the children until they reach 18.
Can a Deed of Variation fix the IHT problem caused by dying intestate?
Yes — a Deed of Variation (DoV) under IHTA 1984 s142 allows the beneficiaries of an estate (including intestate beneficiaries) to redirect their inherited share, and for IHT and CGT purposes the DoV is treated as if the deceased had made the new arrangement themselves. For a couple where the first spouse died intestate, the surviving spouse and children can agree within 2 years of the death to vary the distribution — for example, the children could redirect their intestacy share back to the surviving spouse (removing IHT by using the spousal exemption), or the spouse could redirect part of their inheritance into a NRB discretionary trust. The DoV requires the consent of all affected beneficiaries: both adult beneficiaries and, where children under 18 are affected, the court's approval (if the variation would benefit the children less, the court will need to be satisfied it is in the children's interests). A DoV is not always possible — it requires everyone to agree and can be costly to arrange. The better solution is a will that gets it right from the start.
Does the RNRB apply if someone dies intestate?
The Residence Nil Rate Band (RNRB) is available if the deceased's estate includes a qualifying residential interest (the family home) that passes to direct descendants. Under intestacy, the home may form part of the estate that is distributed to direct descendants — so in principle, the RNRB can apply on intestacy. However, complications arise: (1) In a simple estate where the whole estate (including the home) passes to children (no surviving spouse), the RNRB and NRB should apply normally. (2) Where the estate is split between spouse and children under the statutory legacy rules, the RNRB depends on whether the home (or a proportion of it) is attributed to the children's share. If the home is within the statutory legacy going to the spouse, it does not pass to direct descendants and the RNRB is not available on first death (though it may be transferred to the survivor). (3) Stepchildren do not inherit on intestacy (intestacy rules only apply to biological or adopted children). If the family home passes to the spouse under intestacy and the couple's children are stepchildren of the deceased, the RNRB might be lost on first death. A will can specifically direct the home to stepchildren to preserve the RNRB.
What is the most important IHT reason to make a will?
The single most important IHT reason to make a will is control over distribution. The intestacy rules are a blunt instrument that distributes your estate in a fixed way based on your family structure at the date of death. A will gives you the ability to: (1) Pass everything to your surviving spouse on first death (no IHT — spousal exemption) and defer all IHT to second death, where both NRBs and RNRBs can be used. (2) Set up a NRB discretionary trust on first death to shelter up to £325,000 for future generations outside the surviving spouse's estate. (3) Leave 10%+ to charity to reduce the IHT rate from 40% to 36% (IHTA 1984 s24). (4) Direct the family home specifically to direct descendants (children, grandchildren, stepchildren) to ensure the RNRB applies. (5) Create trusts for minor children with age restrictions and trustee discretion rather than handing over assets at age 18. Without a will, none of these optimisations are available — the fixed intestacy rules apply, the surviving spouse inherits a fixed statutory legacy, and IHT planning is largely lost.
Make a Will — Don't Let Intestacy Decide
The intestacy rules take control away from you and your family. A will puts you back in control — of who inherits, in what proportions, with what protections, and how much IHT your beneficiaries will pay. WillSafe UK provides clear, plain-English will kits from £39.99.
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