The law of intestacy should be rare. But when it appears, knowing what to do is essential.
The laws of intestacy become relevant when someone dies, and their estate needs to be inherited by someone else.
In the blog below, we’ve outlined what the law of intestacy is.
What are the laws of intestacy?
If someone dies without leaving a will, or if they have left a will which is found to be invalid, they are described as having died ‘intestate’.
Under these circumstances, the laws of intestacy become relevant.
The intestacy laws dictate who can inherit from the deceased person and who cannot.
Generally speaking, only very close relatives will inherit, which is why so many unmarried couples who live together are advised to write a will.
Most people’s most significant asset is their property. So, inheriting the laws of intestacy will often be concerned with probate properties.
Close relatives who can inherit under the laws of intestacy
Under the rules of intestacy, only a select group of people can inherit. These are primarily relatives who are close to the individual who has died.
The list of people that this applies to includes:
- Married partners
- Civil partners
- Children
- Adopted children
- Grandchildren or great-grandchildren
In some circumstances, you will also find that parents, siblings, nieces and nephews can inherit under the laws of intestacy.
They can also sometimes force the sale of inherited property.
However, whether this occurs depends on whether there is a surviving husband/wife or children.
Who cannot inherit under the laws of intestacy?
Certain people cannot inherit under the laws of intestacy. Generally speaking, these are people who are not related to the individual in any way.
The most common examples include unmarried couples, friends and carers.
For this reason, unmarried couples are typically strongly advised to write a will – because they may not inherit their partner’s estate if they don’t.
What is partial intestacy?
Partial intestacy occurs when a will is left by the person who died, but it does not fully deal with the entire estate.
For example, this may occur when a named person in the will is no longer alive.
In this case, ‘partial intestacy’ means that intestacy rules will be followed for that part of the estate. The rest of the will remains valid.
You should visit the UK Government’s website for more guidance on intestacy rules and who can/can’t inherit an estate when there is no will.
Do I pay Capital Gains tax on an inherited property?
You must typically pay Capital Gains Tax on an inherited property. However, the amount that you must pay will vary.
For example, if you sell the property immediately after you inherit it, you may not have to pay any Capital Gains Tax on it.
The UK government does not require you to pay tax on assets not sold before the deceased individual passes away.
If you inherit a property, you have several options, from selling it immediately to renting it out.
However, if you inherited a property a while back, you will have to pay capital gains tax on the increase in its value since then.
Even then, you typically will not have to pay any tax if the inherited property becomes your primary residence once you inherit it.
Capital Gains Tax and foreign property
Like property in the UK, you do not have to pay Capital Gains Tax on a foreign property if it is your primary residence.
To avoid tax in this way, you must declare that your property is your primary residence within two years of purchasing the foreign property.
There have been some reports of difficulty, however, when people have tried to sell their UK property and their foreign property in the same tax year.
If you are planning on doing this, you should consult an accountant before proceeding to see how you can sell your properties in the most tax-efficient way.
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