What Happens to Inheritance Tax When Someone Dies Without a Will

Dying without a will means the estate does not follow the wishes of the person who has passed away. Instead the law decides who inherits based on a strict hierarchy. Although Inheritance Tax still applies in the same way, the lack of a will can change who benefits from certain tax exemptions and sometimes increases the final tax bill. Understanding how the rules work can help families prepare for the administration process and avoid avoidable tax or legal issues.

1. What Is Intestacy and Why Does It Matter for Inheritance Tax

A person dies “intestate” when they die without a valid will. This means:

• they have not named executors

• they have not chosen beneficiaries

• they have not directed how their estate should be distributed

Because of this the estate follows the statutory rules of intestacy.

Inheritance Tax still applies, but intestacy can affect:

• who receives tax free allowances

• whether spouse exemption applies

• how assets are divided

• how easy it is to plan for tax

• who is responsible for paying the tax

In my opinion dying without a will often causes unnecessary stress and cost because intestacy removes much of the flexibility that allows families to reduce or delay tax.

2. Who Is Responsible for Inheritance Tax When There Is No Will

When someone dies intestate, nobody has been appointed as executor. Instead a person known as the administrator takes on the responsibility.

The administrator is usually:

• the spouse or civil partner

• the children

• other relatives according to the intestacy list

The administrator must:

• calculate the value of the estate

• complete the Inheritance Tax forms

• ensure all tax is paid

• apply for letters of administration

• distribute the estate correctly

This job is identical to that of an executor but without the benefit of having been chosen or guided by the deceased.

3. Does Inheritance Tax Still Apply if There Is No Will

Yes. Dying intestate does not remove Inheritance Tax obligations. The same rules apply:

• the first £325,000 is covered by the nil rate band

• anything left to a spouse or civil partner is tax free

• gifts to charity are tax free

• anything above the allowances may be taxed at 40 percent

The rules do not become more lenient because there is no will.

4. Does the Spouse Exemption Still Apply

Yes. If the deceased was married or in a civil partnership, assets passing to the surviving spouse are still exempt from Inheritance Tax. This applies even when there is no will.

However intestacy laws decide how much the spouse receives, which can affect the final tax position.

How intestacy distributes the estate when there is a spouse and children

• The spouse receives personal belongings

• The spouse receives the first £322,000 of the estate

• The remaining estate is split 50 percent to the spouse and 50 percent to the children

This means part of the estate may go to children rather than the spouse. Anything going to children may be taxable if it exceeds the nil rate band.

In my opinion

This is one of the biggest pitfalls of intestacy. Many people assume everything goes to the spouse, but the estate is forcibly split which can create an avoidable Inheritance Tax bill.

5. What Happens to the Residence Nil Rate Band Without a Will

The Residence Nil Rate Band (RNRB) gives up to £175,000 extra allowance when the home passes to direct descendants.

Dying without a will can affect this because:

• the property may not pass in the most tax efficient way

• the share passing to children must be structured correctly

• trusts created by statute do not always qualify

• the surviving spouse might inherit the property even if the children were intended beneficiaries

RNRB can still apply, but intestacy may block or reduce it.

In my opinion a will is essential if you want to guarantee access to the full RNRB allowance for your children.

6. Are Children Automatically Liable for More Inheritance Tax Under Intestacy

Children do not pay Inheritance Tax personally. The estate pays it before anything is distributed.

However intestacy forces assets to be divided between the spouse and children in a way that can create more chargeable transfers to the children.

Example:

Estate value: £900,000
Spouse entitlement: £322,000 plus half of the remainder
Children receive the other half

If assets pass to children immediately, the estate may lose valuable spouse exemption, increasing the tax payable.

With a will the deceased could have left everything to the spouse, resulting in zero tax at the first death.

7. What If the Deceased Was Not Married

If the deceased was not married or in a civil partnership:

• the partner receives nothing under intestacy

• everything passes to children or relatives

• no spouse exemption applies

This can significantly increase Inheritance Tax, because everything passing to non exempt beneficiaries becomes taxable above the allowance.

In my opinion this is the single biggest tax risk for unmarried couples.

8. How Inheritance Tax Is Calculated When There Is No Will

The process is:

1. Identify the administrator

2. Value all assets and debts

3. Apply the nil rate band

4. Apply the residence nil rate band if applicable

5. Apply exemptions (spouse, charity, etc)

6. Calculate remaining taxable amount

7. The estate pays the Inheritance Tax before distribution

8. Administrator applies for probate (letters of administration)

Without a will this process may take longer because:

• the administrator may have difficulty valuing assets

• disputes between relatives may arise

• property may be owned jointly in unclear proportions

• some assets may not be easily assigned

All of these can delay the tax settlement.

9. What Happens if There Are No Direct Descendants

The estate passes through the intestacy hierarchy:

1. Spouse or civil partner

2. Children or grandchildren

3. Parents

4. Siblings

5. Nieces and nephews

6. More distant relatives

If no relatives exist, the estate goes to the Crown under “bona vacantia”.

There is no special Inheritance Tax exemption for distant relatives. This means more of the estate may be taxed if it passes to non exempt beneficiaries.

10. Does Intestacy Affect Gifts Made Before Death

No. Lifetime gifts are taxed in the same way whether there was a will or not. This includes:

• the seven year rule for PETs

• taper relief

• gifts with reservation of benefit

However if the deceased had no will, their lifetime planning may have been incomplete which can affect how much tax becomes payable.

11. How Joint Assets Are Treated When There Is No Will

Jointly owned property depends on how it was held:

Joint tenants

The deceased’s share passes automatically to the surviving owner.
It does not follow intestacy rules.
This transfer is exempt for spouses but not exempt for cohabiting partners.

Tenants in common

The deceased’s share becomes part of their estate.
It is distributed under intestacy.

In my opinion many people assume joint ownership protects unmarried partners but it does not unless it is joint tenancy.

12. How Tax Planning Opportunities Are Lost Without a Will

A will allows you to:

• leave everything to a spouse tax free

• control how the home passes to use the RNRB

• use trusts to reduce tax

• ensure unmarried partners inherit

• equalise estate values between spouses

• protect the £1 million tax free threshold for couples

• avoid splitting assets between spouse and children too early

Without a will none of these planning tools are available.

In my opinion intestacy almost always leads to a worse outcome.

13. Real World Examples

Example 1: Married couple without a will

Husband dies intestate.
Estate £700,000.
Spouse receives £322,000 plus half of the remaining.
Children receive £189,000.
Inheritance Tax applies on the portion passing to children.
If he had left everything to his wife in a will, no tax would be due.

Example 2: Unmarried partners

A couple lives together for 20 years with children, no will.
Partner dies.
The surviving partner is legally entitled to nothing.
Children inherit everything which immediately creates Inheritance Tax above the allowances.

Example 3: Loss of the residence nil rate band

A widow dies with a £400,000 home and children.
Because intestacy rules divert assets into a trust structure that does not qualify, the RNRB is lost.
Tax bill increases unnecessarily.

Example 4: Disputes delaying probate

Siblings argue about who should be administrator.
Probate delays cause penalties and interest on late tax.

In My Opinion: Why a Will Is Essential for Inheritance Tax Planning

In my opinion a will is one of the most powerful tax planning tools available. It costs very little compared with the tens or hundreds of thousands that families lose through intestacy.

A will allows you to:

• choose who inherits

• minimise tax

• protect children and partners

• preserve allowances

• avoid disputes

• appoint trustworthy executors

• stop the estate being split in a tax inefficient way

Intestacy removes all these benefits.

Conclusion

When someone dies without a will, their estate must follow intestacy rules. Inheritance Tax still applies in full, but the lack of a will can create higher tax bills because assets may be forced to pass to children instead of a spouse, partners may be excluded entirely and valuable allowances like the residence nil rate band can be lost or reduced.

In my opinion the best way to protect your loved ones from unnecessary tax, stress and delay is to make a clear and properly drafted will. Intestacy rarely produces the outcome a family expects and almost never produces the best tax result.