When creating a financial plan, you might think about the legacy you’ll leave when you’re gone. After all, you work hard to build wealth throughout your life and may want control over how your assets are used when you pass away.
If you have surviving family members, you might decide to pass your wealth to them. But what happens if you have no next of kin?
Regardless of your familial situation, it’s still important to make decisions about what happens to your assets. Otherwise, somebody else could make those choices for you, and their decisions might not align with your wishes.
Read on to learn more.
The local authorities will try to track down potential beneficiaries if you have no will or next of kin
If you pass away without a will and have no close family members, the local authority will normally attempt to find living relatives to pass your estate to.
They may conduct investigations, including a search of your property, and look into official records to find anybody who is related to you. If the authorities can find one or more relatives, those people might inherit your estate.
Forgotten assets could be passed to the Crown if nobody claims them
If you pass away without a will and the local authority can’t find any relatives to inherit your estate, the courts may decide what to do with your wealth.
A portion of your wealth will be used to pay for a funeral, and the remaining funds are typically passed to the Crown, technically becoming the legal property of the reigning monarch.
The UK government reports that, in 2023/24, receipts from estates passed to the Crown reached £17 million, so this situation might be more common than you realise.
However, certain forgotten assets such as bank accounts or pensions might be managed through the “Dormant Assets Scheme”. This is an industry scheme that organisations such as banks or pension providers can sign up to, and it aims to put uninherited wealth to good use.
First, members of the scheme will attempt to find beneficiaries and pass the wealth to them. If this isn’t possible and the assets meet certain criteria, they are considered “forgotten”. They can then pass to the “Reclaim Fund”, which the National Lottery distributes to support good causes.
According to Aviva, from 2011 when the scheme started up to 2023, almost £900 million had been given to more than 2,500 social, community, financial inclusion and environmental initiatives.
3 crucial estate planning tips if you have no next of kin
You may not want a distant relative, the Crown, or an unknown charity initiative to inherit your wealth when you’re gone. As such, it’s important to create an estate plan so you can retain full control over your legacy.
Here are three key steps you may want to take.
1. Consider alternative beneficiaries and write a will
While you might not have any surviving family members, there are others you could leave your estate to. For instance, are there any close friends or neighbours you might consider passing your wealth to?
Alternatively, you could leave some or all your wealth to a charitable cause close to your heart.
By considering alternative beneficiaries and writing a clear will, you can ensure you have full control over who inherits your estate. Otherwise, the local authority and the courts will make the decision for you.
2. Choose a reliable executor
When creating your will, you’ll need to choose an executor to manage and distribute your estate when you pass away. This needs to be somebody you can trust to carry out your wishes, so consider who will be suitable.
You might choose a friend or neighbour, or you can appoint a professional such as a solicitor or a financial planner as your executor. This may be a beneficial option as a professional executor will have the necessary skills and experience to handle your affairs and ensure your wishes are fulfilled.
3. Create a Lasting Power of Attorney
A Lasting Power of Attorney (LPA) is an important document that nominates one or more attorneys to handle your affairs if you’re considered not mentally capable.
There are two types of LPA:
- Health and welfare – Nominate attorneys to make important decisions about your medical care and overall wellbeing, including your living situation.
- Property and financial affairs – Nominate attorneys to handle your financial affairs and make decisions about your property. Your chosen attorneys will have access to your bank accounts, investments, and pensions, and will manage them for you.
If you fall ill or get injured and don’t have an LPA, the Court of Protection will typically appoint an attorney to act on your behalf. This may be a family member but if you have no next of kin, the court may choose a professional such as a solicitor or a representative from the local authority.
This could mean that a stranger makes crucial decisions about your health and medical care, or your wealth.
As such, it’s important that you create an LPA and choose one or more attorneys yourself. While you may choose a friend or neighbour, it could be beneficial to name a professional of your own choosing, such as a solicitor or financial planner as an attorney.
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Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning, Lasting Powers of Attorney, or will writing.