From Wednesday 1 October 2014, the Inheritance and Trustees’ Powers Act 2014 (“the Act”) came into force. The Act makes substantial changes to the Intestacy Rules, the Inheritance (Provision for Family and Dependants) Act 1975, and trustees’ powers.
When a person dies without leaving a valid Will disposing of all his or her estate, the distribution of the deceased’s estate is governed by the Intestacy Rules. Over the years, the Intestacy Rules have received much criticism which has prompted the rule change.
Before 1 October 2014, if the deceased died without leaving a Will and he or she was survived by a spouse or registered civil partner and children, not all of the deceased’s estate would pass to the surviving spouse or civil partner. Under the old rules, the spouse or civil partner would receive the deceased’s personal chattels outright and a statutory legacy of £250,000. If the deceased’s estate amounted to more than this, the balance would then be divided into two equal shares. One share would pass to the deceased’s children outright (at the age of 18), but with regards to the other share, the surviving spouse or civil partner would only receive a right to the income generated from that share of the fund until he or she died (known as a life interest). At this point, the capital would pass to the deceased surviving children.
From 1 October 2014, the new rules provide that if the estate is worth more than £250,000, the balance would still be divided into two equal shares like before, however the surviving spouse or civil partner will now receive one of shares outright as opposed to receiving a life interest. The other share still passes to the children.
The Act also changes the rules that are applied to a deceased’s estate where he or she does not leave children, but is survived by a spouse or registered civil partner and parents or siblings. Under the old rules, the surviving spouse or civil partner would receive the personal chattels and a statutory legacy of £450,000. Anything over this amount would be divided between the deceased’s surviving parents or siblings depending on who the deceased person left behind. The new rules provide that the surviving spouse or civil partner will inherit the whole estate on Intestacy in all cases where there are no children. Therefore the new rules remove the provision that was in place for the deceased’s surviving parents or siblings.
The Inheritance (Provision for Family and Dependants) Act 1975
Even where the deceased person leaves a Will, but the Will does not make adequate financial provision for certain people who the deceased leaves behind (family members and dependants), those people may decide to bring a claim against the estate for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975.
Prior to the Act, a person who was treated by the deceased as a “child of the family” in relation to a marriage or civil partnership to which the deceased was a party fell within a class of applicant who could bring a claim on the deceased’s estate. Under the new rules, this category of applicant is now be extended to include any person who was treated by the deceased as a child of the family, not only in relation to a marriage or civil partnership, but in relation to “any family” in which the deceased had a parental role.
Jon Gould, Associate in the Private Client Team at DWF LLP, comments “The change in the Intestacy Rules will now greatly benefit the surviving spouse or registered civil partner which in turn will provide them with peace of mind and greater financial stability. However, this comes at the expense of the deceased’s surviving children, or if there are no children, then other family members. Given the increase in the number of people remarrying and having children from a previous marriage, this is likely to increase the likelihood of disputes arising on death. In fact, coupled with the extended meaning to the Inheritance (Provision for Family and Dependants) Act 1975, the likelihood of a dispute is almost inevitable which is not in anyone’s best interests. What the new rules highlight is the need for everyone to put a Will in place which reflects their wishes. The Intestacy Rules still do not include provision for cohabitees, which in itself, is a disappointment as more and more couples are deciding to live together rather than get married or entering into a civil partnership. Therefore, a cohabitee only has the option of trying to bring a claim on the deceased’s estate under the Inheritance (Provision for Family and Dependants) Act 1975, but this is subject to satisfying certain criteria which can be difficult. As part of the Will making process, consideration can be given to the needs of a spouse or civil partner as well as any other person that they wish to include as a beneficiary. The Private Client Team at DWF are experts in preparing Wills and Estate Administration”.
For further information please contact Jon Gould on (0)191 233 9778.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.