New rules have come into force this month to make provisions for when people die without a Will.
The Inheritance and Trustees’ Powers Act was introduced on October 1 in a bid to ensure the fairest outcome for loved ones of the deceased.
The Rules of Intestacy have been made to reflect today’s society, but still penalise cohabitees and raises new issues over inheritance.
The changes are as follows:
1. Unmarried Partners
The biggest shock is that the rules regarding cohabitees remain unchanged. “Common law” partners have no rights over their deceased partner’s estate – even if they had children together.
2. Married couples and civil partners without children
Prior to October 1, the first £450,000 of the estate and half the remainder went to the surviving spouse. The other half was divided between the deceased’s blood relatives.
Under the new rules, the surviving spouse inherits the whole estate. It is therefore less likely that you will receive a surprise inheritance from a long-lost relative.
3. Married couples and civil partners with children
Previously, the surviving spouse inherited the first £250,000 and all personal belongings. The children would then receive half of the balance over £250,000 on reaching 18 years of age.
The other half of the balance would also go to the children, but the surviving spouse would have a “life interest” in that half – receiving the income, but not the capital.
Now the surviving spouse is also entitled to half of the remainder as a capital sum. This could be contentious if it involves a second marriage or a couple are separated.
4. Adopted children
The Act also ensures a child under the age of 18, who is adopted after the death of a birth parent, will no longer lose their inheritance when they turn 18.
5. Re-definition of “Personal Chattels”
Chattels are now defined as anything which is not a monetary or business asset, or ‘held as an investment.’
Disputes may arise over the term ‘investment,’ such as where the estate holds collectable items of value like art and wine.
6. Amendments to the Inheritance (Provision for Family and Dependants Act) 1975
A person may be treated as a child of the family if the deceased ‘at any time stood in a parental role’.
A person may be classed as ‘maintained,’ if the deceased made a substantial contribution to their reasonable needs. This is likely to increase the claims made by cohabitees, as they no longer need to show that the deceased contributed more to the relationship than them.
The law on intestacy has been simplified but does not fully protect everybody.
Making a Will is the only way to override the new rules and ensure that the right people inherit your estate.
Leila Murray is a partner with Kerseys, who works in the private client department.
Her specialism includes making Wills, Trust and Estate Administration and Inheritance Tax Planning.
- For further information on the topics discussed, call 01473 407 115.