The new intestacy rules…Changes that may affect you
The Law Commission have stated that it is estimated that at least 40% of the adult population does not have a will. In some cases where, perhaps a will has been made at home, the law may mean that the will is invalid, if it is invalid then you fall back on the rules of intestacy.
Thus if a person dies without first making a valid Will their estate will be distributed amongst surviving family members in accordance with legislation often referred to as the Intestacy rules. The Inheritance and Trustees’ Powers Act 2014 (“the Act”) came into force on 1st October 2014 and, amongst other things, made changes to the Intestacy rules.
The principal changes that have been made affecting surviving spouses and civil partners and which have been applicable since 1st October 2014 are:
- If the deceased leaves a spouse or civil partner but no issue (i.e. direct descendants such as children, grandchildren, great grandchildren and so on) the whole of their estate will pass to the surviving spouse or civil partner absolutely.
Prior to 1st October 2014 in some cases the surviving spouse or civil partner had to share the estate. If the estate was worth more than a fixed net sum (which was £450,000.00) and the deceased had no issue but had surviving parents those surviving parents were entitled to one half share of the residue over £450,000.00. If there were no such parents but surviving full siblings, the surviving full siblings were entitled to that share of the residue and if they had died a full sibling’s issue (that is to say their children or remoter issue) would have been entitled to that share.
- If the deceased leaves issue the surviving spouse or civil partner is entitled to receive
(a) the personal chattels
(b) a fixed net sum which in this case is currently £250,000.00 (together with interest)
(c) one half of the residue absolutely, with the remaining half being held on statutory trusts for the deceased’s issue.
Prior to 1st October 2014 the surviving spouse or civil partner was entitled to the personal chattels and the fixed net sum but was entitled to a life interest only in one half of the residue which meant they were entitled only to the income generated by that sum and not the sum itself. When the surviving spouse or civil partner themselves died the deceased’s issue then received that half share of the residue.
Some other changes made by the Act include:
- a change to what is meant by “personal chattels” which now covers all tangible moveable property except for:-
– property consisting of money or security for money, or
– property that, at the death of the person dying intestate, was used solely or mainly for business purposes or was held solely as an investment
The reference to the word “solely” means that a chattel will pass to the spouse or civil partner and not into the residue of the estate if there is any personal use albeit that the deceased had perhaps hoped it would also prove to be an investment and go up in value. An example might be jewellery that was placed in the bank and never worn for personal use.
Note also that where there is a Will, if that Will was executed before the changes came into force on 1st October 2014 and the will refers to the old definition of “personal chattels” the old definition will apply.
- that the fixed net sum (of £250,000.00) referred to in paragraph (b) above will be index linked and regularly reviewed and the rate of interest will be the Bank of England rate at date of death
- changes to the rules relating to the rights of certain family members and dependants in cases where there is a will to apply to court for reasonable financial provision from the estate
- There are various changes to trustees’ powers under the Trustee Act 1925.
- There are various changes to the right of adopted children to inherit from a deceased parent Although the changes to the Intestacy rules made by the Act were significant the application of the Intestacy rules will still in many cases mean that a deceased’s estate will be distributed in a way which the deceased may not have wanted. This once again highlights the need to give careful thought to making a Will that is valid and achieves the objectives that you are looking for – If that is done then the Intestacy Rules are unlikely to come into play and cause an unexpected problem. Wills in the main do not need to be too complicated, but it is a question of tailoring each Will to the needs of the person making it.