02 October 2014

How October's inheritance law changes could affect you

For people who have not made a will, the Government imposes a strict set of rules which determine how someone's estate will pass on their death; these are known as the intestacy rules. The existing rules have been in place for 20 years, but amendments to them came into force on 1 October 2014.

Under the previous rules, a surviving spouse with children received the first £250,000 of the deceased's estate and half the remaining estate on a life interest trust. This means that the surviving spouse only received the income from this half share, and on their death the capital would pass to the children when they reach the age of 18, together with the other half of the estate. This has now been changed so that the surviving spouse will receive the first £250,000 and half of the remaining estate outright. The other half of the estate will pass to the children equally on reaching the age of 18.

This may mean that too much is passed to the surviving spouse, particularly where there has been a second or third marriage so that children from a previous marriage are likely to receive less under the new rules. Anyone with children from a previous marriage should therefore have a carefully considered will.

Before 1 October 2014, if the deceased left a spouse, but no children, there were provisions that if the estate was more than £450,000, the spouse would receive £450,000 and the surviving parents or siblings would receive half of the balance of the estate with the spouse taking the remainder. This has now been changed so that the whole of the estate will pass to the spouse and the deceased's other relatives will not receive anything. This rule applies even to estranged spouses or civil partners and it is therefore vital that wills are prepared if spouses or civil partners separate.

The Inheritance and Trustees’ Powers Act 2014 also makes some changes to the definition of"personal chattels". The new definition covers all physical belongings but does not include money, securities for money, property - if mainly for business purposes - or property held solely as an investment. However, what counts as an investment is a grey area.

The Act will also make it easier for some co-habitants to make a claim under the estate of a person who has died without a will. However, a co-habitant will still need to make a claim against the estate as opposed to receiving anything under the rules. This makes it extremely important for co-habitants to have wills.

Although the new rules bring welcome changes, they are also likely to give rise to a high number of disputes and our advice is that everyone should have a will drafted by a solicitor.

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