On the 1st October 2014, the Inheritance and Trustees’ Powers Act 2014 came into force making significant changes to the law governing the Intestacy provisions (dying without a Will.)
At present, if an individual passes away without leaving a will, the Intestacy Rules set out statutory entitlement to the estate. For those with over £250,000 in assets these changes could have a significant impact on what would now happen.
Surviving Spouse / Civil Partner and no children
A surviving spouse / civil partner will now inherit the estate outright.Previously, any value over £450,000 was split 50/50 with half to be shared with any surviving parents or siblings of the deceased. Considering current property values, this would often cause financial difficulty for a surviving spouse and so is a very welcome change to the entitlement.
Until the new changes are implemented, a surviving spouse or civil partner only inherits the first £250,000 outright with half of any surplus being held on a trust for life (spouse / partner entitled to the income only) and the balance 50% passing directly to the children. The children would then inherit the capital held on the life interest following the death of the survivor.
Under the new legislation, the position is simplified and the life interest will be eradicated and the widow/widower will be entitled to the initial £250,000 and then half of any amount above it again goes directly to the surviving spouse/partner, with the children taking the other half of the excess outright.
Keeping pace with inflation
The new Act also provides a mechanism to review the £250,000 level at least every 5 years or when the Consumer Price Index (CPI) has risen more than 15% from any previous alteration to the level.
Other Minor changes
Smaller changes are also included in the new Act including the definition of “Personal Chattels,” Interest rates for statutory legacies and the presumption of death for parents to recognise modern society trends and children born outside of marriage and those children who are adopted.
One area that the Act was hoped to amend was to include provision for cohabiting partners who were previously excluded from an intestacy distribution. Whilst official figures show the number of marriages is on the increase, there is still a large section of society that prefers to cohabit rather than formally entering a marriage or civil partnership union, a lifestyle choice not a reflection on a committed relationship status. It was argued by the legal profession that after a time period, suggested 5 years or 2 years if they had children together, a long term partner should inherit under the Act.
Unfortunately, the Act fails to do so and unmarried partners still receive nothing at all, making it vitally important for them to have Wills in place to prevent their partner being excluded.
Whilst the changes to the married / civil partner financial provision are a much needed update to previous statutory levels of finance, the Acts failure to address the issue of cohabiting partners means it fails to recognise a key demographic of our society. Without making any provision, where no Will exists, disputes and claims over an estate will continue to rise in volume and more importantly, a cohabiting partner will face financial hardship and possible eviction from their home at a time of loss and grief.
Having said that, if you are in any relationship, why would you not make a Will to ensure you’re not leaving their fate to chance anyway? Whilst it had always been important to make a Will, it is never more vital than now as it is a clear statement that the law will not automatically provide for an unmarried partner.