Where someone dies without disposing of all their estate by a valid will, the intestacy rules dictate who inherits. These intestacy rules have changed. From Wednesday, 1 October 2014 the Inheritance and Trustees’ Powers Act 2014 came into force.
Prior to 1 October 2014, if someone died without a will and was survived by a spouse or registered civil partner and children, not all the estate would pass to the surviving spouse/civil partner: she or he would inherit £250,000 and the personal effects, but anything over this limit would be divided into two half shares. The surviving spouse or civil partner would get a right to the income only from one remaining half of the fund and when he or she died this trust fund would then go straight to the children of the first spouse/civil partner. The children would get the other half outright.
Although the limits are not changing, so the surviving spouse/civil partner would still get the first £250,000, the rules are changing regarding the balance previously held on the trust for the surviving spouse/civil partner. From 1 October 2014, any balance over £250,000 would again be divided into two shares. The surviving spouse/civil partner will now get one half share outright. It would not therefore be held in trust for him/her to be passed on to the children of the first to die. The other half share does however still go to the children as before.
Some other rules are also changing, if a married person or registered civil partner dies without any children but survived by parents or siblings. Previously the surviving spouse/civil partner inherited £450,000 of the estate but the balance used to be shared between the deceased’s parents or brothers or sisters. The new rules mean that the survivor of a marriage/registered civil partnership inherits everything where there are no children. It avoids part of the estate passing to other family members.
Unmarried partners are not included in changes to the intestacy rules.
The latest changes have increased the rights of widows and widowers and surviving registered civil partners but have not improved the position of unmarried or unregistered partners. In the absence of a will making provision for them, unmarried or unregistered partners receive nothing and their only course of action may be to claim under the Inheritance (Provision for Family and Dependents) Act 1975 which could cause a level of unnecessary uncertainty, expense and stress.
The inheritance tax position between unmarried/unregistered partners is also less beneficial and the impact needs to be considered as there may be tax to pay reducing what is left to the surviving unmarried/unregistered partner or ultimately the children.
The new rules benefit the surviving spouse or registered civil partner more favourably, but the children ultimately will end up with less and any surviving parents or siblings now miss out altogether.
It is therefore important to make sure you have a will in place to reflect your wishes as the new rules may not allow your estate to be divided in the way you may wish.
For advice on writing a will, please contact our Wills & Wealth Planning team on 01625 422148.
For further information on dealing with someone’s estate if they have died, please contact Helen Gowin in our Estate Administration & Probate team on 01260 282351.