10 December 2014
New intestacy rules are a timely reminder to make a will
When it comes to new year resolutions, near the top of your list should be a commitment to making a will. Craig Williams, partner in the wills, trusts and probate team, explains why it is so important and the impact that new intestacy rules will have.
“Recent statistics reveal that 61% of people in England and Wales die without a valid will, which means many people run the risk of their assets being distributed differently from the way they may have wished,” said Craig.
“In turn, that can lead to family disputes and distress for all concerned at an already difficult time. Given that the start of a new year is often the time when couples decide to take their relationship to another level by marrying or committing to a civil partnership, we say it’s also the perfect opportunity to make your wishes very clear in the event of your death.”
New inheritance laws, which came into force on 1 October and are part of the Inheritance and Trustees’ Powers Act, now offer greater protection to married couples and civil partners where one spouse dies without making a will.
Where a person has no children and is married, the rules allow for the surviving spouse to inherit their entire estate, whereas previously, he or she would have received £450,000, plus half of the rest, with the remainder going to other family members, including parents and siblings.
For those with children, the surviving spouse will now inherit the first £250,000 together with any chattels as before, as well as half of the remaining amount. Previously this would have gone into a life interest trust, with the spouse only being paid interest. The remainder will be inherited by any children, going into a separate trust if they are under 18.
In addition, step-children still have no automatic right to inherit, while for adopted children, the new reforms remove a rule which meant children lost their right to inherit from a parent’s estate when they turned 18, if they were adopted by another family before that age.
Craig welcomes the changes as a positive step forward in simplifying a very complex situation, but says they are no substitute for making a will and you should take expert advice to ensure those you want to benefit from your wealth actually do so.
“In some cases, the new intestacy rules may be at odds with what the deceased perhaps intended to do with their estate,” he added.
“For example, if you die leaving a spouse or civil partner and a child from your marriage, your partner will now benefit from a greater amount of money. By the time he or she dies, there is no guarantee any of that money will be left to be inherited by your child.
“The only way to be sure is to talk to a solicitor and make a will before it’s too late.”
He says he would also like to have seen the changes applied to co-habiting couples, concluding: “When the consultation originally took place, the Government was considering including unmarried couples, provided they had lived together for a minimum period, such as two years, and it’s a shame the reforms haven’t delivered on this.”
Case study: Evie, 52
When Evie moved in to co-habit with her partner, neither of them thought about making a will. Although they had promised to leave each other “everything”, it was only after Evie died that Alex realised he had no legal claim on any of her estate because they had failed to legalise their plans.
New trustee powers
Also changing under the reforms are two statutory provisions concerning the powers of trustees.
Previously, trustees who were administering a trust could only pay out a “reasonable” amount of income for a minor beneficiary, whereas now they can pay as much as they think fit.
In addition, trustees now have an enlarged statutory power of advancement, which means that if they are administering a trust – and not just for minors – they can now advance the full entitlement, at their discretion, to a beneficiary. Previously, they were only allowed to advance half the beneficiary's entitlement.
The new powers will only apply to trusts set up after 1 October 2014.
Case study: Lewis, 26
Lewis freely admits that his teenage years were “a mess” as he drank to excess and failed university. Now he has settled into a steady job and wants to buy a house with his girlfriend.
With a baby on the way, he doesn’t want to wait until he is 30, which is the age he can officially gain access to the money his grandparents left him in a trust. The new reforms allow his trustees, at their discretion, to draw on the full sum to help him start his new life.
For more information see our new intestacy rules flow chart here.