October 2014 saw the introduction of the Inheritance and Trustees Powers Act 2014, which has a huge impact on the assets of people who die without a will in place. This legislative change to intestacy rules granted new rights to the following groups of people:
- Spouses (including civil partners)
- Adopted children
- Unmarried fathers
- Other family members
Along with this, there were also changes to the definition of capital and trust income, as well as what the trustees can do to manage funds.
Previous rules stated that the surviving spouse, in a relationship where there were no surviving children, was required to share the estate with relatives of the deceased if the value of the estate was greater than £450,000.
The new intestacy rules will allow the surviving spouse to inherit the entirety of the estate, or if there are children, to share it with them too. In addition to this, the surviving spouse is able to receive one half of the capital of the estate, instead of being limited to just receiving the income (if the estate was worth over £250,000).
Under the old system, survivors were entitled to receive a statutory legacy; a sum of £250,000/£450,000 depending on whether there were surviving children or not. The new legislation means that the statutory legacy will be regularly reviewed, rising in line with the Consumer Prices Index and including interest, which is paid from the date of death until the date of payment.
Increased rights for fathers
Unmarried fathers were previously ignored entirely from the inheritance process, which has now changed. Now, the assets pass to the father (if he is named on the birth certificate) to be held in trust until the child/children reach the age of 18. While this makes it easier for unmarried parents, it becomes a complication if they are also cohabitating.
Changes to financial support
The new legislation has made it a lot easier for dependants to claim financial support if they don’t inherit anything.
While the intestacy rules have changed to make it easier for surviving spouses and relatives, it is still important to create a will. Ensuring that your assets go where you want them to as tax-efficiently as possible, can most securely be achieved with a well written will.
If you have any questions about these matters, please do get in touch with one of our tax partners.