New Inheritance Rules Now in Force

The 1st of October 2014 saw the coming into force of the Inheritance and Trustees' Powers Act 2014. This has significantly changed the law surrounding distribution of inheritance when an individual dies intestate. Intestate is where a person dies without leaving a will.
In particular, the new Act includes reforms that affect surviving spouses, giving them 100% of the deceased’s estate in the event of there being no children. Under the previous rules, if an estate was worth more than £450,000, the surviving spouse in a childless couple got the first £450,000, plus half of anything above that. The other half was divided among other blood relatives (the parents or, in their absence, the siblings of the deceased).
In essence, the new provisions remove wider family members from consideration, as the surviving spouse inherits the entire estate, whatever the value.

Have Any Other Provisions Been Introduced by the Inheritance and Trustees' Powers Act 2014?
Simplified provisions are also introduced regarding the sharing of the estate where the deceased is survived by a spouse and children or grandchildren. The Act changes the rules so that the surviving spouse receives the first £250,000 of the estate as before, plus half of the residue of the estate outright, rather than just life interest on that amount.
‘Life interest’ meant that the spouse only had the income from half the residue and was not entitled to the capital which then passed to the children after his or her lifetime. Since the life interest concept has been abolished, the spouse is now fully entitled to half of the remainder and as a result the surviving children receive only one remaining half on statutory trusts.
The position of the surviving spouse is therefore significantly improved in the event that the deceased’s estate is worth more than £250,000, while the rights of children have been watered down accordingly.
A spouse is also entitled to the deceased’s ‘personal chattels’ absolutely. However, the old definition has been amended to cover all tangible movable property with some stated exceptions being money, securities for money, and property used solely for business purposes or held as an investment. Although the new definition is shorter and modernised, there may be disputes over what is meant by ‘investment’.
Other changes include the altering of the position for children adopted after the death of their parents. New rules ensure that these children do not lose any potential claim to inheritance from their natural parent.
Comment
Overall, the new provisions streamline the intestacy process and simplify the sharing of assets where someone is survived by children or other descendants as well as by a spouse. However, as the reforms greatly benefit spouses, this could eventually lead to an increase of legal disputes regarding inheritance issues.
In essence, the changes to the entitlement of the deceased's surviving spouse could leave wider family members overlooked, as well as children who would have received more of their parents' estate under the old rules. Given that cohabiting partners still have no legal intestacy rights, the new Act serves as a reminder of the importance of having a will.
For specialist advice about inheritances issues including wills and probate contact Iftekhar Shah on 020 7611 4848 or by e-mail ishah@rollingsons.co.uk.