When a person dies without leaving a valid Will they are said to have died “intestate”. The intestacy rules, which were first published in 1925, dictate how the assets of the intestate will be divided between the surviving family members.
Almost 90 years later, the Inheritance and Trustees’ Powers Act 2014, which is expected to come into force in October 2014, seeks to modernise the intestacy rules and, in particular, the rights of the widow(er).
Spouses and children
Currently, where an intestate leaves a spouse but no children the estate will be divided between the spouse and the intestate’s parents or siblings. The new law leaves everything to the surviving spouse with no assets passing to the intestate’s parents or siblings at all.
In the case of a surviving spouse and children, the spouse is still given priority but part of the residue falls to the children. The current law distributes the estate as follows.
The Spouse receives:
- The personal belongings of the deceased;
- A fixed cash legacy of £250,000; and
- A life interest in half of the residue. This is an interest in the income only, once the spouse dies the capital will pass to the children in equal shares.
The children receive half of the residue in equal shares upon reaching the age of 18 and the other half of the residue when the spouse dies.
Whilst this means that the whole of the residuary estate is eventually passed to the children, it may be that the legacy and the life interest do not provide the spouse with enough financial support for the future. For example, a spouse may elect to receive the intestate’s share of the family home as part or all of their inheritance but this could leave them with no liquid assets with which to support the family.
The new law ensures that the cash legacy increases every 5 years in line with the Consumer Prices Index. In addition, the spouse will receive an absolute interest in half of the capital of the residuary estate (“the capital”) and not simply an interest in the income.
Whilst these changes may seem sensible, they will have a significant impact on a number of modern families, particularly in the case of second marriages. Firstly, the increased cash legacy will reduce the value of the residuary estate and therefore, the size of the children’s inheritance. In some cases it may consume the whole estate.
Secondly, children will no longer automatically receive the left over capital upon the surviving spouse’s death. Where a surviving spouse is the second spouse of the intestate it is likely that they will choose to leave their own estates to their own children, not those of the intestate. This means that half of the capital is taken out of the family completely.
The new Act aims to close a little-known gap in the law of succession which disinherits children who are adopted after the death of their parent unless they have an “immediate interest” in their parent’s estate. This is because the child is treated as the natural child of the adopted parent from the date of adoption.
As seen above, in the case of intestacy, children only inherit when they reach 18. This means that if an intestate’s child is subsequently adopted that child will receive nothing from their estate. The new law will ensure that children who are adopted after the death of their natural parent will inherit from that parent’s estate even if their interest becomes absolute after the date of adoption.
Finally, where the intestate dies without a spouse or children, the estate is shared between his/her parents equally. However if the intestate’s father was not married to the intestate’s mother when the intestate was born the current law presumes that the father, and anybody related through him, has predeceased the intestate. This means that the father and/or half-siblings will not inherit from the estate.
The new Act removes this presumption where the unmarried father is named on the birth certificate. Personal Representatives will need to trace unmarried fathers where they may be entitled to the estate. This provision relates to any parent named on the birth certificate, so in the case of same sex couples, the non-parent will have the same rights as the natural parent and cannot be deemed to have predeceased the intestate child.
Enough of a change?
These changes are based on a number of recommendations by the Law Commission which aimed to “reflect the needs and expectations of modern families”. It is notable that the government has declined to introduce any provision for cohabitees despite research which suggests that the majority of the 2 million cohabitees in the UK do not realise that they have no automatic right to the estate of their partner.
Therefore, despite the significant steps which have been made in this area, it is still imperative that individuals continue to consider their own circumstances and make provision to ensure that their loved ones are provided for after their death.
For further information please contact a member of our Wills, Trusts & Probate department.
Myerson Solicitors LLP provide specialist advice relating to wills, probate, probate disputes, inheritance tax planning and powers of attorney to clients in Manchester and Cheshire.