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Inheritance and Trustees' Powers Bill - Changes to the Intestacy Rules

View profile for Stephanie Brobbey
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The Inheritance and Trustees’ Powers Bill (“the Bill”) is currently working its way through the House of Lords, with a second committee stage reading due to take place on 22 October. The Bill proposes a wide range of amendments to a number of different inheritance and succession law issues although this article concentrates on reform of the intestacy rules, an area of law which has not had a comprehensive review for over 20 years. Essentially, the main objective of the Bill is to simplify the distribution of an estate when a person dies without making a Will (intestate).

The principal change under the Bill relates to the entitlement of a surviving spouse (or civil partner) of the person who has died intestate in two situations. First, where the deceased is survived by issue (i.e. direct descendants of the deceased including children, grandchildren, great-grandchildren etc.) and secondly, where the deceased was not survived by issue but was survived by at least one parent or at least one full sibling (although there are other categories of relatives who rank lower in the order of priority under the intestacy rules such as nieces, nephews, grandparents, aunts and uncles).

The intestacy rules state that where the deceased dies leaving issue, the surviving spouse is entitled to the deceased’s personal effects and a statutory legacy (currently £250,000). In addition the existing rules provide that in such circumstances the surviving spouse is entitled to a life interest in half the residuary estate, namely a right to receive the income throughout his or her lifetime but not the underlying capital of half the residuary estate; the other half of the estate being divided equally between the issue. The Bill changes this so that the surviving spouse will now inherit half the estate absolutely.

At present the intestacy rules provide that where the deceased dies without leaving issue but is survived by a spouse and a parent or full sibling, in addition to the deceased’s personal effects and statutory legacy of £450,000 the spouse is entitled to half the residue outright; the other half passing to the surviving parent or sibling. The Bill modifies this position by giving the surviving spouse an entitlement to the whole residuary estate rather than allowing other surviving relatives to benefit from the estate.

The proposed reforms are practical and should simplify the distribution of assets where an individual dies intestate. However, the Bill remains in the House of Lords and is therefore subject to change. It may be some time before it is clear whether Royal Assent will be given to the Bill in its current form, but its arrival is most welcome after such a lengthy period of consultation over many years.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 020 7404 0606 and ask for your usual Goodman Derrick contact.