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Intestacy Rules: Change on the Horizon

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The Inheritance and Trustees’ Power Bill received Royal Assent on 14 May, to become the Inheritance and Trustees’ Power Act 2014 (“the Act”). In this update, we revisit our article from last August to provide a reminder of the changes that are due to come into force in October 2014.

The Act changes several issues around the law of inheritance, but the focus of this update is on the amendments to the intestacy rules which govern the distribution of an estate in the absence of a valid will.

Broadly speaking, the Act changes the default distribution to make it more favourable to a surviving spouse or civil partner of the deceased. The position is changed both where the deceased is survived by issue (meaning direct descendants – children, grandchildren, great-grandchildren etc.), and where the deceased leaves no issue behind but is survived by at least one parent or one full sibling.

In the first case, the surviving spouse is currently entitled to a statutory legacy of £250,000 plus the deceased’s personal goods. The spouse also benefits from a life interest in half of the residue of the estate, with the other half being distributed between the issue. Under the Act, the spouse will now inherit half of the estate absolutely, in place of the life interest.

In the second case, the spouse currently receives a statutory legacy of £450,000, the deceased’s personal goods and half of the residue outright (with the other half passing to the surviving parent or sibling). Under the Act, the spouse will take the entire residuary estate absolutely.

Whilst these changes to the intestacy rules may provide some comfort to surviving spouses in reality, they do not lessen the importance of making a will and engaging in sensible estate planning where appropriate. The intestacy rules, both new and old, can throw up arbitrary outcomes that fail to take into account the individual family circumstances of the deceased. For this reason, readers are advised to seek professional advice in order to avoid an unwanted outcome.

This article was written by Ian Bradshaw, Partner, Private Client with assistance from Trainee Solicitor, Alex Barker.

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.