Since 1st October 2014, a new law has taken effect which will affect anyone who has yet to make a Will. Called the ‘Inheritance and Trustees Powers Act 2014, this piece of legislation has far reaching consequences for married couples and those in Civil Partnerships. The biggest impact will be felt by married couples and civil partners without children.
Before 1st October 2014, the rules concerning intestacy (relevant to individuals without a Will) provided that where a couple had no children, upon death of the first spouse, the first £450,000 plus half the remaining sum, went to the surviving spouse. The remaining half was divided between blood relatives of the deceased.
Now, the surviving spouse will receive the whole of the deceased’s assets, with nothing due to their wider relatives. In other words, surviving parents or siblings will have no claim on the deceased’s assets where a Will has not been made.
A further change in the law applies to married and civil partners with children. Under the previous regime, the surviving spouse took the first £250,000 of the deceased’s assets with children receiving half the remaining sum over £250,000, either immediately or held in Trust until the age of 18. The remaining half would also go to the children, but the surviving spouse would hold a ‘life interest’ meaning they could extract an income from this sum, but not the capital.
However, since October 1st, the concept of a ‘life interest’ no longer applies. The surviving spouse will receive the first £250,000, and be fully entitled to half the remainder. The children will only receive the remaining half, and cannot gain control until they’ve reached the age of 18.
A worked example should make the relative positions clear;
John is married to Mary and has two children. John dies without making a Will, leaving an estate of £750,000.
Under the old rules, Mary would receive £250,000, and the children upon reaching 18, would acquire between them £500,000, with Mary able to take a regular income (life interest) from up to £250,000 of the capital owned by the children.
Under the new rules, Mary would now receive £500,000, with the children able to take control of the remaining £250,000 between them once they’d reached 18.
It is also worth noting that intestacy rules around unmarried partners remain unchanged. The surviving partner would have no claim to the assets, and if they had children, all the assets would go to the children. The idea of a ‘Common Law’ husband or wife has no foundation in law, and the deceased will be treated as though they were a single person.
These rule changes underline the importance of making a Will in order that your wishes are taken into account upon death, above all else.