Intestacy and Family Provision Claims on Death: Update
Following a six-year project by the Law Commission, the Inheritance and Trustees’ Powers Act 2014 (“the Act”) received Royal Assent in May 2014 and came into force on 1 October. The Act brings changes to the law of inheritance, in particular the Intestacy Rules and family provision claims. This article provides a basic introduction to these changes and addresses their impact.
One of the principal objectives of the Act is to simplify the distribution of an estate when a person dies without making a Will (intestate).The Intestacy Rules specify an order of priority as to who will benefit from the deceased’s estate in such circumstances. The principal change to the Intestacy Rules concerns the entitlement of a surviving spouse or civil partner in two situations. Firstly, where the deceased did not leave issue but was survived by at least one parent or at least one full sibling and secondly, where the deceased is survived by issue (i.e. direct descendants of the deceased including children, grandchildren, great-grandchildren etc.)
Under the old law, in the first scenario, where the deceased died without leaving issue but left a surviving spouse, the estate was shared between the spouse and the deceased’s parents or siblings. The amended Act removes the entitlement of parents and siblings and instead the whole estate now passes to the surviving spouse absolutely.
In the second scenario, when the deceased dies intestate leaving a spouse and issue, the Act simplifies the distribution of the estate. While there have been no changes to the spouse’s entitlement to the deceased’s personal effects and a fixed net sum (currently £250,000), rules concerning the residuary estate have been modified. The old rules provided for one half of the residuary estate to be divided equally between the issue and the other half was held on trust. The trust entitled the surviving spouse to receive a life interest in half the residuary estate, namely a right to receive income throughout his or her lifetime, but preserved the underlying capital of that half of the residuary estate for the issue to inherit upon the death of the spouse. The Act removes the life interest and the surviving spouse will now inherit half the residuary estate outright. The other half will continue to pass to the deceased’s issue in equal shares.
These changes are likely to provide reassurances to surviving spouses particularly in instances where it will enable the surviving spouse to stay living in the family home. Nevertheless, some critics have drawn attention to the fact that this new priority given to the surviving spouse, results in children sharing a far smaller proportion of the estate, which is of particular concern in the case of subsequent marriages. The Act also makes no provision for unmarried partners.
The Act also amends the Inheritance (Provision for Family and Dependants) Act 1975 (“IPFDA 1975”). The IPFDA 1975 allows certain people to bring claims for provision from the deceased’s estate where they consider that there has been a failure to make reasonable financial provision for them. The changes broaden the definition of who can apply to bring a claim.
Now, where the deceased assumed a role akin to a parent and treated a person as a child of the family that person is entitled to make a claim. Additionally, the eligibility requirements of a person being maintained by the deceased are less stringent under the amended legislation. A person may qualify where the deceased made a substantial contribution to that person’s reasonable needs.
Previously claims could fail in cases where the deceased and the applicant were mutually dependent on one another. Under the amended IPFDA 1975 there is no longer a requirement to establish that the deceased contributed more to the domestic relationship than the applicant. The Act has also removed the requirement that the deceased had formally assumed responsibility for the applicant’s maintenance. Cohabitees have few rights under the law of inheritance and these developments should remove the obstacles that have previously restricted cohabitees from making claims under the IPFDA 1975.
The amendments, in respect of the Intestacy Rules and family provision, made by the Act represent long-awaited practical changes which should simplify the administration of the deceased’s estate.
However, the changes to the law of inheritance should not be viewed as diminishing the need for a Will. A Will allows the testator to make clear who is to be provided for and why provision has or has not been made for certain people. A Will is especially important in avoiding an arbitrary outcome where people have had successive marriages and stepchildren are involved or where partners are unmarried or have not entered a registered civil partnership. Therefore the changes, in many respects, make it even more necessary to instruct a solicitor to prepare a Will to ensure your individual family circumstances are taken into account and your estate is left in accordance with your wishes.
If you need to write or update your Will then please do not hesitate to contact us.
This article was written by Stephanie Brobbey, Solicitor, with assistance from Trainee Solicitor Freya Marks.
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 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.