Consultation on Inheritance and Trustees’ Power Bill

As a result of recommendations made by the Law Commissions in December 2011, the Government has issued a draft Inheritance and Trustees Power Bill which deals with two main areas, intestacy and family provision. These are both important areas of the law, affecting a large number of families at times of financial and emotional vulnerability.

Intestacy Rules

The intestacy rules apply when you have not left a Will. They date back to 1925 and until now they have not been comprehensively reviewed for more than 20 years. Under the existing law of England and Wales, on a death in intestacy, if the deceased leaves a spouse and children, the surviving spouse receives only the first £250,000 of the estate. The remainder is then split into two with half going to the deceased’s (blood) children and the other half held in the surviving spouse’s life interest trust. The new Bill will abolish the spouse’s life interest trust and will mean that the surviving spouse gets £250,000 plus the deceased’s chattels and half the balance of the remaining estate outright. Children or other descendants would then share the other half of the balance.

Family provision

As it stands, on intestacy if the deceased had no children and the estate is worth more than £450,000 the spouse has to share it with the deceased’s parents and full siblings or their descendants. The Law Commission’s findings show that people think that this is unfair, so under the new Bill the whole estate will always pass to the surviving spouse, and the deceased’s parents and siblings would be cut out of the distribution.

• The Inheritance (Provision for Family and Dependants) Act 1975 allows close relatives and dependants to make claims against the estate, where they have not been provided for under the intestacy rules or the deceased’s will, as long as the deceased was domiciled in England or Wales. This Act has not been subject to a full review since it was enacted in 1975 and the Law Commission’s recommendations emphasise the importance of not placing unnecessary obstacles in the way of a valid family provision claim. As a result, the new Bill now allows relatives or dependants to bring such claims against the estate of a NON-domiciled deceased, providing the deceased left property in England or Wales.

• Anyone treated by the deceased as a child can bring a claim whether or not there was a marriage or civil partnership. Furthermore, the person who was being maintained by the deceased immediately before the death will no longer have to show that the deceased contributed more to the relationship in financial terms than the applicant did.

• The new Bill will also extend trustees statutory powers to distribute income or capital from the trust fund to or for the benefit of beneficiaries who are not yet entitled to take such funds outright removing the need to specifically grant these powers to trustees.

Studies suggest that around half and two thirds of the adult population do not have a will. Although the new bill is an attempt to rectify some of the difficulties that family members of the deceased face when there is no Will, the problems and strict application of the intestacy rules can be completely avoided by simply making a Will!

If you have any comments on this update please contact Tony Millson, Partner for the Private Client Department on 020 7583 2222 or [email protected]