Recent changes to intestacy rules highlight the need for making a will and assessing inheritance tax implications.
On 1 October 2014, the Inheritance and Trustees Powers Act 2014 (“the Inheritance Act”) brought in sweeping changes to the rules on intestacy as well as, among other things, amendments to the rules for making claims against estates.
One of the main changes is in simplifying who would be entitled to what when someone died without leaving a valid will. So, for example, under the new rules if the deceased leaves a spouse or civil partner without any surviving children then they would inherit the whole of the estate and any surviving parents would no longer receive anything.
If, on the other hand, there were surviving children then the spouse or civil partner would receive all personal chattels and in addition a statutory legacy of £250,000. They would also receive half of the residue of the estate above that amount outright. The children would then receive the other half of the residue outright.
The Inheritance Act also made amendments to the Inheritance (Provision for Family and Dependants) Act 1975 which allows certain classes of people to make a claim for reasonable financial provision when someone dies. Specifically it now allows for claims by certain people treated as a child of the deceased. What’s more, the test for dependency will now involve looking at whether the deceased was making a substantial contribution to the reasonable needs of that person.
This is just a short summary of some of the detailed and technical changes introduced by the new Act. What it highlights is the importance of planning ahead, assessing the options, making a valid will and clearly setting out your wishes. So, too, the need to keep any will up-to-date with any life changes which may occur.
Otherwise there is a risk that when it comes to probate the rules of intestacy may not only over-ride what you would have wanted but, depending upon the situation, might also have significant inheritance tax implications.
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