Trust Estate
EXPERT VIEW: Updated Intestacy Laws: Who Has Been Left Behind?

In May 2014, the UK Parliament signed into existence an Act that promised to revolutionise intestacy law. This article examines some of the potential problems that remain - or which may have got worse.
James Ward, private client partner at Seddons, the law firm,
examines recent sweeping changes to the laws of inheritance in
England and Wales. (Scotland operates under its own legal
system.) As always, this publication welcomes readers to send in
their views.
In May 2014, Parliament signed into existence an Act that
promised to revolutionise intestacy law. Anomalies would be swept
away, process modernised and individuals protected. The reforms
have been hailed as a long-awaited and much-needed upgrade of a
law created almost 40 years ago, and they have removed several
legal complexities, but not everyone will benefit. It is now more
important than ever for wills to be made and updated regularly,
if individuals want to retain control of their estate and protect
their assets.
The Inheritance and Trustees Act (2014), which came into force on
1 October, makes some significant changes to the law surrounding
how an individual’s estate will be divided if he/she dies without
leaving a will. Most notably it removes the life interest trust
over the spouse’s half share of the remainder of the estate after
the statutory legacy. Furthermore, it prioritises the spouse over
other family members if the deceased had no children.
Positively, numerous archaic anomalies have been removed,
including several surrounding who is entitled to inherit the
estate. Children who are adopted after the death of their parents
will no longer lose their claim to inheritance, and children who
are not blood-relatives but have been “treated as a child of the
family” will also be taken into account when dividing up the
estate. Crucially, the law detailing which assets are captured in
the legal parameter of someone’s estate has been amended. The
definition of “personal chattels” – an individual’s personal
belongings – has been limited to exclude some movable items which
could now be considered an investment. Wills should therefore be
updated to ensure that personal belongings are left directly to
the relevant individuals.
These attempts to modernise the intestacy laws in order to better
deal with the complexities of contemporary family life should
absolutely be welcomed. However, the reforms do not significantly
protect cohabiting partners, children from previous marriages or
wider family members.
The changes are perhaps less satisfactory for individuals who
have children from a previous marriage. Under the new laws, the
first £250,000 ($402,030) plus half of the remainder of the
assets will be left automatically to the current spouse. The rest
will go to the deceased’s children in equal shares. This sees the
abolition of the life interest for the spouse, which would have
traditionally ring fenced half of the remainder of the estate for
the children of the deceased. This means that now the assets
falling into the current spouse’s half share may never go back to
the children of the first marriage.
An untimely death may, consequently, see the second spouse take
much more than might have been envisioned. Furthermore, the
reforms apply also to estranged spouses. It is therefore vital
that individuals with children from a previous marriage make –
and update – their will to ensure all their dependents are
protected. Without taking the necessary steps to plan ahead,
families affected by this aspect of the new legislation may risk
being caught out.
Weighting of the inheritance towards the current spouse is even
more pronounced if there are no children involved. Previously,
after a statutory legacy of £450,000 passed to direct dependents,
half of all an individual’s assets would have gone to the parents
or siblings. Now, if a married individual dies leaving no
children, all assets will pass automatically to the spouse. This
may seem fair, but having the spouse take everything may not have
been the intention of the deceased, especially if there had been
gifting from the deceased’s parents or if it was a relatively new
marriage.
The new Act does allow trustees to apply income and capital with
more discretion than was previously possible under the Trustee
Act of 1925, but individual circumstances will always mean that
blanket laws can never offer as much protection as a prepared and
thought-out legal alternative. The updated intestacy laws do not
take into account formal affiliations, external responsibilities
or personal wishes – all things that will be identified and
included in a properly drafted will.
Another unaddressed concern surrounds the rights of unmarried,
cohabiting partners. This grey area is significant and complex,
and is one that modern law has, so far, been slow to adapt to.
This new Act is a prime example of law’s inability to respond
quickly to changing social circumstances, as unmarried,
cohabiting partners still have no legal intestacy rights. The Law
Commission recommended that Parliament pass a specific
cohabitation bill to recognise the changing needs of individuals
and families and to offer more adequate legal protection. The
proposed bill would have given unmarried partners who had lived
together for more than five years (reducing to two years, if the
couple had a child together) substantial legal rights and
protection; unfortunately, this suggestion has so far been
ignored by law makers.
Overall, the Inheritance and Trustees’ Powers Act (2014) does
streamline the intestacy process and remove some obvious
anomalies. However, I would argue that it gives too much priority
and importance to the remaining spouse or partner. It is
impossible for intestacy laws to work for every situation, given
the increasing complexity of modern family life. The only way to
truly protect your assets and guarantee your inheritance is by
drafting a will to represent your wishes.