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Changes to Inheritance Law from 1st October

The laws which govern who inherits your estate if you die without leaving a will are changing from today. Dawn Joughin from our Private Client Department goes through what these changes will mean for you, and why making a will is still your best option.

From today, October 1st 2014, a huge number of changes to the rules which govern what happens to the money and assets of someone who dies intestate (i.e. without making a will) are coming into force.

These Rules of Intestacy, as they are known, affect anyone who dies with an estate worth more than £250,000 (including properties) but who hasn’t made a will.

The last overhaul of the law relating to intestacy was in 2009 and mainly dealt with updating the amount of money passing to family members to take into account the big increase in property values.

Following the latest review of the laws relating to intestacy by the Law Commission of England and Wales, many in the legal profession had been expecting a change in the law to include provision for unmarried couples, given the high number of cohabiting partnerships in England and Wales. This hasn't happened, and it still remains the case that if you wish your cohabitee to benefit from your estate, you must make a Will providing for them.

Many people mistakenly believe their co-habiting partner will be able to benefit from their estate. But, in order for an unmarried partner to benefit, they must be able to prove they have lived together for at least two years before the date of death, and the surviving partner must make a claim under the Inheritance (Provision for Family and Dependants) Act 1975. In my opinion this is costly, stressful and best avoided.

As an example of how the new rules could affect you and your family, imagine the following scenario:

You moved in with your partner eighteen months ago and you have recently had a baby together. Tragically, your partner has just died intestate. Your baby will inherit the entirety of your partner’s estate and as you did not live with your partner for two years, you cannot make a claim against your partner’s estate for provision.

Or imagine the scenario whereby, you had lived with your partner for two years, so you are able to claim against the estate. In this instance a litigation friend has to be appointed to act on behalf of your baby, because you have to issue a claim naming your baby as one of the defendants to your claim. I have represented clients who have found themselves in both these unhappy situations.

One change which has been implemented affecting the entitlement of spouses who have no children, would have prevented a very upsetting situation for one of my clients.

My client, a widow, who lived with her husband for a number of years prior to their marriage, had made a will in similar terms to her husband in each other’s favour, before they married. What they did not know was their marriage actually revoked their wills. You may think to yourself, no problem, they were married and she would benefit. But under the old rules, my client was entitled to only the first £250,000 of her husband’s estate outright. She received 50% of the remainder and the other 50% passed to a niece and nephew of her husband’s, whom he had not seen since they were children, some thirty years earlier, before they moved to America to live!

Now under the new rules, widows, widowers and civil partners without children, will be entitled to the whole of their spouses’ estate. For those couples with children, the surviving spouse will take the first £250,000 and half of the remainder outright, doing away with the old life interest trust system (which meant they were entitled to the income from the money only with the capital being held in trust for the children). The children will be entitled to the other half.

The new rules also prevent an unfair situation which meant orphaned children who were under 18 when their parent died, and who were then adopted by someone else lost their inheritance from their natural parent.

Other changes have been made modernising the language used to describe your personal items, which in this area of law, are referred to as 'chattels'. Old fashioned language referring to carriages and linen has been brought up to date, and chattels are now described as anything which is not monetary, a business asset or an investment. However, I can foresee some problems arising when defining the word 'investment'. There will be further reviews in the future no doubt as the law evolves to take into account ever changing social and financial circumstances we all find ourselves in.

By Dawn Joughin