On 21 March 2013, the Government published draft legislation to reform the Intestacy Rules in England and Wales and rules relating to claims for family provision from a deceased person's estate. The draft Inheritance and Trustees' Powers Bill follows a lengthy period of consultation led by the Law Commission and their recommendations published on 14 December 2011.
The Intestacy Rules apply where a person dies without leaving a valid Will disposing of the whole of his or her property. Under the Rules, there is a fixed order of priority for family members who can receive the deceased's property, specifying the share each is to receive (if any). The Intestacy Rules have not been comprehensively reviewed for over 20 years and have been much criticised for being out of date and not reflective of modern families' wishes and needs.
The Intestacy Rules can be overridden by making a Will and we would always advise our clients to make a Will rather than rely on the Intestacy Rules.
Under the current Intestacy Rules, where the deceased leaves a surviving spouse and children, the spouse receives the first £250,000 of the estate and one half of the remainder on a life interest trust. The children share the other half of the estate outright. The Rules were criticised for not allowing the surviving spouse full access to his or her half of the remainder of the estate as a life interest only entitles the beneficiary to income, not capital, and with no control over how the assets are managed.
Under the proposed reforms, the spouse will be entitled to their half of the remaining estate outright, meaning they can deal with the assets as they please.
The other reform in this area is to the interest the surviving spouse receives if the deceased dies without children. Currently, the spouse must share the remaining estate (after payment of a £450,000 legacy to the spouse) with the deceased's parents (if living) or full siblings (and their descendants). Under the proposed reforms, the spouse will receive the whole of the estate. This is regarded as fairer to the spouse and, in most cases, more likely to be what the deceased would have wanted, which is what the Intestacy Rules should seek to achieve.
Claims for Family Provision
Certain family members and dependents can apply to the court for a share (or larger share) of a deceased person's estate under the Inheritance (Provision for Family and Dependants) Act 1975 if they believe that the entitlement they receive under his or her Will (or on intestacy) is not "reasonable financial provision". The Family Provision rules have not been fully reviewed since they were enacted in 1975.
Although making a Family Provision claim can go some way to readdressing the balance, it involves litigation which can be costly. It is far better to ensure that you consider any potential claims when making your Will as there are steps that you can take that may help prevent problems after your death.
The Rules are to be reformed so that claims are permitted in certain circumstances where the deceased died domiciled outside of England and Wales but left property and family member or dependants here (this is not currently possible). Anyone treated by the deceased as a child of his or her family but who is not the deceased's child by marriage or civil partnership will be able to make a claim under the proposed reforms. Changes are also proposed to the qualifying conditions for those claiming on the grounds that they were financially maintained by the deceased, and these changes should make it easier for such claimants to qualify.
Unfortunately for cohabitees, it has been announced that the Law Commission's recommendations giving rights to certain categories of unmarried cohabitants will not be implemented in this Parliament.
A consultation has been launched on the draft legislation closing on 3 May 2013.