I am an IFA and I understand new intestacy laws have been introduced. Can you please explain what these are and what I should be discussing with my clients?
Mike Farrell, head of protection sales at LV=:
The new intestacy rules for England and Wales apply for people who die from 1 October 2014. The rules which are different in Scotland and Northern Ireland are unchanged.
Where advisers can add value remains in encouraging clients to see the importance of making a will, especially those with children, and helping them to put one in place.
Thinking through what will happen should the worst occur may identify further advice or insurance needs.
The new regime is simpler than previously for those with a spouse:
• Where the deceased has no children and leaves a spouse they inherit everything.
• If the deceased had children, the spouse receives up to £250k and half of any balance over £250k. The rest of the balance over £250k goes to the children. Previously the surviving spouse only had a lifetime interest in their half of the excess over £250k, the capital going to the children when they died.
• For those with no spouse or children the existing priority order (grandchildren, parents, siblings etc) stays the same.
Where property is held in joint tenancy it will pass to the survivor and not count towards the limits. For example a bond worth £200k held in joint names of husband and wife. If the husband dies it all goes to the wife and doesn't count towards the limit if he had children. If they held the bond as tenants in common it would form part of the deceased's estate and would count towards the limit if there were children.
Rachael Griffin, financial planning expert at Old Mutual Wealth:
The intestacy rules have been amended from 1 October by the Inheritance and Trustees' Powers Act 2014. The most significant change is for married couples and civil partners without children. Previously, where the spouse of a civil partner died without a valid will and without children, the first £450,000 plus half interest in any amount over this would be left to the surviving spouse/civil partner, with the rest being held for the blood relatives - often the parents. Under the new rules, the surviving spouse/civil partner will inherit the whole estate.
Other key amendments are the changes in the position where a married or civil partner couple have children. Previously, a surviving spouse or civil partner would inherit the first £250,000 of the estate and have a life interest (right to receive income) in any amount over this, with the capital held for the children. The new legislation has removed the concept of ‘life interest', resulting in the surviving spouse or civil partner receiving half the value, absolutely, over the first £250,000.
The new legislation still treats unmarried partners as single. Partners of 20 years, where both their parents died many years ago, could see inheritance passed to a sibling even if they have not been in touch for many years.
While the intestacy rules have been updated, clients relying on them may still find uncertainty and unwanted outcomes. Clients should be advised to make a Will to ensure they have control on who should benefit in the event of death.
Austin Gill, head of probate for the Co-operative Legal services:
Unmarried couples still receive nothing automatically from their partner's estate if they die intestate (without having a valid Will in place).
Married couples and Civil partnerships without children - Following the changes to the Rules of Intestacy, where there are no children (or their issue), the entire estate will now pass to the surviving spouse.
Married couples and Civil partnerships with children - Under the new rules, the surviving spouse or partner still receives the first £250,000 and personal chattels, but instead of having a life interest in 50% of the remaining balance, they now receive this as a capital sum outright. The remainder of the balance continues to go to the deceased's children or their issue.
The new definition of chattels (personal property) - Chattels (personal property) is now defined as anything that is not monetary, business assets or ‘held as an investment'. It's evident that there will be disputes over what is meant by ‘investment'. People see investments as different things and where there are collectable items of value in an estate, there might be disputes over whether they pass to the spouse as ‘chattels', or form part of the estate for distribution.
Adoption - The new rules allow a child of the deceased to inherit on intestacy, even if it is subsequently adopted.
Recommended action - We would always recommend that a professional written Will is made by their client to give them peace of mind that the people they care about are cared for as they wish.
