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New Intestacy Rules

With the coming into force of the Inheritance and Trustees’ Powers Act 2014 on the 1st October 2014, there has been a long needed makeover of the Intestacy Rules.  Probate solicitor, Toni Sinclair, explores how the new provisions will operate.

The Intestacy Rules determine (amongst other things) who is entitled to benefit from the estate of a person who has died without making a Will.  

Here are some common scenarios, looked at from the perspective of the old law and the new law:

WHERE THE DECEASED LEAVES A SURVIVING SPOUSE/CIVIL PARTNER AND CHILDREN.

BEFORE THE ACT 
The surviving spouse/civil partner was entitled to receive all the deceased’s “personal chattels”.  Personal chattels was defined by s55(1)(x) of the Administration of Estates Act 1925  as:
  “carriages, horses, stable furniture and effects (not used for business purposes), garden effects, domestic animals, plate, plated articles, linen, china, glass, books, pictures, prints, furniture, jewellery, articles of household or personal use or ornament, musical and scientific instruments and apparatus, wines, liquors and consumable stores but do not include any chattels used at death for business purposes nor money or securities for money”. 
In addition to the deceased’s personal chattels, the surviving spouse/civil partner received the first £250,000 of the deceased’s estate.  This is known as a “statutory legacy”.
If there was anything left in the deceased’s estate after the statutory legacy was paid, then half of the excess went into a Trust.  The terms of the Trust were that the surviving spouse/civil partner was entitled  to receive the income generated by the Trust Fund for their lifetime but they would not be entitled to receive any of the capital representing the Trust Fund.  When the surviving spouse/civil partner died, the capital within the Trust Fund was divided equally between the deceased’s children (or remoter issue if the children had also died) upon them reaching the age of eighteen.
The other half of the excess above the statutory legacy was to be divided equally between the deceased’s children (or remoter issue) upon them reaching the age of eighteen.

AFTER THE ACT
The surviving spouse/civil partner still receives all the deceased’s personal chattels, but the definition has been amended by the Act to bring it into the twenty first century.  The definition has been amended to cover:
 “all tangible moveable property except for: 
•    property which consists of money or security for money; or
•    property that, at the death of the Intestate,  was used solely or mainly for business purposes or was held solely as an investment.”  

The surviving spouse/civil partner will also still receive a statutory legacy, being the first £250,000 of the deceased’s estate.  However, this will be indexed linked and reviewed regularly.
If there is anything left after the distribution of the personal chattels and payment of the statutory legacy then the surviving spouse/civil partner will be entitled to half of the excess absolutely.  It will not go into a life interest Trust.  The other half of the excess above the statutory legacy will be divided equally between the deceased’s children (or remoter issue) upon them reaching the age of eighteen.

WHERE THE DECEASED LEAVES A SURVIVING SPOUSE/CIVIL PARTNER BUT NO CHILDREN 

BEFORE THE ACT
If the deceased died leaving no children, but had surviving parents,  then their surviving spouse/civil partner was entitled to receive all of their personal chattels and a statutory legacy of £450,000.  If there was anything left in the estate after the settlement of these gifts, then the surviving spouse/civil partner was entitled to receive half the excess outright.  The other half of the excess went equally between the deceased’s parents. 
If the deceased had no surviving parents but had full siblings then their siblings would equally share the other half of the excess above the statutory legacy (in place of their parents).  
The surviving spouse/civil partner was only entitled to receive the deceased’s entire estate if it fell below the value of the statutory legacy or the deceased had no children (or remoter issue), no parents and no full siblings.

AFTER THE ACT
Where the deceased leaves no children (or remoter issue) then the surviving spouse/civil partner is entitled to receive the whole of the deceased’s estate absolutely.   It is not shared with surviving parents or siblings.

It is important to note that these rules apply to separated or estranged spouses/civil partners.  If there is no Will in such a situation, the estranged surviving spouse/civil partner could benefit from more of the deceased’s estate than the deceased would probably have wished.  Likewise, where there have been second (or more) marriages and competing interests exist between the surviving spouse/civil partner on the one hand and the children of the previous relationships on the other hand, then the children are very likely to lose out.  If nothing else these changes to the Intestacy Rules should at least emphasise the importance of making a Will.  

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