Partner Article

New rules on intestacy add urgency to need for inheritance planning

New intestacy rules have recently received Royal Assent and are due to come into force from 1 October. These are the rules which apply when individuals die without a valid will and govern the distribution of assets.

The Law Commission suggested a number of changes to the rules back in 2011 because the existing rules were seen as outdated. For example, surviving spouses, where there no children, only received a fixed legacy (£450,000) plus half the estate. The balance was given to other family members, such as parents or siblings. Under the new rules, the surviving spouse will now receive the full estate

Other changes include a change to the definition to “chattels” which may impact some existing wills which refer to this definition.

However, other recommendations have not been dealt with, in particular there is no provision for co-habitees or “common-law spouses” to benefit, meaning that they will only benefit under the provisions of a valid will.

It continues to remain true that wills need to be in place to avoid intestacy rules being invoked and, once in place, they need to be reviewed regularly both to ensure that it continues to meet the testator’s wishes and is up to date given changes in tax law.

As we have seen recently, inheritance tax rules continue to pull more estates into the charge to tax from the changes on the use of trusts, the deductibility of debts to reduce the value of the taxable estate and the fiscal drag of the frozen nil rate band. Now is a good time to review those wills and inheritance tax arrangements.

This was posted in Bdaily's Members' News section by Baker Tilly .