Don’t be caught out by the new Inheritance and Trustees’ Powers Act 2014
About 6 months ago, much ado was made about the new tax disc changes which come into effect on 1st October 2014. But not many will know that at the same there were fundamental changes to the areas of private client and contentious probate which could have more far reaching consequences.
Listed below is a quick summary and comparison for ease of reference:
Spouse dies – no children but parent/sibling:
Old rules: Spouse gets first £450,000 + personal chattels and parent(s)/sibling(s) inherits residual.
New rules: Spouse inherit.
Spouse dies – leaving children
Old rules: Spouse – personal chattels + statutory legacy of £250,000 + life interest in half of the balance (which would then pass to children on subsequent death). Children – other half held on statutory trusts.
New rules: Spouse – personal chattels + £250,000 legacy + half of the balance of the estate.
Children – other half held on statutory trusts
NB:- new definition of Personal Chattels.
The Inheritance (Provision for Family and Dependants) Act 1975
Bring a claim
Old rules: Within 6 months of grant of probate being made.
New rules: Can be made before a grant of probate obtained.
Old rules: “Child of the family” in relation to a marriage or civil partnership to which the deceased was at any time a party
Includes person being maintained, either wholly or partly, by the deceased; such a person shall be treated as being maintained by the deceased if the deceased was, otherwise than for full valuable consideration, making a substantial contribution towards that person’s reasonable needs.
New rules: Any person who was treated by the deceased as a child of the family, not only in relation to a marriage or civil partnership, but in relation to “any family” in which the deceased had a parental role.
Includes a person where the deceased made a substantial contribution to that person’s reasonable needs other than for full, valuable consideration under an arrangement of a commercial nature. A person claiming as a dependant will no longer need to show that the deceased contributed more to the relationship than the applicant did (‘balance sheet test’).
Jointly owned properties
Old rules: Must be made within 6 months (regardless of whether court has given permission for an out of time application generally).
New rules: Can be made outside of 6 months (if the court has given permission for an out of time application generally).
Power to apply income for maintenance, education and benefit of beneficiary
Old rules: Trustees must take into account certain circumstances including the beneficiary’s age and requirements.
New rules: Trustees free to pay out as much of the income as they think fit.
Power to pay capital in advance
Old rules: Up to half of a beneficiary’s presumptive/vested share.
New rules: Up to whole of beneficiary’s presumptive/vested share. Advancement can also be made by a transfer of assets (i.e. not cash alone)
A marked omission is the provision for unmarried couples who will still not inherit under the intestacy rules, and should be advised to make a will to avoid the harshness of the intestacy rules, old or new.
The Law Commission is aiming to start a project on reviewing the law on wills in 2015 with a view to providing a draft bill by 2018, which could not come soon enough given the unsatisfactory position for unmarried couples.