The Inheritance and Trustees’ Power Act 2014

Last year we saw significant changes to intestacy rules and trustee’s powers introduced by The Inheritance and Trustees’ Power Act 2014.  Whilst the changes have been welcomed in the main, a client’s intentions may not come to fruition without a thorough and regular will review and, in many cases, this should be done in coincidence with independent financial advice.

Now, more so than ever, it’s vital for clients to have a will in place to ensure that their assets are dealt with according to their wishes when they pass away.  Whilst spouses stand to benefit from the new rules, co-habiting partners and step-children, in particular, will receive nothing if a will is not in place.

What has changed?

Intestacy rules govern how a deceased’s estate will be divided if a valid will is not in place.  In summary, the changes mean that:

  • If the deceased has no children, then their spouse or civil partner will receive 100% of their estate outright. Prior to the changes, parents or siblings may have been able to claim a share of the estate.
  • If the deceased has children, then their spouse will receive;
    i) all ‘personal chattels’
    ii) £250,000 outright (or the entire estate if the value is less than this amount)
    iii) 50% of the remaining balanceThe remaining 50% will be inherited by the deceased’s biological or adopted children.  If under the age of 18, their share will be held in trust until they reach the age of 18.
  • The £250,000 level will be reviewed at regular intervals to keep pace with inflation.
  • The definition of ‘personal chattels’ has been simplified to include any tangible moveable property, such as jewellery or furniture. This definition has three key exceptions:
    i) money and securities
    ii) assets used solely or mainly for business
    iii) assets held solely or mainly for investment purposes

Whilst these changes benefit spouses, they may not always reflect the wishes of the deceased.  For example, they may prefer their children to inherit only when both parents have passed or they may wish for step-children to receive a share of their assets.  These kind of specific requests must be dealt with by a will as they are not accommodated under current intestacy rules.

Pension Death Benefits

Alongside a will review, your client’s pension death benefit instructions should also be reassessed, particularly in light of the Government’s recent abolishment of the 55% tax charge upon death.  These changes have made it possible for savers to pass on their pension as inheritance, making it a more attractive investment proposition.