The Inheritance and Trustees’ Powers Act 2014

The Inheritance and Trustees' Powers Act 2014 (ITPA 2014) represents the biggest legislative change for Private Client practitioners in a number of years and makes significant changes to the law governing intestacy and family provision claims under the Inheritance (Provision for Family and Dependants) Act 1975. It is intended that it will come into force on 1 October 2014.

What is meant by "intestacy”?

Where someone dies "intestate”, they have died without a will. As the deceased has not made provision for family and dependants through a will, the laws of England and Wales determine how their assets are distributed.

For a long time, private client practitioners have called for changes to what is considered to be an outdated system. Under current rules, co-habitees of the deceased have no automatic right to receive anything from a deceased's estate - even if they have lived together for a number of years or even if they have had children together.

The Intestacy Rules have not been updated for over 20 years and it was hoped, prior to the changes, that the ITPA 2014 would modernise the current rules to give partners in unmarried relationships rights over their deceased partner's estate if they had lived together for five years prior to death. Despite the new legislation however, there has been no such change. It remains the case that the only way to ensure that part, or all, of your estate will go to your partner is to marry them, or make a will in which they are named as a beneficiary.

The rule changes in ITPA 2014 won't affect people who die with less than £250,000 in assets. But for those with more - and there's a growing number following the explosion in house prices - it could have a crucial impact on the people they leave behind.

So what are the main changes following 1 October 2014?

  1. The biggest change is for married couples and civil partnerships where there are no children.

    Under the old rules, if a spouse died without a will and there were no children, then the first £450,000 of the deceased's estate, plus half of the rest, went to the surviving spouse. The other half was split between the deceased's blood relatives - dependant on who had survived the deceased.

    Under the new rules, the surviving spouse will receive the whole of the deceased's estate, whatever the value, meaning that it is impossible for parents and long-lost relatives to inherit.

  2. ITPA 2014 also introduces some important changes where a spouse/ civil partner dies intestate with children.

    Under the old rules, the spouse/civil partner inherits assets from a deceased's estate up to £250,000, known as the 'Statutory Legacy'. The rules for determining how the remainder of the estate is to be distributed follows a complicated system whereby the children would receive half of the balance above £250,000 immediately (or held in trust to the age of 18) and the other half would also go to the children, but not until the death of the surviving spouse. The surviving spouse would have a "life interest” in the money while he or she remained alive. The life interest means he or she could take income from the money, but not the capital.

    In a welcome move from the existing complicated system, from 1 October, the "life interest” concept is abolished. A surviving spouse/civil partner will therefore take the Statutory Legacy of £250,000 and also one half of the remainder of the estate. Children will be limited to half of anything above £250,000, which they will receive at 18.

  3. The Statutory Legacy -

    ITPA 2014 provides a mechanism by which the Statutory Legacy will be regularly uplifted so that it does not fall behind the "real” level of prices. Under the new rules, the Lord Chancellor must review and set the Statutory Legacy every 5 years.

  4. The definition of chattels is also updated by ITPA 2014.

    The archaic and complex definition applied to a person's chattels on death has been modernised to reflect "tangiable moveable property” belonging to the deceased at the date of his or her death.

    The new definition excludes "money and securities for money”, chattels "used at the death of the intestate sole or mainly for business purposes” and chattels "held at the death of the intestate solely as an investment”.

  5. The new rules also ensure that a child who is adopted after the death of a natural parent will not lose their inheritance from the estate of that natural parent. Under the old rules, a legal anomaly existed which meant that if someone died leaving a child under the age of 18 who was subsequently adopted, there was a risk that the child would lose their inheritance from their natural parent.