Inheritance reforms do not offer enough protection, warns lawyer

A legal expert has argued that the imminent passing of the Inheritance and Trustees' Powers Act, while significantly changing the law surrounding distribution of inheritance when an individual dies, will leave cohabiting partners, children from previous marriages, parents and siblings overlooked and ignored.

James Ward, private client partner at Seddons, says: "These attempts to modernise the intestacy laws in order to better deal with the complexities of contemporary family life should be welcomed. However, the reforms coming into play do not significantly protect cohabiting partners, children from previous marriages or wider family members."

Under the new provisions, spouses and partners are set to inherit more. In the past, when an individual died without a valid will and left behind a surviving spouse or partner, that spouse or partner would receive the first £450,000 of the residuary estate if the deceased had no children. This would include any property left over when all debts and administrative expenses have been paid from the estate and anything up to the entirety of the remainder of the estate, depending on what other surviving family the deceased had.

If the deceased had children, the surviving spouse or partner would receive the first £250,000 of the residuary estate, plus a life interest in half of everything else left in the estate.

Life interest

Ward warns that it is now more important than ever for individuals with children from a previous marriage to make a will: "The change sees the life interest trust over the spouse's half share of the assets disappear meaning that assets falling in that half share are never likely to go back to the children of the first marriage, as they did under the previous rules. An untimely death may, therefore, see your second spouse take over 50 per cent of everything."

Ward continues: "If a married individual dies leaving no children, then assets will pass automatically to their spouse. Previously, after a statutory legacy of £450,000, half of this would have gone to the parents or siblings. In new marriages, having the spouse take everything may not have been the intention of the deceased.

"Under the new Act, unmarried, cohabiting partners still have no legal intestacy rights. It is a shame that the Law Commission's recommendation of a co-habitation bill has not yet been taken up by Parliament, as this would have given unmarried partners who had lived together for more than five years (reducing to two years, if the couple had a child together) substantial legal rights and protection."

Will importance

Ward admits that although the Inheritance and Trustees' Powers Act 2014 streamlines the intestacy process and removes some obvious anomalies, it is impossible for the intestacy laws to work in every situation given the increasing complexity of modern family life.

"The only way to truly protect your assets and guarantee your inheritance is by drafting a will to represent your wishes. It is estimated that between half and two-thirds of the adult UK population do not have a current will. With more and more 'baby boomers' now entering later life, the need for wills to be drafted and regularly updated is more important than ever," he explains.

Commenting on the new legislation, Law Society president, Andrew Caplen, said: "The changes to the intestacy rules serve as a reminder of the importance of having a will. Dying without a valid will not only means your final wishes may go unheeded, but a financial and emotional mess is left for your loved ones to sort out. This need not be your final legacy."

He concluded: "We urge people to use a qualified, insured solicitor because they are trained to spot and address the issues that could lead to trouble later. As the law currently stands anyone can set themselves up as a 'will writer'. It is important consumers are able to distinguish between those who are unregulated, uninsured and untrained, and solicitors who specialise in this area and offer a quality service. For full consumer protection the only prudent choice is to instruct a solicitor to prepare a will."

Additional changes

Other changes include the altering of the position for adopted children. Where children were adopted after the death of their parents, the new legislation ensures they do not lose any potential claim to inheritance. Under the current system, when children lose their parents and are subsequently adopted they can lose their claim.

There is also an expansion of the definition of those who can make a claim against the deceased's estate to include a person who was 'treated as a child of the family' even though they were not a child of the deceased's spouse or civil partner. Under the old rules the person had to be a child of the deceased's spouse or civil partner.

Finally, there has been a change to the definition of 'personal chattels'. Some moveable items can now be considered an investment and, therefore, are not captured by the definition of personal chattels. This change in definition may mean a need to update a will to ensure that personal belongings are left to those that the deceased intended them to be.