Step change

The Inheritance and Trustees’ Powers Act 2014 was given royal assent on 24 May 2014 and is expected to come into force on 1 October 2014. The Act (as it now is) makes some significant changes from a contentious probate perspective to the law of intestacy and provision claims under the Inheritance (Provision for Family and Dependants) Act 1975.

There are two significant changes
to the current law on intestacy:

• The Act will ensure that, where a couple is married, the whole estate passes on intestacy to the surviving spouse in all cases where there are
  no children or descendants.

• When a person dies intestate and has surviving children the Act simplifies the sharing of assets on intestacy. The surviving spouse takes the personal chattels (which now have a new definition) and a statutory legacy of £250,000 (as now), plus half of any balance of the estate outright. This removes the current intestacy rule that creates a statutory life interest trust of one half of the residue for the surviving spouse or civil partner, which will reduce costs and make
  the law easier to understand and apply. The surviving children
  or other descendants take the
  remaining half on statutory trusts.

There are also amends to the 1975 Act.

• Children: the Act recognises that a family unit may exist outside of what we consider to be traditional family and allows for a 1975 Act claim to be brought by a person who was treated as a child of the deceased regardless of whether that relationship had arisen because of the marriage of any person in that unit or not. This includes the situation where the family consists simply of the deceased and that person. For example, whereby the deceased was the unmarried partner of the parent of a child, the child will now have a right to make a claim against the estate as though they were a child of the deceased even if their own parent had passed away prior to the death
  of the deceased.

• Dependants: a person may qualify as being maintained by the deceased (and so eligible to make a family provision claim) if 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. This means that a person claiming as a dependant no longer needs to show that the deceased contributed more to the relationship than the applicant did. This removes the ‘balance sheet’ test that can block claims in cases of mutual dependency.

• Assets held as joint tenants: under section 9 of the 1975 Act, the court may treat the deceased’s share of such property as part of the deceased’s net estate to the extent that the court considers to be just in all circumstances. This enables an applicant to access a valuable resource to meet their claim.
  Currently, to bring such assets into account applications under the 1975 Act must be made within six months of the date that a grant of representation is first taken out, failing which the assets fall outside the net estate and cannot be included in any provision claim. The Act removes this ‘guillotine’ date, so applications, even if outside the six-month time limit, can now include such assets.

• Commencing claims: previously, to commence proceedings a grant of probate had first to be issued. This often delayed the commencement
  of claims unnecessarily. The Act makes it clear that proceedings may be commenced before a grant is issued.

Therefore, the changes effected by the Act to intestacies will see an end to claims by surviving spouses where there are no children or descendants as the whole estate now passes to them. And there will be a reduction in surviving-spouse claims where the deceased dies intestate leaving children because the statutory life interest is now substituted for an outright interest in one half
of the residue.

Conversely, widening the class of applicants treated as a child of the deceased, and the removal of the balance sheet test in maintenance claims, is likely to see more dependant applications.

Lloyd Junor is a senior associate at Thomas Eggar

He writes the regular in-practice article on wealth structuring for Private Client Adviser