Meeting the needs of the modern family
The Inheritance and Trustees' Powers Act 2014 ("the 2014 Act") is the result of a 6 year project by the Law Commission, and private client practitioners should be well aware of its provisions.
It makes helpful changes to the intestacy rules and furthermore, where those rules or a Will fail to make adequate provision for close family, the 2014 Act removes certain obstacles to a claim under the Inheritance (Provision for Family and Dependants) Act 1975 ("the 1975 Act"). The changes apply to deaths on or after 1 October 2014. The changes are welcome but clients should be wary of relying on them as a substitute for making a Will.
Summary of changes to the Intestacy rules
Married but no children
The new rules make more generous provision for spouses. Take the example of Peter and Pauline, who are married but have no children. Peter dies without a Will. Under the old rules Pauline would receive Peter's personal belongings and the first £450,000 of his estate. The balance of his estate over this amount would be divided in two. Pauline would receive half of the balance outright and the other half would pass in a strict order to Peter's parents, failing whom his siblings. Under the new rules Peter's entire estate would pass to Pauline. Peter will therefore need to make a Will if he wants anyone else to benefit from his estate or to make provision for his wife dying before him or both of them dying together. The same rules apply to civil partners.
Married with children
Now let us assume Peter and Pauline had a child, Philip. Under the old rules Pauline would receive Peter's personal belongings and the first £250,000. The balance of his estate over this amount would be divided in two. Pauline would be entitled to a life interest in half the balance and the other half would pass to Philip at the age of 18. Under the new rules the balance over £250,000 is still divided in two, but Pauline would receive her half outright rather than just a life interest. This greatly enhances the spouse's interest which was previously quite limited.
Suppose that Peter and Pauline are not married. Whether the old rules or the new rules apply, and whether or not Peter is survived by their son Philip, Pauline would receive nothing at all from her partner's estate. The government is considering changes to the law to provide protection for people who have lived together as a couple – these are controversial and are included in a separate Cohabitation Rights Bill which received its first reading in the House of Lords on 9 June 2014. Undoubtedly, unmarried couples should think very carefully about what would happen if one of them died and consider making a Will.
Key changes to the law on family provision claims
In respect of those persons eligible to bring a claim, the "child of the family" category has been extended to include any person who was treated by the deceased as a child of the family in relation to any family in which the deceased stood in the role of a parent. The marriage or civil partnership requirement for a child to apply is therefore removed. This could lead to an increase in claims, and practitioners need to ensure that due consideration is given to this change when advising clients.
So continuing our examples, we shall assume that Peter and Pauline are unmarried and Peter has a son Philip, but he is not the natural child of Pauline. Under the new rules, if Pauline died, Philip would be able to bring a claim against her estate where previously this was not the case. The rules have also been extended to include a single parent family so that a family can include just the deceased and the claimant.
In welcome news, the so-called "negligence trap" in Section 9 of the 1975 Act has been removed. Section 9 permits the court to treat the deceased's share of jointly held property as part of the deceased's net estate. The court is now permitted to exercise this power even where an application is made more than six months after the grant of probate is taken out. This amendment is very helpful to practitioners. Section 9 also deals with the value of the deceased's severable share. It provided that property would be valued at the date of death. However, this caused difficulties where property increased substantially in value between the death and the hearing. Section 9 has been amended to provide that the property will be valued at the date of the hearing, unless the court orders a different date.
Another important change is the amendment to Section 4 which makes it absolutely clear that an application for a claim under the 1975 Act can be made before the grant – there was previously ambiguity regarding this.
The new rules demand consideration. Overall, while the reforms go some way to meeting the needs of the modern family, they fall short in several areas, especially in relation to unmarried couples. That is an area where we hope to see some progress in the not-too-distant future.