Potential important changes to Inheritance Laws
Law Commission bills propose
changes to spouses' and cohabitees' rights to inherit on
intestacy
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Two draft bills published by the
Law Commission could potentially change the rules that apply to the
distribution of the estate of a person who dies intestate, that is,
without a will. The main changes will affect spouses and
co-habitants’ rights to inherit.
If a person dies intestate leaving
a spouse or civil partner but no "issue" (children or, failing
that, grandchildren etc) and if that person also leaves surviving
parents or siblings, under the current law, the surviving spouse
receives only the first £450,000 of the estate plus any personal
property. The rest is then divided equally between the spouse
in one share and the parents of the deceased in the other or, if
there are no surviving parents, the deceased's siblings.
Under the proposed new law, the
surviving spouse or civil partner will receive the whole estate,
irrespective of the value.
Where a person dies leaving a
spouse or civil partner as well as issue, current law provides that
the spouse receives the first £250,000 plus personal
property. The remainder is then divided with half going to the
issue straightaway. The other half is placed in trust to
provide an income for the surviving spouse for his or her lifetime
and then passes to the issue upon death.
Under the proposed new law, the
surviving spouse will still receive a priority lump sum and the
remainder is still split. The difference is that the spouse
receives his or her half outright as capital, to spend as he or she
pleases, rather than in trust.
The proposals under the second
draft bill (‘The Inheritance Co-Habitants Bill’) go even
further. Currently co-habitees have no automatic right to
inherit if their partner dies intestate and usually have to bring a
claim against the estate under the Inheritance (Provision for
Family and Dependants) Act 1975. Such a claim has no guarantee
of success and raises the spectre of inter family litigation and
large legal costs.
The new bill provides that somebody
who has co-habited with a person who dies intestate should be
entitled to a part of their estate if they had been co-habiting for
a period of at least five years immediately prior to death or two
years if the couple had a child living with them.
There are other changes envisaged
which, alongside the two new bills, make the intestacy provisions
more appropriate for the reality of today's society.
So far as co-habitants are
concerned, they are a welcome development. Matthew Evans, Senior
Associate at solicitors Hugh James says “Recent research
undertaken by the Law Commission shows that around 7.5 million
people are living in cohabiting families, representing around 15%
of all families. As such, it is arguably very important that
the law changes to provide for this large section of the
population.”
Mr Evans continues: “The
intention behind the proposals generally is to govern the
circumstances where a person dies without leaving a will.
However, the point that cannot be emphasised enough is that
state-imposed inheritance is rarely satisfactory and can, in most
cases, be easily avoided if people make a valid will. By
taking that simple step, people can decide at which point their
estate passes out of the hands of the state and into their
own.”
It remains to be seen to what
extent the proposals will be adopted into law but, given the
exhaustive consultation process that has been undertaken, it seems
likely that, one way or the other, there will a drastic overhaul of
the inheritance laws in the near future.