Wills & Inheritance laws receive a makeover

The Inheritance and Trustees Power Act 2014 (ITPA), which will come into force on 1^st October 2014, will bring about many changes to wills and tax laws.

Three of the main changes will be a new definition for ‘personal chattels’, the simplification of the distribution of assets on intestacy and a revision of the powers of trustees to apply income and capital for beneficiaries.

Personal chattels

The current definition of personal chattels includes ‘carriages’, ‘horses’ and ‘stable furniture’ and is archaic.  The ITPA will introduce the simplified definition of ‘tangible moveable property’. Tangible moveable property does not include property used in a business, assets held as an investment or assets consisting of money or securities for money.

Intestacy

From October 2014, if a person dies intestate (i.e. without a will) and is survived by a spouse, but no children; the whole estate will pass to the spouse.  Presently any surviving parents would also take a share.

If a spouse and children survive and the deceased’s estate is over £250,000, then the spouse receives:

• personal chattels (‘tangible moveable property’)
• a statutory legacy (£250,000 plus interest from date of death); and
• ½ the remainder of the assets.
• The children receive the other half on statutory trusts.  

Presently, the spouse would receive the right to benefit from half the remaining assets (known as a life interest) but not an absolute right to that half remaining share.

The statutory legacy will also be reviewed at least every 5 years and will be in line with the Consumer Price Index.

Finally, if a child dies intestate and the parents are not married at the date of the child’s birth, the current provisions presume that the deceased child was not survived by the father or his side of the family.  The ITPA will amend this provision if the father or parent (other than the mother) is named on the child’s birth certificate.  This will also apply to a same sex couple who have a child by fertility treatment.

Trustees Powers

The ITPA reforms trustees’ statutory powers in line with most professionally drafted wills and trusts.

In short, subject to any express powers in a will or trust deed, the changes will allow trustees to advance the whole of a beneficiary’s prospective share rather than just half and, will remove certain requirements for trustees, when applying income for the maintenance, education or benefit of a minor beneficiary, giving trustees more flexibility in exercising their powers.

The ITPA has been a long time coming and is welcomed by wealth and estate planning practitioners alike.  However, the changes mean it’s time to review your wills and trust documents, to ensure the present law and forthcoming changes will not conflict.