Inheritance And Trustees Powers Act 2014 This Act makes a number of important changes to (a) the rules relating to intestatcy; (b) the Inheritance (Provision for Family and Dependants) Act 1975; and (c) trustees powers. INTESTATCY The new Act changes the rules relating to intestacy as follows: (1) Section 46 of the Administration of Estates Act 1925 (succession to real and personal estate on intestacy) is amended as follows. (2) For the Table in paragraph (i) of subsection (1) substitute-- "TABLE (1) If the intestate leaves no issue: the residuary estate shall be held in trust for the surviving spouse or civil partner absolutely. (2) If the intestate leaves issue: (1) the surviving spouse or civil partner shall take the personal chattels absolutely; (2) the residuary estate of the intestate (other than the personal chattels) shall stand charged with the payment of a fixed net sum, free of death duties and costs, to the surviving spouse or civil partner, together with simple interest on it from the date of the death at the rate provided for by subsection (1A) until paid or appropriated; and (3) subject to providing for the sum and interest referred to in paragraph (B), the residuary estate (other than the personal chattels) shall be held--(a) as to one half, in trust for the surviving spouse or civil partner absolutely, and(b) as to the other half, on the statutory trusts for the issue of the intestate. 1
The amount of the fixed net sum referred to in paragraph (B) of case (2) of this Table is to be determined in accordance with Schedule 1A. Changes: 1. Where intestate leaves spouse but no issue The present position is that the estate is split between the surviving spouse and specified relatives (parent, brother or sister of the whole blood, or issue of a deceased sibling of the whole blood) In such a case, the surviving spouse would today receive: (a) The personal chattels; (b) The higher level statutory legacy ( 450,000); and (c) One half of the remainder absolutely. From 1 st October 2014 the surviving spouse will receive the whole of the estate and the other relatives nothing at all. 2. Where the intestate leaves spouse and issue Today the surviving spouse would receive (a) the personal chattels; (b) the statutory legacy ( 250,000); and (c) a life interest in half of the remainder (which can be capitalised). From 1 st October 2014 the surviving spouse will receive (a) the personal chattels; (b) the statutory legacy (remaining at 250,000); and (c) an absolute interest in one half of the remainder with the issue receiving the other half. 3. Interest As previously, interest is payable on the statutory legacy from the date of death but the rate has changed. It was previously set in 1983 at 6%. 2
The new Act now provides that interest will accrue at the Bank of England rate as at the date of death. Thus the rate will vary according to when the death occurred, without the need for there to be future statutory instruments to effect any change in the rate. 4. Personal Chattels There is a change to the definition of personal chattels, the intention being to bring the definition up to date. Current definition: carriages, horses, stable furniture and effects (not used for business purposes), motor cars and accessories (not used for business purposes), garden effects, domestic animals, plate, plated articles, linen, china, glass, books, pictures, prints, furniture, jewellery, articles of household or personal use or ornament, musical and scientific instruments and apparatus, wines, liquors and consumable stores, but do not include any chattels used at the death of the intestate for business purposes nor money or securities for money New definition: tangible movable property, other than any such property which- consists of money or securities for money, or was used at the death of the intestate solely or mainly for business purposes, or was held at the death of the intestate solely as an investment Note: 5. Adoption If a will or codicil executed before 1 st October 2014 contains a reference to personal chattels defined in Administration of Estates Act 1925 (whatever the form of words), the old definition will apply in the absence of a contrary intention. There is a minor change made in relation to adopted children, in order to remove an anomaly in the present law. Principally, the Act will protect children who might be at risk of losing an inheritance, to which they are already contingently entitled, if they are adopted after the death of their natural parent. 6. Unmarried Fathers The Act also amends the rules in relation to unmarried fathers where the child dies intestate, so that the current presumption of death of the father (or any 3
other person to whom the intestate was related solely through his father) is removed where the father was named on the intestate s birth certificate. 4
INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975 A number of changes, of varying significance, are made to the 1975 Act. 1. Limitation Section 4 is amended by the addition, at the end, of the words (but nothing prevents the making of an application before such representation is first taken out) Section 9 (joint tenancies) is also amended to remove the so-called negligence trap of the anomaly that the court is unable to extend the 6 month limitation period in relation to the severance of a joint tenancy under section 9, even where permission had been granted to bring a claim out of time. 2. Child of the Family The definition is amended so that it is clear that it can now include a child of a single parent family. It is also extended to include any person treated as a child of the deceased in any family in which the deceased had a parental role not just in relation to marriage or civil partnership. 3. Maintenance The wording in section 1 in relation to claims made under subsection (1)(e) - a person dependent on the deceased is amended to read: a person is to be treated as being maintained by the deceased (either wholly or partly, as the case may be) only if the deceased was making a substantial contribution in money or money's worth towards the reasonable needs of that person, other than a contribution made for full valuable consideration pursuant to an arrangement of a commercial nature." The reference to an arrangement of a commercial nature is now included in order to remove the balance sheet assessment in cases of mutual dependency between the applicant and the deceased. The current position is that the applicant must show a contribution towards his or her support in excess of benefits provided by the applicant flowing the other way. The new definition omits the words otherwise than for full valuable consideration save in the context of an arrangement of a commercial nature. The section still requires the applicant to show that the deceased was making a substantial contribution to maintenance. 5
4. Amendments to section 3 (a) In section 3(2) (claims within section 1(1)(a) or (b)) the following words are added but nothing requires the court to treat such provision as setting an upper or lower limit on the provision which may be made by an order under section 2. This amendment does little more than reflect the current position under the case law. (b) In section 3(3) ( claims within section 1(1)(c) or (d) -child or person treated as a child), the court is to have regard to which the applicant was or expected to be educated or maintained and also Current wording: (a) to whether the deceased had assumed any responsibility for the applicant's maintenance and, if so, to the extent to which and the basis upon which the deceased assumed that responsibility and to the length of time for which the deceased discharged that responsibility; (b) to whether in assuming and discharging that responsibility the deceased did so knowing that the applicant was not his own child; (c) to the liability of any other person to maintain the applicant. New wording: (a) to whether the deceased maintained the applicant and, if so, to the length of time for which and basis on which the deceased did so, and to the extent of the contribution made by way of maintenance; (aa) to whether and, if so, to what extent the deceased assumed responsibility for the maintenance of the applicant; (b) to whether in maintaining or assuming responsibility for the applicant the deceased did so knowing that the applicant was not his own child; (c) to the liability of any other person to maintain the applicant (c) In section 3(4) (dependant under section (1)(1)(e)) Current wording: Without prejudice to the generality of paragraph (g) of subsection (1) above, where an application for an order under section 2 of this Act is made by virtue of section 1(1)(e) of this Act, the court shall, in addition to the matters specifically mentioned in paragraphs (a) to (f) of that subsection, have regard to the extent to which and the basis upon which the deceased assumed responsibility for the maintenance of the 6
applicant and to the length of time for which the deceased discharged that responsibility. New Wording: Without prejudice to the generality of paragraph (g) of subsection (1) above, where an application for an order under section 2 of this Act is made by virtue of section 1(1)(e) of this Act, the court shall, in addition to the matters specifically mentioned in paragraphs (a) to (f) of that subsection, have regard (a) to the length of time for which and basis on which the deceased maintained the applicant, and to the extent of the contribution made by way of maintenance; (b) to whether and, if so, to what extent the deceased assumed responsibility for the maintenance of the applicant. It seems, therefore, that the court shall have regard both to the actual maintenance and to the assumption of the responsibility to maintain. (d) Date on which grant is taken out Section 23 1975 Act is amended. Section 20 Administration of Justice Act 1982 (rectification of wills) is amended in like terms. Current wording: In considering for the purposes of this Act when representation with respect to the estate of a deceased person was first taken out, a grant limited to settled land or to trust property shall be left out of account, and a grant limited to real estate or to personal estate shall be left out of account unless a grant limited to the remainder of the estate has previously been made or is made at the same time. New wording: (1) The following are to be left out of account when considering for the purposes of this Act when representation with respect to the estate of a deceased person was first taken out-- (a) a grant limited to settled land or to trust property, (b) any other grant that does not permit any of the estate to be distributed, (c) a grant limited to real estate or to personal estate, unless a grant limited to the remainder of the estate has previously been made or is made at the same time, (d) a grant, or its equivalent, made outside the United Kingdom (but see subsection (2) below). 7
(2) A grant sealed under section 2 of the Colonial Probates Act 1892 counts as a grant made in the United Kingdom for the purposes of this section, but is to be taken as dated on the date of sealing. TRUSTEES POWERS Amendments are made to both section 31 and section 32 Trustee Act 1925. Section 31 Currently, trustees have the power to apply income for the maintenance, education or benefit of a minor or to accumulate surplus income during his minority - Current wording: as may in all the circumstances be reasonable New wording: as the trustees may think fit Further, the following proviso is deleted Provided that, in deciding whether the whole or any part of the income of the property is during a minority to be paid or applied for the purposes aforesaid, the trustees shall have regard to the age of the infant and his requirements and generally to the circumstances of the case, and in particular to what other income, if any, is applicable for the same purposes; and where trustees have notice that the income of more than one fund is applicable for those purposes, then, so far as practicable, unless the entire income of the funds is paid or applied as aforesaid or the court otherwise directs, a proportionate part only of the income of each fund shall be so paid or applied. The effect, therefore, is to give the trustees complete discretion. These changes shall apply only to trusts created or arising after 1 st October 2014. Section 32 The wording of the section is changed so as to permit the trustees to make an advancement in the form of property forming part of the trust fund as well as capital money. This change applies to all trusts, whenever created or arising. In the proviso, the words one half are omitted so that trustees may now advance the whole of a beneficiary s presumptive share. This change applies only to trusts created or arising after 1 st October 2014. 8
Nicola Preston No5 Chambers + 44 (0) 845 210 5555 np@no5.com 9
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