On 30 July 2013, the Government introduced the Inheritance and Trustees' Powers Bill to Parliament. The Bill makes reforms in three main areas:-

  1. to the Intestacy Rules in England and Wales (the rules that apply where an individual dies without leaving a valid Will);
  2. to the rules for individuals who want to claim against a deceased person's estate under the Inheritance (Provision for Family and Dependants) Act 1975; and
  3. to trustees' statutory power to advance assets to a beneficiary from a trust under s. 32 of the Trustees Act 1925.

Our previous update on the draft legislation provides a summary of the main provisions (which you can view here). In brief these are:-

1. Intestacy Rules

  • Under the current Intestacy Rules, where the deceased leaves a surviving spouse and children, the spouse receives the first £250,000 of the estate and one half of the remainder on a life interest trust. Under the proposed reforms, the spouse will be entitled to their half of the remaining estate outright, not under trust.
  • Where the Intestacy Rules apply and the deceased dies without children, the spouse at present must share the residuary estate with the deceased's parents or full siblings (and their descendants). Under the proposed reforms, the spouse will receive the whole of the estate.
  • The reforms to the Intestacy Rules in particular are welcome, and bring the rules into the 21st century . We would, however, always advise you to make a Will rather than rely on the Intestacy Rules. This way you can control to whom your assets pass, choose the executors who will administer your estate, and take advantage of any tax planning opportunities. 

2. Inheritance (Provision for Family and Dependants) Act 1975 claims

  • The categories of applicants who can make a financial claim against a deceased person's estate under the Inheritance (Provision for Family and Dependants) Act 1975 is to be extended to anyone treated by the deceased as a child of the family but who is not the deceased's child by marriage or civil partnership.
  • The ability to make a claim against an estate is also to be extended to estates where the deceased was non-domiciled but habitually resident in the UK. Currently, claims are restricted to estates where the deceased died UK domiciled. Someone who is "habitually resident" is described in the explanatory notes to the Bill as someone who is living in the UK for a settled purpose as part of the regular order of his or her life. This is a controversial measure as it will mean that the UK courts will have power to make orders over overseas assets which may or may not be enforceable in the country concerned.

3 Trustees' powers

  • Trustees' powers to advance assets to beneficiaries under the Trustees Act 1925 are to be extended. Currently, the Act allows trustees to pay out up to one half of a beneficiary's prospective capital share in a trust before the beneficiary is absolutely entitled to it. Under these reforms, the power will be extended so that trustees can advance up to 100% of the beneficiary's share.
  • Trustees will no longer be restricted to paying out cash to a beneficiary, but will have the power to advance other assets instead, such as shares or property. This puts the existing case law in this area on a statutory footing.

The Bill will now make its progress through Parliament and we await details of whether any amendments are made to the Bill during these stages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.