The Inheritance and Trustees Powers Act 2014 (ITPA 2014)
The Inheritance and Trustees Powers Act 2014 (ITPA 2014) came into force on 1 October 2014. The table below summarises the changes. If you don’t have a Will you may wish to consider getting a Will given the changes below. Please call us on 0207 998 7777.
|Deceased dies leaving:||Old rules (until 30 September 2014)||New rules (from 1 October 2014)|
|A spouse / civil partner but no children(parents and / or siblings survive)||Spouse / civil partner receives: (i) the first £450,000; (ii) Personal chattels; and (iii) One half of the remainder of the estate. Parents receive the remaining half of the estate (or siblings if no surviving parents)||Spouse / civil partner receives whole estate. Parents / siblings do not receive anything|
|A spouse / civil partner and children||Spouse / civil partner receives: (i) the first £250,000; (ii) personal chattels; and (iii) a life interest in half of the remainder of the estate. Children receive the remaining half of the estate at 18.||Spouse / civil partner receives: (i) the first £250,000; (ii) personal chattels; and (iii) half of the estate outright. Children receive the remaining half of the estate at 18.|
|No Spouse, No Siblings, No Parents, No surviving relatives (i.e. no uncles & aunts, no cousins, no nieces & nephews etc)||Everything to the Crown||No Change|
When do the Intestacy Rules apply?
(i) When the deceased has not left a Will (or a Will that has not been executed validly);
(ii) When the deceased’s Will has gifts that fail and those gifts fall under the intestacy rules because the Will does not apply to those gifts. This is called a partial intestacy.
The intestacy rules do not apply to jointly owned property (including bank accounts) that is owned as “Joint Tenants” and you may need to get advice to determine if property is held as “Joint Tenants”.
In general terms, anybody with assets of £1m or more (ignoring any debt) should always consider the tax consequences of his death and the impact on family and friends. Similarly if you run a business you should have a Will so the executors can run your business.
What are the tax effects of not bothering to make a Will and relying on the Intestacy Rules?
(i) UK individuals has an amount exempt from inheritance tax which is £325,000 (but for a non-UK domiciled the amount can be much lower – £55,000). If the deceased is a widow or widower, then the deceased may be entitled to carry forward his deceased’s spouse unused nil rate band (so the maximum could be £650,000 for a widowed spouse whose deceased spouse did not use the nil rate band);
(ii) However, if you are married with children, many testators like to use their nil rate band for beneficiaries that are not “exempt” from inheritance tax, and then use the spouse exemption for say the family home. This can mean there is very little inheritance tax to pay.
For more information please contact our Tax specialist Alison Phillips at: firstname.lastname@example.org or call us on +44 (0)207 998 7777.