As a common law jurisdiction with our roots in the United Kingdom it is understandable we have an interest in what happens “across the pond”. The UK has recently updated their inheritance laws and made large changes to their intestacy laws. Normally we look to the UK for changes but in this case it seems like the UK may have taken a page out of our book. The new Inheritance and Trustees Powers Act 2014 (ITPA 2014) came into effect October 1, 2014 and made changes to the intestacy rules and dependant support rules.
With implementation of the new Act, spouses and civil partners in the UK have new inheritance rights, along with adopted children, unmarried fathers and other family members. Additionally, trustees have new powers to deal with the entire income of trusts and the way in which personal ‘chattels’ are defined has been updated.
Of interest to estate practitioners in Ontario are the revised intestacy rules. Under these rules the UK comes in line with our SLRA rules in that if a person dies without a will and without issue, the residue of the estate shall pass to the surviving spouse absolutely. Prior to this change a surviving spouse was entitled to the first £450,000.00 and the personal property of the deceased with any remainder passing to the deceased’s parents (if they are living) or the deceased’s siblings.
If the deceased leaves a surviving spouse and issue, the surviving spouse receives the personal chattels of the deceased (which has been updated to include all personal property that is not money) as well as a fixed sum of £250,000.00 (approx. CAD $450,000.00) off the top of the estate (similar to the preferential share under the SLRA) and half of the remainder. Under the old rules, if the deceased left a surviving spouse and issue, the spouse received the first £250,000.00 and the personal belongings of the deceased. The remainder was then split between the surviving spouse and the deceased’s children as to 50% to be held for the spouse on trust for life, to pass to the children on the spouse’s death, with an option for the spouse to capitalise that life interest within 12 months of the date of letters of administration, and the other 50% to the children right away.
One of the most notable changes, which differs from the SLRA, is that the fixed sum (preferential share) will be index linked and regularly reviewed, at least every 5 years, whereas our preferential share of $200,000.00 has not been updated since 1995.
The indexing and legislated review of the “preferential share” is something Ontario should seriously consider. The current preferential share of $200,000.00, set in 1995, does not adequately reflect the division of family assets fairly between a spouse and children now.
If a person dies intestate leaving a surviving spouse and two children, the spouse may end up receiving less than half of the estate under the SLRA. The amount the surviving spouse receives may be insufficient for their maintenance, which would then require a dependant support application (an often costly process) or an equalization application.
The changes in the UK are reflective of the modern family and something similar should be considered here. Perhaps rather than setting a specific dollar amount for the preferential share, making the preferential share a proportion of the whole and dividing the remainder?
Until next time,
Sidenote: Argument began on the Carter appeal about assisted suicide yesterday at the Supreme Court of Canada.