“Get a will and keep it up to date” is advice that often appears in the personal finance pages and elsewhere. A recent lapse in concentration from the Ministry of Justice illustrates how important that advice can be.
The lapse from the Ministry of Justice involved a key intestacy limit that was due to increase in December 2022. Instead, the timing was overlooked… until July 2023, potentially leaving beneficiaries worse off.
To cover the legal background, in 2014, an amendment to the Administration of Estates Act 1925 was added stating that “the Lord Chancellor must, before the end of a period of 21 days” increase the fixed monetary amount if the consumer price index (CPI) measure of inflation had risen by more than 15% since the figure was last set.
The aim of the amendment was to ensure that the fixed monetary amount for intestacy legacies did not suffer the fate of, for example, the inheritance tax nil rate band, and have its value seriously eroded by inflation over time.
In November 2022, the CPI triggered the increase clause, but the Ministry of Justice failed to notice. In fact, it was not until 26 July 2023 that the overdue increase took effect. By then inflation was enough to mean the increase applied was 19.3% – a £52,000 rise from £270,000 to £322,000. An embarrassed Ministry did not issue any accompanying press release and made no reference to the seven-month delay in the explanatory note to the regulation introducing the higher limit.
The House of Lords Secondary Legislation Scrutiny Committee was unimpressed, saying that the Ministry had made an “inexcusable error in timing” and “breached the law”. The Committee also noted that “some estate beneficiaries may have lost out because they have received amounts that are significantly lower than they would have been entitled to…”.
The intestacy rules for England and Wales state that where there is no will, if on first death the deceased leaves children, grandchildren or great grandchildren, the surviving spouse or civil partner is entitled to the deceased’s personal chattels plus the lesser of:
· the value of the deceased’s residual estate; and
· a fixed monetary amount plus half the remaining estate.
Intestacy rules differ throughout the UK and there are no automatic increase triggers in Scottish or Northern Irish legislation, where fixed cash amounts applying in similar circumstances have not been revised since February 2012 and January 2008 respectively.
The significant lapse by the Ministry of Justice is just one more reason why having a current will is such an important recommendation. So what are you waiting for?
The Financial Conduct Authority does not regulate tax, wills or estate planning advice.
If you believe we can help you with your finances please contact us:
