By Bob Howard
BBC Radio 4's Money Box
Alastair Collett thinks it is time the rates were changed
More money should be allowed to parents with dependent children if their spouse dies without a will, say legal experts.
In England and Wales husbands, wives and civil partners are eligible for the first £125,000 of the estate plus the interest on half of the remainder.
The rate has not been changed since 1993.
Some surviving parents say the income is not sufficient and they may be forced to sell the family home to pay the inheritance tax bill.
They can claim more from a court, but this means a potential legal battle with their own children.
The issue was highlighted this week after a mother filed papers at the High Court after most of her husband's estate was passed to their dependent children after he died without leaving a will.
Only around one in every five parents makes a will according to a survey last year conducted by the National Consumer Council.
If someone dies without one, their estate is dealt with according to the rules of intestacy.
The £125,000 due to a husband or wife is called the "statutory legacy".
If there are no children but other surviving relatives, the surviving spouse receives the first £200,000.
Inheritance tax implications
Only spouses and civil partners have any exemption from inheritance tax, so if dependent children inherit directly from a deceased parent they may be liable to pay tax on their inheritance at 40%.
This can force the sale of the family home.
Alastair Collett, partner at law firm Bircham Dyson Bell, said it was time the rates were changed:
"They certainly need to be reviewed and increased because the value of housing in particular has increased in the intervening years.
"The greatest complaint that comes up is that the statutory legacy doesn't allow the spouse to stay in the house" he added.
Research for the Department for Constitutional Affairs found there could be up to 9,000 estates where the statutory legacy prevents the surviving spouse from receiving the whole estate, and of these, about 4,000 where the surviving spouse might be at risk of losing the home.
Geoffrey Shindler, President of the Society of Trust and Estate Practitioners said there is an urgent need for change:
"The widow is actually suing her own children - it's a disaster - it's finding the remedy that's the problem.
"I would increase the £125,000 immediately: I would say no less than £300,000 and I would index link this to the retail price index."
A consultation paper for the Department for Constitutional Affairs in 2005 recommended the statutory legacy be increased to £350,000 where the deceased has children and up to £650,000 if they do not.
The Ministry of Justice said it intends to publish responses to the consultation "in due course."
The Law Commission for England and Wales expects to start reviewing the laws on intestacy in the Autumn.
It will publish its findings by 2011.
The Scottish Law Commission is also about to carry out a similar review.
In Scotland in cases where the deceased has children, the surviving spouse is due the home or share of the home belonging to the deceased up to £300,000 and contents of the home up to £24,000.
They also receive a cash sum of up to £42,000.
Both the spouse and children get a third of the estate, other than land or buildings, left after the prior rights have been satisfied.
The remaining third is put into the remainder of the estate which is shared between the children.
BBC Radio 4's Money Box was broadcast on Saturday,
5 July 2008 at 1204 BST.