Following on from the Scottish Government’s 2015 consultation on the law of succession (the response to which was released at the end of last year), a further consultation paper has now been launched. This tackles some of the difficult questions left unanswered after the previous consultation exercise, focusing on what should happen to your assets if you die without a will.
What happens to my worldly wealth at the moment?
If you die without a will, you are said to be ‘intestate’. This means that all of the assets you leave behind (your ‘estate’) are divided up amongst various beneficiaries according to a strict set of rules.
These provide any surviving spouse/civil partner with a share of the family home and furnishings (up to a certain value) and a right to a proportion of the remaining ‘moveable’ assets (i.e. everything which is not land and buildings – often called ‘heritable’ assets).
The rest of your estate is then distributed amongst your other beneficiaries in a certain order of priority:
• your children
• your siblings and/or parents
• your spouse/civil partner
• more remote relatives
• finally, the Crown
So what’s the problem with the existing rules?
Due to their rather rigid structure, the rules can bring about unexpected results. For example, if you die without children, after the initial entitlements of a surviving spouse/civil partner are used up, your siblings and parents will inherit before your spouse/civil partner.
The rules can therefore potentially result in your spouse/civil partner receiving far less than you would want while other family members benefit from your wealth.
The intestacy rules also haven’t kept up with the modern family structures. For example, step-children have no entitlement to a step-parent’s estate and cohabitants only have very limited rights. This can lead to considerable unfairness.
Are there any easy solutions?
The Scottish Government has already announced that they will be changing the law so that if you die without a will:
• a spouse/civil partner will inherit your whole estate if you have no children; and
• if you have no spouse/civil partner, your children will inherit the whole estate.
These changes are uncontroversial and are a welcome simplification.
The difficult question - what should happen when there is both a surviving spouse/civil partner and surviving children?
The Scottish Government, drawing inspiration from other jurisdictions, has outlined two potential alternatives: a ‘threshold’ system and a ‘community property’ approach.
The introduction of a threshold system would see the surviving spouse/civil partner receive a share of the deceased’s whole estate up to set value with the children being entitled to the remainder.
A community property approach, however, would see the adoption of a concept similar to that of ‘matrimonial property’ which features in the law of separation and divorce. This would see a spouse entitled to receive a larger share of the property acquired during the course of the marriage, but a smaller share of any other assets.
What are the pros and cons of a ‘threshold’ system?
A threshold system is somewhat similar to the existing law and it should be relatively easy to put into practice as it simply requires assets to be divided depending on their value.
The potential difficulty of this approach is determining where to set the threshold? If it’s too low, the surviving spouse may not receive a large enough share of the estate, whereas if it’s too high, children are at risk of being disinherited entirely.
What are the pros and cons of a ‘community property’ approach?
The adoption of a matrimonial property-type model in a succession context will be a considerable change compared with current practice. It’s thought that this approach could be more flexible and could remove some of the unfairness which can exist in the present system, especially where the deceased’s children may be from a previous marriage.
It’s likely, however, that this approach may be more difficult to put into practice as the origin of each asset in an estate needs to be determined before it can be passed to the appropriate beneficiary. This could lead to uncertainty, disputes and costs.
Are there other answers?
The Government has expressed the opinion that the community property approach is quite an attractive option but they have invited Scots to have their say. This is a complicated area of law and there are no easy answers, but you can access the consultation here and make your voice heard.
What if I have a will?
This consultation is almost entirely focussed on the law of ‘intestacy’ and so, with very few exceptions, the result of the consultation will not affect those who have put a will in place.
The Scottish Government had also looked at reforming succession rights where there was a will but any changes were shelved as no consensus could be reached on what should replace the existing regime for protection of family members from disinheritance.
The law of intestacy seems very complex and uncertain – what can I do?
We’ll be watching the result of the consultation with interest and will keep you updated as things develop.
In the meantime, if you want to avoid the difficulties that go along with leaving an intestate estate, you simply need to make a valid will.