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8 January 2008Turcan Connell responds to Scottish Law Commission's Succession Paper
SCOTTISH LAW COMMISSION
DISCUSSION PAPER ON SUCCESSION (DP 136)
RESPONSE BY
TURCAN CONNELL
SOLICITORS AND ASSET MANAGERS
Turcan Connell is pleased to provide this response to the Scottish Law Commission's Discussion Paper on Succession (DP 136).
General
We believe that the doctrine of testamentary freedom is of prime importance in Scots succession law and we believe that a testator should be free to make such arrangements as he or she pleases with as little interference by law as possible.
We agree with the Commission that it should be possible for a testator to disinherit non-dependent adult children. Indeed, by logical extension, it ought to be possible for a testator to disinherit his or her spouse or civil partner, provided that there is some provision in law for protection where there is a degree of financial dependency. We believe that this should be one of the very few exceptions where the law may over-ride to any extent the testator’s clearly expressed wishes.
Intestate Succession
We note with interest the proposals which the Commission has set out in relation to intestate succession. The basic principle appears to be that a fixed sum only will be made available to a surviving spouse or civil partner, with the distribution of estate thereafter being made on the basis of dependency. We see some merit in these proposals.
We have a concern about the amount which is proposed as the spouse/civil partner’s fixed cash entitlement. The suggestion of £300,000 which is made in the Paper does not compare favourably with the current provision afforded a spouse under prior rights (presently a total of £366,000). This ignores, of course, any entitlement to legal rights which might accrue over and above those sums. We would be concerned if the proposal were given effect and the figures were then not uprated on a regular or consistent basis. This would quickly devalue the entitlement of the surviving spouse or civil partner.
If a fixed sum is to be adopted in order to replace the current prior and legal rights regime for spouses in intestate estates, then there must be an appropriate method for its automatic increase on a regular basis. How this should be determined remains to be decided. The Commission has steered away from the notion of average house prices as an appropriate measure, although it was because of the rapid growth in house prices that the level of the prior rights dwellinghouse entitlement was (much belatedly) increased only a few years ago. We consider that some measure which does at least pay heed to the average house price index would be appropriate. A straightforward increase in line with RPIx or similar inflation-related indices may not by itself be sufficient.
Heritable and moveable property; “legal share”
We have noted the proposal to assimilate heritage with moveables for the purposes of succession law. We agree with the Commission that there are areas of difficulty: in particular, the Commission comments on the difficulties which may be presented in the case of agricultural property or landed estates, where the intention is normally for a farm or estate to be bequeathed to one individual (usually a family member) who has the ability and inclination to continue the farming or estate operations. We support the proposal that property of this nature should be excepted from the normal rules of assimilation of heritage with moveables.
We believe that there is a case for ensuring that this exception also extends to historic houses and gardens, which we assume the Commission has intended to include within the same category as agricultural property and landed estates.
We believe that the provisions which are suggested by the Commission in relation to exclusions from the rules on “legal share” ought also to be extended to family businesses. A privately-run family business is in broadly the same position as, for example, an agricultural estate: family involvement is generally restricted to a limited number of family members who have the skills, ability and desire to be involved in the running of the business. Succession to such a business by a large number of disinterested beneficiaries will not always be conducive to the ongoing success of the business going forward and indeed may represent one of the biggest threats to the business’s future.
Cohabitees
Like the Commission, Turcan Connell recognises the shifts in society in the last century in human relationships in Scotland: our client base and the advice which we are regularly asked for shows clearly the increase in the number of people living together in relationships other than that of marriage. We agree entirely that the rights of spouses should be afforded to civil partners and vice versa.
We do not disagree in principle with the notion that a cohabitee who is financially dependent on a deceased person should be able to make some kind of claim on a deceased person's estate in the case of intestacy. We are not aware of any claims of any substance having been made through the Courts which demonstrate how well the current provisions operate and we continue to monitor this with some interest.
One natural concern is the possibility of false claims being made. The Court is presently able to consider such matters as the length of a relationship, its nature, the degree of financial dependency on each other: and we agree that these are the kinds of matters which the Court ought to be considering when claims of this nature are made.
We are concerned by the proposal that there be an extension of cohabitees’ rights to include testate estates. This seems to us to contradict the prime tenet of testamentary freedom. If the Commission’s proposal that a testator should be able to disinherit his non-dependent adult children and, perhaps by extension, his spouse or civil partner (assuming that they are also non-dependent), then the same rules should apply to cohabitees.
On the basis that the state recognises marriage and civil partnerships as having a qualitative difference from straightforward cohabitation, it is not immediately clear to us why two individuals who are not in a marriage or civil partnership should nevertheless have access to the same rights and entitlements under succession law as if they were in such a relationship.
If two individuals wish to have certainty as to their rights under each other’s estates, then they have the option of marrying, entering civil partnership, or making testamentary provision for each other. Failure to do any one of these things may be considered a voluntary act.
Anti-avoidance
We have difficulty with the suggestion that there should be disinheritance anti-avoidance provisions which involve the repayment to the estate of property gifted by the deceased. Creating a personal liability on donees to repay assets to a deceased’s estate takes no account of (a) the deceased’s wishes in making the gift; or (b) the donee’s actions following the gift (i.e. she could have disposed of the asset or spent the cash sum gifted).
An individual may have good reasons for disposing of assets by gift prior to his or her death. Indeed, gifts may be made where early death is not anticipated. It seems to us to be manifestly unjust that a legitimate gift made by a 30 year old who then dies unexpectedly in an accident should then become repayable to the deceased’s estate. The notion that such gifts might be repayable removes (conditionally) the irrevocability of the act of gift and goes against the doctrine of testamentary freedom inasmuch as it prevents the donor from disposing of his assets as he sees fit.
In the event that some form of anti-avoidance provision were to be introduced, which we would not favour, we believe that there would have to be strict time limits for the making of claims for repayment. We believe that a period of two years might be sufficient period for such claims to be made and we would not favour a period in excess of two years. Most executries can be wound up well within a 24 month period and the possibility of a claim having to be made by executors beyond that timescale would cause unnecessary delay in the administration of a deceased’s estate.
It does appear to us that the present rules relating to collation inter liberos achieve some of what the Commission has suggested in relation to anti-avoidance provisions (albeit restricted to children claiming legal rights). The rules of collation are also much simpler to operate. We believe that if any anti-avoidance provisions had to be created for succession purposes then the rules of collation provide a more useful model to follow.
Caution
We agree with the Commission’s suggestion that the need for caution should be abolished. We also agree that it should be within the Sheriff’s power to insist on caution being obtained where there is some particular necessity or uncertainty which requires to be protected against.
If the need for caution is not dispensed with, then we do agree that the requirement should be waived where the estate is exhausted by a civil partner’s prior rights-equivalent, in order to bring civil partners and spouses into line.
Turcan Connell
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