New rules on Succession in Scotland - how they will affect who inherits your estate
A changing society
The laws of succession in Scotland – which govern who receives your assets when you die – have finally been brought up to date for the first time in 50 years.
The new Succession (Scotland) Act 2016 which came into force on 4 March 2016 – although many of the provisions have yet to come into effect – is intended to clarify the situation and make it fairer. Here, we examine some of the changes the new law brings in.”
Since the last major examination of succession in 1964, there have been significant changes in Scottish society. Some of these societal changes have already been reflected in new legislation, i.e. the Civil Partnership Act 2004 and Cohabitant’s rights in the Family Law (Scotland) Act 2006.
The new rules governing succession are intended to accommodate for these societal changes so that those who you would wish to inherit your estate are the ones who do.
However, for the past five decades, Wills and estates have been drafted and wound up in line with these old rules so we will all need to familiarise ourselves with the changes.
The new Act will be introduced in two parts, with only Part 1 being in force for the time being although several of the provisions are not yet in effect. Part 2 is still in consultation stages. Part 1 has changed a number of the rules.
Effect on Divorce, Dissolution or Annulment
This relates to the effect of a divorce, dissolution or annulment on (1) a Will and (2) a Special (or Survivorship) Destination. Under the previous rules, a divorce, dissolution or annulment had no effect on a Will in Scotland. Even when the relationship came to an end, the spouse or civil partner could still receive a benefit or power of appointment under a Will. The new legislation reverses that position and now divorce, dissolution or annulment has the effect of revoking any provision in a Will which confers a benefit or power of appointment on the former spouse or former civil partner. The new rules treat the former spouse or former civil partner as having failed to survive the testator. This applies to same-sex marriages and opposite-sex marriages without distinction.
There are two qualifications to this new rule, however. The first is that the rule will not apply where the Will provides that the benefit or the power of appointment should apply even where there has been a divorce, dissolution or annulment and the second is that the provision only applies where the deceased dies domiciled in Scotland and where the divorce, dissolution or annulment is obtained from a court of civil jurisdiction in the United Kingdom, the Channel Islands or the Isle of Man or is otherwise recognised in Scotland.
The new rules for a Special Destination, or a Survivorship Destination as it is otherwise known, provide that such a Destination of property in favour of a former spouse or former civil partner is revoked by the legal end of the relationship. Again, the rule treats the former spouse or former civil partner as having failed to survive the deceased. The new rule also extends the Special Destination to cover moveable as well as heritable property.
Rectification of Will
The 1964 Act had no provision for rectification of a Will, which meant that any errors which had gone unnoticed until after the testator’s death couldn’t be corrected. The new rules give the court power to rectify a Will in certain circumstances but only where the Will has been prepared by someone other than the testator. It has to be shown that the terms do not reflect the intentions of the testator and there has to be extrinsic evidence to support this.
There is a time limit of six months from the date of confirmation (or date of death if confirmation is not being applied for) for an application for rectification and the application must be made by someone with sufficient interest in the application. Another condition is that the deceased must have died in Scotland. The Act also provides protection for an executor who, in good faith, distributes property which is later subject to rectification and protects the title of a third party who acquired that property in good faith.
Revocation of a Will not to revive earlier revoked Will
Contrary to the law under the 1964 Act, the new rules provide that a Will which has been revoked in whole or in part, expressly or impliedly, by a subsequent Will, will not be revived unless the testator expressly re-executes it or revives it in another document.
Death before legacy vests
Under the previous rules, where a beneficiary died before taking a legacy under a Will, in some circumstances the children of the beneficiary would take the legacy which was intended for their deceased parent. The new rules provide that this rule will still exist unless the Will expressly or implies otherwise. This includes where there is a destination over or an express survivorship clause. Where in the past, nephews or nieces could vest in a legacy under this rule, it is only direct descendants who will vest under the new Act.
Liferent: vesting of fee other than on death
Contrary to the current rules on liferents where a fiar only receives the fee on the death of the liferenter, the new legislation provides that where property has been left to someone in liferent, with the intention that it passes to the fiar on the liferenter’s death, it will pass to the fiar at the date of termination of the liferent, whether on death or before, unless the Will expressly provides otherwise.
Destination in Wills and certain trusts: conditional institution
It is common when drafting a Will to leave a legacy or residue to “A whom failing B”. This is normal for the testator to try and prevent a legacy from lapsing should the original beneficiary predecease the testator. It is clear from this what will happen if A was to predecease the testator but it was less clear under the previous legislation what would happen if A survived the testator but then died before taking the legacy. B would either be considered a “conditional institute”, so A would take the legacy and B has no further rights, or B was considered a “substitute” and on A’s death, B would take the legacy.
The new Act provides that where a Will, Trust Deed, etc contains such a destination over, that conditional institution will be presumed whatever the nature of the property. So, once A takes the legacy, B has no further right. This is presumed unless the Will or Trust expressly provides otherwise.
Uncertainty of survivorship
Section 31 of the 1964 Act, provided rules for two situations where two people die simultaneously and it is not known who survived the other. For the purposes of succession, spouses and civil partners were deemed to have failed to survive each other and where the parties weren’t married or in a civil partnership, the younger was deemed to have survived the elder.
The new rule in section 9 of the 2016 Act has revoked the rule for spouses and civil partners and provides that where two people die simultaneously, neither is presumed to have survived the other, provided the rule in section 10 below does not apply.
Equal division of property if the order of beneficiaries’ deaths uncertain
Section 10 covers situations where the property will pass to a person depending on the order of death but that property does not form part of either estate. An example of this is the proceeds of a life policy. This situation wasn’t covered by the 1964 Act so this is a new addition to the legislation. The new rules, therefore, provide that in situations such as this, the property is to be divided equally between the estates of those persons unless there is express provision to the contrary.
Testamentary requirement of survival for a specified period
It is common for a Will to specify that a legacy or residue will fall to A “if they survive for 30 days (or another period) after my death”. In some cases, there is insufficient evidence to suggest that the beneficiary survived for that period of time. In these cases, the new rules provide that the beneficiary should be treated as having failed to survive where there is insufficient evidence to prove otherwise.
This rule is to prevent killers from being able to benefit from the estate of the person they have killed. Under the previous legislation, the killer was deemed to have failed to have survived the victim. The new legislation maintains this regulation but goes on to provide protection for a person who has acquired property in good faith whose title would otherwise be affected by the killer’s forfeiture.
Further powers have been provided to the court for the sheriff clerk to order the execution of documents where those in possession of the property are under a duty to hand it back but are refusing to sign the necessary documentation to do so.
The court now has the power to grant relief under the Forfeiture Act 1982 (where they grant the killer relief from forfeiture to allow them to inherit property from their victim) if the application is made to the court within six months.
Repeal of the Parricide Act
The Parricide Act 1594 made provision for a person who had killed their parent or grandparent to be automatically disinherited from their victim’s estate. There is also a general rule where an individual cannot inherit from the estate of a person they have unlawfully killed and this is not limited to convicted killers.
The new legislation covers this under Forfeiture above so the Parricide Act 1594 has now been repealed.
Estate Administration: Errors in distribution
The 1964 legislation protected executors or trustees who distributed an estate without being aware of the existence of adoption orders and the Law Reform (Miscellaneous Provisions) (Scotland) Act 1972 went further to protect the executors and/or trustees who distributed an estate without being aware of the existence of children where the parents were not married to each other.
The new rules bring these together and also hold that the executor or trustee should not be held liable for any distribution in light of the above so long as they have acted in good faith and made reasonable enquiries.
Protection of Persons acquiring title
The 1964 Act protected buyers who had purchased heritable property in good faith, which had been vested in the executors by virtue of confirmation. This protection however only applied to heritable property and not moveable property.
The new 2016 Act has been extended to offer protection where both heritable and moveable property is concerned.
Gifts made in contemplation of death
A donation mortis causa is a gift made by an individual in contemplation of their death. Although it is a lifetime gift, it wasn’t regarded as an outright gift because it could be revoked by the donor while alive, didn’t defeat legal rights and would be liable for the deceased’s debts should the remainder of their estate be insufficient to meet them.
The new legislation has abolished the mortis causa rule because it is now all but obsolete and the gift in contemplation of death is now regarded as a straight lifetime gift unless it is expressed otherwise.
Expenses of mourning
The new rules have abolished the right of a widow (this never extended to widowers) and family of a deceased person to claim an allowance from the estate to purchase mourning clothes and provide an aliment to enable bills to be met until the estate was distributed. This was a common law right but has now been abolished.
Bonds of Caution
A Bond of Caution (pronounced “kay-shun”) is an insurance document required by the courts before they will grant confirmation in some intestate estates. The Bond does not protect an executor – it protects beneficiaries and ensures that the executor pays who they are obliged to pay from the estate. If the executor does not do so, the insurance company will pay the creditor or beneficiary and thereafter pursue the executor for payment.
The 1964 Act only dispensed with caution for spouses where the intestate estate was exhausted by prior rights. All other executors-dative required to obtain a Bond of Caution before the court would grant confirmation.
The new Act has extended this exemption to include civil partners whose prior rights exhaust the estate, bringing civil partners into line with a spouse in the same position. They have also extended the exemption to estates under £36,000 (small estates) where the simplified procedure applies and where the executor-dative has applied to have the sheriff clerk prepare the inventory and declaration of the confirmation application (Form C1).
Section 20 of the 2016 legislation gives Ministers power to abolish the requirement for executors-dative to find caution. Section 21 provides that Scottish Ministers may make regulations to the effect that the courts are not to appoint persons as executors-dative unless particular conditions are met.
The previous legislation hadn’t changed since 1964 so bringing the rules up to date will be welcome news. Sections 18-22 regarding Bonds of Caution came into force immediately so apply to any Bond of Caution being applied for from 4th March 2016 will be affected by the new rules. The remainder of the Act, excluding the provisions regarding commencement, etc, will be commenced in autumn 2016.
Get in touch
If you would like to know more about the changes to the law on succession, are considering making a Will, or would like any other assistance, please don’t hesitate to get in touch with our private client team
We can provide the assistance you need to protect your assets and your loved ones. This will allow you to put your mind at ease, knowing everything is in hand.
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