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RFPG
Wills – Practical Points, Hints and Wrinkles and the Future
September 2014
Practical (but important) points in Will Drafting There are a number of points which should be kept in view when drafting a Will. Admittedly some are obscure, others not so. I do not claim that the following list is exhaustive. However, they represent points to watch out for:-
• Always bear in mind the question of your client’s capacity. Capacity is a very difficult topic
and there would appear to be an increasing number of challenges (particularly in England)
to Wills based on allegations that the Will was made at a point in time where the testator
lacked capacity. The difficulties which can arise here would justify a Seminar on their own.
The point I wish to make is that you may find yourself in a situation where you are not sure
as to whether or not the client before you lacks capacity. In such circumstances, I think
best practice would dictate that you seek an assessment of your client’s capacity to make a
Will from a suitably qualified clinician. The main thrust of the point which I wish to make to
you today is this – do not just write to the clinician indicating that your client wishes to make
a Will and requiring the viewpoint of that clinician as to whether or not your client retains
capacity. What is wrong with that approach? Frankly, you are not providing the clinician
with sufficient information to form a proper and decided view. This means that quite apart
from enquiring as to testamentary capacity, the clinician requires to have further information.
The British Geriatric Society Guidelines on capacity and testamentary capacity – Best
Practice Guide 2.2 (Updated 2006) stated in terms of General Rule 6
“Any assessment of mental capacity must be made with reference to a particular
task. Thus, testamentary capacity has to be determined with regard to a particular
Will - the more complex a disposition, the greater the mental capacity necessary.
The doctor has to have some idea of the extent and complexity of the Estate and
the number and nature of likely claims”.
In particular, it is well accepted in both Scotland and England that where the individual
suffers from a delusion, this can “poison” the mind of the testator and affect the disposition
of his Will. This means that, if, for example, the testator (whose capacity may be in doubt)
has indicated that he wishes to exclude a child (whom you might normally expect to have
been a beneficiary) you should explain to the clinician the reasons put forward to you by the
individual for such exclusion and seek the view of the clinician as to whether or not the
testator does suffer from some delusion which is affecting the disposition of his
testamentary instructions.
Do not lose sight of the important Guidance Notes issued by the Law Society of Scotland
in August 2013 in relation to Powers of Attorney and Vulnerable Clients.
• Never express the appointment of Executors to be “joint”. The reason for this is that the
Commissary Clerk will not (in certain circumstances) grant Confirmation on a Will where, for
example, the testator has stated:-
“I appoint A and B jointly as my Executors”.
If one of the Executors is unable to act for any reason, the Commissary Clerk takes the view
that the appointment of the other Executor has fallen. This leaves you with a Will which is
valid, but no Executors, and the normal (but not insurmountable) problems which can be
faced in that situation.
Similarly, avoid the expression “sole Executor”. Why?
• Always be wary of the conditio si testator sine liberis decesserit. The effects of the same
can be drastic.
Many clients do, for personal reasons, will understandably wish to name their children.
However, where that approach is adopted, unless appropriate drafting is employed, and
where another child is born to, or adopted by, the testator after the date of the Will, then
problems can arise. If the client wishes to name their children (and there is nothing wrong
with this) then always add on an additional phrase (why a client should not wish you to add
the following clause might give you pause to query such a decision) i.e.
“….and any other child of mine born to or adopted by me after the date of these
presents…”
The “nuclear” effect of the conditio was most recently seen in the case of Greenan v
Courtney 2007 SLT 355.
The Scottish Law Commission favours the abolition of this condition. This viewpoint is
repeated in the very recent Consultation on Technical Issues relating to Succession
(August 2014) issued by the Scottish Government. It seems clear that this Conditio will be
abolished – but will this abolition relate to all Wills whenever executed, or only to those
granted after inception of the relevant legislation?
• Make sure that clients are not confusing children/adopted children with stepchildren. As
discussed, the Law Commission has noted, there are more step relationships in Scottish
society than ever before. This is likely to increase. The Scottish Law Commission had
considered whether or not Scots Law should be amended to provide the Rights to
Succession to stepchildren but (I think rightly) concluded against this. The particular
problem which I have in mind is where a step-parent treats a stepchild as one of their own
having “accepted” the step child for the purpose of Maintenance. However, even where a
stepchild has been accepted and therefore may claim a right to aliment, this opens no
Rights of Succession in the step-parent’s Estate. If a step-parent wishes to benefit a
stepchild, then he or she must specifically provide for this in his or her Will.
• Make sure you avoid the conditio si institutus where a testator clearly intends that a bequest
is not to pass to the issue of the legatee. This is fairly simple.
An example of a bequest which would avoid the effect of the conditio si institutus is:-
“… I bequeath a legacy of TWENTY THOUSAND POUNDS (£20,000) STERLING
to my nephew, JAMES SMITH, residing at One Brown Street, Gourock but
expressly excluding his issue.”
I deliberately chose the foregoing example. For some strange reason, Scots law still
(bizarrely, in my view) recognises that the conditio applies not just to issue but also to
nephew and nieces. The Scottish Law Commission is of the view that the conditio should
be amended so that it no longer applies to nephews and nieces, only to direct descendants
(again see the Consultation referred to above).
The conditio si institutus does not apply to inter vivos deeds – Trustees of the Gwendolen
Beatrice Thomson Trust, Petitioners 1963 SC 41.
• Always check your drafts carefully – The use of one small simple (and wrong) word can
have a dramatic effect. Again see the Greenan case referred to above.
• Always send a copy of the draft to the client to be approved by them. In the English case of
Hawes v. Burgess and Another 2013 EWCA Civ 74 the Court of Appeal allowed a
challenge to a will on the basis of “want of knowledge and approval”. Inter alia, even
although the will had been read over to the testator prior to signature, the Court placed
some importance on the fact that a draft had not been sent to him for approval prior to his
meeting with his solicitor to sign the document.
• Where charities are to benefit, check their details – full name, Registered Charity Number
and current address. Do not simply rely on the details provided by the client. Why?
• If you are asked to incorporate a Nil Rate Band legacy/Discretionary legacy provision, then
be careful as to how you word the same. In the case of RSPCA v Sharp 2010 EWCA Civ
1474 the testator had made a Will which included a legacy in terms of which the testator
bequeathed the maximum amount he could “without Inheritance Tax becoming payable in
respect of this gift” to be divided between two individuals. The testator bequeathed his
dwellinghouse to one of those individuals in terms of a separate bequest, providing that
Inheritance Tax, if any, due in respect of the property was to be payable out of the testator’s
residuary estate. The residuary estate was left to the RSPCA.
At the testator’s death, his estate comprised assets valued at £780,000. His dwellinghouse
was valued at £169,000. The Executor had administered the estate on the basis that the
pecuniary legacy referred to amounted to the entire Nil Rate Band (then £300,000). The
Executor took the view that the dwellinghouse passed to the relevant beneficiary free of
Inheritance Tax which required to be borne by the residue – which had, of course, been
bequeathed to a charity.
The RSPCA contended that the Executor’s construction of the Will was incorrect. In the
charity’s view, the gift of the unused Nil Rate Band was only of such amount as remained
after the value of the dwellinghouse (also subject to a specific bequest) had been taken into
account.
At first instance, the Judge found in favour of the Executor’s construction of the Will. The
charity appealed to the Court of Appeal.
The Court of Appeal overturned the decision of the lower Court and upheld the charity’s
construction. The Court of Appeal took the view that the phrase at issue contemplated
calculation of the Nil Rate Band by reference to all transfers of value made by the Will. The
phrase was not superfluous but an accurate recognition of how Inheritance Tax worked.
The Court held that the draftsman of the Will had appreciated gifts under the relevant
clauses would be aggregated in order to calculate what was left of the Nil Rate Band. The
legacy of what was left of the Nil Rate Band was therefore limited to what might left of the Nil
Rate Band, taking into account the specific bequest of the dwellinghouse.
I think it also noteworthy that the Court of Appeal rejected the suggestion made on behalf of
the Executors that the relevant clauses in the Will required to be regarded as taking effect
sequentially i.e. that the Nil Rate Band legacy was equal to the whole of the Nil Rate Band
and therefore Clause (iv) should not be taken into account when construing Clause (iii).
However, the Court took the view that this was in inappropriate way to read the Will. The
Court pointed out that payment of debts and expenses had been placed after the two
clauses under discussion despite that obligation taking precedence over the same. The
Court of Appeal held that this undermined the contention that the effect of the clauses was
intended to be strictly sequential. In the Court’s view, clear words were required, and
otherwise that one clause could not be construed as being subordinate to the another simply
because it was later in the Will (see also the case of Thwaites v Foreman 63 ER 477).
The possible effect of the transferable Nil Rate Band in respect of a clause incorporating a
Nil Rate Band legacy provision was considered in the case of Loring v Woodland Trust
(2015) EWHC 4400.
In the Loring case, Clause 5 and 6 of the Will at issue were as follows:
(5) My Trustees shall set aside out of my residuary estate assets or cash of an
aggregate value equal to such sum as is at the date of my death the amount
of my unused Nil Rate Band for Inheritance Tax and to hold the same for such
of the following as shall survive me and in the case of grandchildren attain
twenty three and, if more than one in equal shares absolutely (the names of
the beneficiaries were then set out).
(6) Subject as aforesaid, my Trustees shall hold the remainder of my estate for
the Woodland Trust of Autumn Park Grantham aforesaid absolutely
The net value of the estate of the testator (Mrs Valery Smith) amounted to £680,805. The
Will under discussion had been signed by Mrs Smith on 2 February 2001 i.e. long before the
introduction of the transferable Nil Rate Band. Depending on how the Will fell to be
interpreted, the residue left for the charity was either £30,805 or £355,805.
Section 8A(3) of the Inheritance Tax Act 1984 provides
“Where a claim is made under this provision, the Nil Rate Band maximum at the time of the
survivor’s death is to be treated for the purposes of the charge to tax on the death of the
survivor as increased by the percentage specific in sub-section (4) below”.
Sub-section (7) provides
“In this Act, “Nil Rate Band maximum” means the amount shown in the second column in
the first row of the table in Schedule 1 to this Act.”
There was no contemporaneous evidence as to the intentions of the testator. She was, however,
entitled to her late husband’s full Nil Rate Band.
The Judge considered the Will as a whole and examined the language of Clause Five in that
context. Giving the words used in that clause their normal meaning, and then taking into account
the relevant background which informed the meaning of the words used, the Judge concluded that
Clause 5 should be construed as including the increase in the Nil Rate Band available to the
testator’s Executors. Not only is the statute clear that the effect of a successful claim would be
retrospective, but also that the effect is that the Nil Rate Band maximum at the time of the
survivor’s death is treated as “increased” at that date. The Judge held that it was of no
consequence that the increase arose as a result of an election made at the discretion of the
personal representatives after the death.
In their submissions to the Court, Counsel for both parties referred to the guidance and examples
contained in the Inheritance Tax Manual series 43065. The Court noted the guidance – and also
that it was not binding. In IHTM 43064, HMRC give an example of a bequest which in their view
would carry the enhanced Nil Rate Band
“I give free of tax to the Trustees such sum at my death as equals the maximum amount
which could be given to them by this Will without Inheritance Tax becoming payable in
respect of my estate”.
Examples given by HMRC of gifts not carrying the enhancement as
“To my Trustees, such sums as I could leave immediately before my death before IHT
becoming payable”
– because any Nil Rate Band which may be transferred is not available immediately before the
death.
“I give free of tax to my Trustees in amount equal to the upper limit of the Nil Percent Rate
Band in the table of rates in Schedule 1”
- because it refers to a fixed amount
“To my Trustees, an amount equal to the Nil Rate Band in force at my death”.
The Judge commented that Clause 5 in Mrs Smith’s Will was similar to the first example given by
HMRC.
• If you are setting up a Testamentary Discretionary Trust ensure that the entitlement to
exercise the discretionary pounds is extended not only to the Trustees originally nominated
in the Will but also to any Trustee who may be assumed by them. There is a body of law
which suggests that an assumed trustee cannot exercise discretionary powers, unless
expressly authorised to do so.
• Always ensure that you fully and properly identify the subject of a specific bequest. For
example, a client may wish to leave a bequest of a diamond ring to a friend. However,
following death, it transpires that the testator had three diamond rings and the residuary
beneficiaries may get into a battle with the specific legatee as to which ring the bequest
applied. Thus, it is best always to check whether or not the testator has more than one
diamond ring and to ask the testator to specifically identify the ring intended (for example -
my diamond ring inscribed with the initials “JK” and the date “1977”).
• Bear in mind ademption. It is worthwhile endeavouring to ascertain with the testator
whether, if the testator disposes of an item which is the subject of a specific bequest, that
item should be replaced by something else, or perhaps cash. If not, then say so.
See the very sensible comments of Sheriff Baird in BH Applicant Glasgow Sheriff Court , December 2010.
See also Turner v Turner 2012 CSOH 41
• Always endeavour to ensure that intestacy will not flow from your drafting. Consider
questions of over destination. Perhaps an example of what I mean may assist you:-
Testator A is widowed and her net estate which is all moveable amounts to £100,000. In
her Will she has left the following residuary bequests:-
(a) A one quarter share of my estate to my son whom failing in the event of him
predeceasing me equally between or among his issue per stirpes;
(b) A one quarter share of my estate to my daughter whom failing in the event of her
predeceasing me equally between or among her issue per stirpes; and
(c) The remaining one half share thereof equally between such of my grandchildren as
shall survive me.
What could possibly go wrong with that?
It is important to remember that Section 13 of the Succession (Scotland) Act 1964 might be
criticised as having been poorly drafted. Why? The reason I say this is that Section 13
could have (but does not) state what should happen to a bequest left in the Will to the
individual who opts to claim legal rights.
In truth, there may well be good reason to include in most Wills which we prepare nowadays
a clause which will specifically deal with the possibility of a beneficiary under the Will
claiming legal rights. Barr and Others in both editions of their Book “Drafting Wills in
Scotland” suggest a style of clause which would largely deal with this awkward situation –
the clause provides that where an individual renounces etc., then he or she will be treated
as having predeceased the testator and the share left to that individual under the Will pass
to the other beneficiaries by way of accretion. Do not, however, include that clause
unthinkingly. You have to make sure that the clause fits in with the manner in which the
residue clause has been drafted.
• It is always better to predicate a beneficiary’s entitlement on survivance i.e avoid referring to
the beneficiary “predeceasing”.
See Ross’s Judicial Factor v. Martin 1955 SC (HL) 56
Again, this matter is covered in the Consultation document issued by the Scottish
Government, and referred to above, in relation to its consideration of Section 32 of the
Succession (Scotland) Act 1964.
• It is always an idea not to leave a bequest of furniture and house contents in liferent.
Furniture et cetera, by their nature, will deteriorate and this can bring the liferenter into
conflict with the fiars (particularly where the liferenter is an unpopular step parent). Thus, if
you are asked to draft a Will, in terms of which a bequest of a dwellinghouse is to a
particular beneficiary in liferent, it is always better not to include the furnishings and
contents within the liferent. It would be very much better simply to persuade the client that
the furniture and contents should be left absolutely to the liferenter.
• The incidence of IHT. The normal rule is that where a Will is silent, specific bequests and
legacies will be free of IHT, with the burden of that tax falling on the residue. (See Section
211 of the Inheritance Tax Act 1984 as also the case of Cowie’s Trustees 1982 SLT 326).
The point I am trying to make here is that a client who has no dependants may wish to
substantially benefit friends and wider members of the family. However, they may choose
to do this by means of specific bequests and pecuniary legacies, leaving the residue of their
Estate to charity. I am aware of one case where significant bequests and legacies were left
to friends and more distant relatives “tax free”. However, the testator’s Estate was
substantial. Although the residue was left to charity, with the effect of grossing up and the
fact that the residue had to bear the Inheritance Tax, the charity was left with substantially
less than the testator had anticipated.
• A specific bequest of heritage can also raise issues – is the bequest to be free of any
mortgage or charge secured over the property at the testator’s date of death, or subject
thereto? Some clients, when they make their Wills, will wish to leave their heritable
property to a friend or relative. When you raised the question of whether or not this should
be free of or subject to a mortgage they may scoff – “I have no mortgage over the property
and I have no intention of taking one out”. However, an individual’s circumstances can
change. Many of our older clients, having been mortgage free for many years, have ended
up taking out equity release mortgages to additionally fund their retirement. The client’s
position should be ascertained.
Bear in mind that the normal clause regarding expenses will not enable Executors to convey
the property to the specific legatee free of any outstanding mortgage - see the case of
Muir’s Trustees –v- Muir 1916 1SLT 372.
If a bequest of a heritable property is to be effected free of any outstanding mortgage then
you need to specifically state that the bequest is to be free not only of the expenses of
delivery or transfer but also of any outstanding heritable security or charge secured on that
property.
• Always ensure that you include an appropriate clause of revocation. Bear in mind that the
client may have a foreign Will which should be kept alive.
• Do not fall into the trap of failing to postpone vesting. A clause leaving a share of estate of
bequest to a particular individual but stating that they have not to receive the same until they
reach a particular age will be ineffective on the basis of repugnancy. A valid Trust purpose
has to be interposed.
• Where the client has made an earlier will, ask for a copy of the same. Why?
• Finally, please bear in mind (for your own self protection) that incorporation within a Will of a
direction that a particular solicitor or firm of solicitors have to wind up the testator’s estate
will now be regarded as misconduct by the Law Society of Scotland. It is understood that
inclusion of an expression of wish to that effect will not be so regarded.
The Missing Will
I understand that a small number of claims are intimated to our PI insurers each year as a result of
Solicitors losing clients’ Wills
Unfortunately, I think that it is fair to say that most cases now going into the Court of Session relate
to Wills which have been lost whilst in the apparent custody of solicitors or other professionals. An
action to prove the tenor of a Will is normally a Declaratory one which can only be raised before the
Court of Session. The Court of Session has power under the nobile officium to grant such
Declaratory Orders.
The Pursuers in such a case are normally the Executors named under the missing Will but there is
no reason why a beneficiary named therein should not raise the proceedings. The proceedings
require to be served on all individuals named as beneficiaries in the Will and possibly also those
who would be beneficiaries on intestacy under Section 2 of the Succession (Scotland) Act 1964 in
the event of the Declarator being refused by the Court. The Pursuer requires to prove
1. that the document was executed by the testator;
2. the tenor (the actual terms) of the missing Will; and
3. the reason for the Will being missing (causa ammissionis).
Best practice nowadays dictates that where a Will is made for a client, a copy of the same should be
sent to the client but also retained by the solicitor who made the Will. Where such a copy can be
provided, this normally deals with points 1 and 2 above. Where the action is undefended, the
Court will normally be prepared to proceed on the basis of Affidavit evidence. See paragraph 6(1)
of the Act of Sederunt (Rules of the Court of Session Amendment (Miscellaneous) Order 2009) SSI
2009 (No. 63) (which came to effect on 23 March 2009) it is inter alia provided
“In an action approving the tenor in which no Defences have been lodged, evidence shall be
given by Affidavit unless the Court otherwise directs”.
It would appear that where the action is undefended, the Court will be prepared to accept fairly
general evidence as to the reasons for the Will being missing.
Where Decree is granted, the Extract Decree is effectively treated as being the equivalent of the Will
itself.
What happens, however, where the client removes his Will from the solicitor’s custody and it cannot
be found after the client’s death? This is likely to be an entirely different matter – owing to the legal
presumption that where the client has had the Will in his own possession and it cannot be found
after his death then, in the absence of any reasonable explanation otherwise, the testator will be
deemed to have revoked the Will by destruction animo revocandi (see the case of Clyde –v- Clyde
1958 SC 343).
In the Outer House case of Lauder –v- Briggs 1999 SC 453, Senior Counsel for the Pursuer put
forward an argument which Lord Penrose himself described as “persuasive” that every Authorities
did not in fact support that there was any such presumption in Scots Law. However, Lord Penrose
took the view that the Outer House was not a place for such a matter to be decided and upheld the
presumption in the case in question.
In the Lauder case, the Pursuer averred that after the deceased had taken possession of her Will,
whilst not being incapax to the extent of being incapable of revoking the same, she had been
incapable of managing her affairs and demonstrated “a confused treatment of her belongings”. As
Lord Penrose indicated, the Pursuers case was that “the absence of a deed from the repositories of
a confused person, may not, and given the circumstances….sustain the inference that the person
must have destroyed the deed at all…”. Lord Penrose took the view that the averments were
sufficiently relevant for him to fix a Proof before Answer. However, the matter was settled out of
Court beforehand with the Proof before Answer being discharged.
See the important case of McLernan and Another –v- Ash and Others (Outer House, Lord
Eassie 6 March 2001, unreported).
At the relevant time, this case excited some press interest owing to the fact that one of the Pursuers
was Sheriff McLernan. The deceased was his second cousin who had gone into hospital. The
action was rare in the sense that it was in fact defended.
Sheriff McLernan gave evidence that on the day prior to the testator entering hospital, she had
shown him a Holograph Will drawn up and signed by her in terms of which she had bequeathed her
house and its contents to him and a Father Kilpatrick. He gave evidence that the Holograph Will
also provided that her investments should be divided equally between Father Kilpatrick, Sheriff
McLernan and the latter’s sister, Mrs. Ash. Sheriff McLernan gave evidence that he had suggested
to his second cousin that she should not take the Will into hospital with her but leave her Will
amongst dishes in a sideboard in her living room. Mrs. Ash gave evidence that her second cousin
had told her that she had followed the Sheriff’s advice. Following her death, the Will could not be
found. However, evidence was led that there had been a break-in at her house and that the
contents of the sideboard in question had been disturbed. Lord Eassie, having considered the
prior authorities, took the view that whilst a Holograph Will was not normally something which had
any intrinsic value, the confusion and destruction caused by a break-in could explain the fact that
the Holograph Will had gone missing. In the circumstances, he felt that the explanation regarding
the break-in was both possible and coherent and displaced the presumption. Although, it would
appear (strangely) that Lord Eassie did not refer to the Opinion of Lord Penrose in the Lauder case,
after his own review of the relevant authorities, at paragraph thirty of his Opinion, he concluded
that:-
“It is plainly not sufficient simply to aver and prove that a testamentary deed executed by a
testator and subsequently on his actual custody is no longer extant at his death, if only for
the reason that those simple facts alone provide no basis for holding that the absence of the
deed is not the result of a decision by the testator to revoke its provisions by destroying the
deed itself. There must be averred and proved circumstances which, in the particular case,
offer a real possibility that the loss or destruction of the deed occurred otherwise than by destruction by or on behalf of the testator animo revocandi; where the existence of such
circumstances are averred and proved, the decision whether the absence of the
testamentary writ is attributable to the possibility or possibilities thus identified, or to the
exercise by the testator of his power of revocation by destruction, is one to be arrived at on
the balance of probabilities”.
My advice to all of you is never to lose a client’s Will – even although the process of setting up the
Will is reasonably straightforward, it is expensive. My firm had to bear that pain a few years ago
when, having received notification of a client’s death, the client’s Will was sent by DX to the Books
of Council & Session. On the fact that the Extract had not been returned, enquiry was made of
the B & C of S. They claimed that they had never received the Will.
In the circumstances, my firm had to accept responsibility for the loss of the document.
Suffice it to say, that since then, all Wills (and indeed other documents) are being sent by my firm by
Registered Mail to the Books of Council & Session for registration.
A Practical but Unusual Solution?
Documents not reaching the Books of Council & Session, has affected other firms. I was recently
consulted by a firm of Solicitors who had sent a deceased client’s Will to the Books of Council &
Session via DX. Apparently, the Books of Council & Session never received the same. The firm
had a copy of the Will.
Thinking out of the box, the firm contacted Royal & Sun Alliance and explained the situation to them.
The firm were in a situation that the terms of the Will in fact reflected what would happen under the
Laws of Intestacy. Ewan Whitelaw at Royal & Sun Alliance indicated that he had met this problem
before. It had been dealt with by one of the family being appointed Executor Dative and a Deed of
Variation then being entered into to fully reflect the terms of the Will. Quite sensibly, Ewan
suggested that the firm consult with the Commissary Clerk who would have to deal with any
Confirmation Application. The position was explained in full detail to the Commissary Clerk (I can
vouchsafe this as I have seen the relevant correspondence). Somewhat to my surprise, the
Commissary Clerk indicated that he saw no difficulty with what was proposed. He indicated that the
fact that a Will had gone missing, might be mentioned in the Petition for appointment of the Executor
Dative but went so far as to say that he did not feel that this was necessary. He did not think that
the Sheriff would have any difficulty in all the circumstances, the position having been explained in
full. As I understand it, Ewan Whitelaw indicated to the firm in question that he had encountered a
small number of incidences where this solution had been used to avoid the perhaps prohibitive
expense of going to the Court of Session to prove the tenor of the missing Will.
I merely bring this to your attention. It begs the question perhaps as to how to deal with the
declaration on the second page of the Form C1 but in this particular case, the position having been
explained in advance to the Commissary Clerk, the latter appeared to see no difficulty whatsoever
and (again I have seen in correspondence) appeared to be of the view that there was no question of
obfuscation.
The Missing Beneficiary
I do appreciate that this next part of my presentation to you tonight does not relate so much to Wills
(see below) but rather the administration of an Executry Estate.
I was recently asked for advice in relation to a particular situation. The Executors had made
substantial progress in winding up an Estate under their charge. However, one beneficiary had
“gone missing”. The Executors appreciated that they had to make reasonable efforts to trace the
missing beneficiary but the point was this – could they debit the costs incurred in relation to tracing
the missing beneficiary from that beneficiary’s entitlement in the Estate?
On one level, this seems entirely equitable – but is it correct? I have now entered my thirty eighth
year in the legal profession. If I have learned anything, our Laws of Succession and fairness/equity
are often at opposite ends of the spectrum. The practice of law is not, for the most part, about
justice – it is the bare application of legal rules as they apply at a given point in time. Perhaps an
example would be appropriate:-
A and B are sisters. A never married. However, B fell pregnant when she was 18 and
had a son, C. B never married but, at the age of 40, fell seriously and progressively ill.
A took her sister B into her home and has looked after her and cared for her for more
than 20 years. B is then told by her doctor that she is terminally ill and has only six
months to live. However, shortly after receiving that dreadful news, her son, C, turns
up like a bad penny. It transpires that C has spent much of his adult life in jail for
crimes of dishonesty.
B wants nothing to do with her son. She is intent on making a Will leaving her whole
Estate to her sister, A. However, the doctor’s prognosis as to the remaining lifespan of
B has been unduly optimistic. Before B can complete a Will in favour of A, she died
unexpectantly. There is no Will.
Who is the beneficiary in respect of B’s intestate Estate? And against the background
of the facts as described, would any layperson consider that to be fair?
I hope I have made my point.
Let us return to the difficult situation (based on fact) outlined above. Can the Executors reasonably
debit the cost of tracing the beneficiary to his or her share/interest in the Estate? In my view, he
answer here largely depends on what type of bequest has been left to the missing beneficiary as
also the terms of the Will itself. Barr and others on “Drafting Wills in Scotland” (2nd Edition)
paragraph 3.33 state:
“If a Will silent on the question of expenses where a legacy is concerned, the expenses
are the liability of the legatee...if the bequest is free of expenses, the residue will bear
the expenses...the obvious time to consider potential expenses is at the time that
instructions are taken for drafting the Will with a decision being made on who should
bear them at that time”.
An immediate point which might arise here is whether or not the cost of tracing a missing beneficiary
is in fact an expense of delivery? If those costs are covered by the phrase “expenses of delivery”
then what is the position?
If we are considering a specific bequest or a pecuniary legacy then, frankly, there is likely to be an
immediate problem. Most modern Wills state that specific bequests and pecuniary legacies are to
be conveyed or paid “free of government taxes and duties and of expenses of delivery”. Let us say
that the missing beneficiary has been bequeathed a legacy of £20,000. It costs £2,000 to trace him.
The Executors seek to debit the cost of tracing the beneficiary from his legacy. The legatee objects
on the basis that the Will specifically states that the bequest to him should be implemented free of
expense. The Executors could be in a difficult situation there.
Let us say that the Executors, in the face of opposition from the legatee, decide that they will debit
the cost of tracing him to the residue of the Estate. However, the residuary beneficiaries
immediately object – after all, their interest is being diminished through no fault of their own. How
do the Executors respond to such a complaint on the part of the residuary beneficiaries?
I make it clear that I raise this point purely for your interest and consideration. I am not aware of
any cases which are directly on this point. However, I would offer the following comments:-
• Where a bequest is stated to be free of government taxes and duties and of the expenses of
delivery, then I think that the legatee may have a stateable reason for objecting to the
“tracing costs” being debited against his legacy – but in the world in which we now live,
someone may be happy to foment an argument as to whether tracing costs are truly
expenses of delivery in the sense intended by the testator..
• Similarly, and whilst I could understand the position of the residuary legatees, it is not clear
to me that they have real grounds for serious objection. In the case of Cochrane’s
Executors v. Inland Revenue 1974 SC 158, the First Division of the Court of Session
indicated that residuary beneficiaries could not direct Executors in relation to the
administration of the Estate. Bear in mind that the residuary beneficiary is entitled only to
an accounting. The Court of Session held that Executors were not bound to consult a
residuary legatee before realising any part of the Estate, nor obliged to accept any direction
from a residuary beneficiary in that regard.
The foregoing being so, I think that if the expenses of tracing the missing legatee were reasonable,
the Executors would have a reasonable argument to put before the residuary legatees as to why the
residue fell to meet the costs of tracing that individual – in any event, the expenses of administration
of any Executry Estate fall, in the first instance, to be debited against the residue.
What would the position have been had the missing beneficiary been a residuary legatee? Again, I
would suggest that the costs incurred in tracing him/her (provided they were reasonable) could
properly be debited against the residue.
I have no doubt but that residuary legatees who had not gone missing, would feel hard done by –
however, as I have indicated to you, fairness/equity and the application of our Laws of Succession
are often many miles apart.
If the Will says nothing about expenses of delivery or implementation, then the normal rule is that
the bequest will have to bear the relevant expenses.
In either case, however, what if it is argued by the legatee that the costs of tracing are not normal or
appropriate expenses of delivery et cetera?
There is of course a possible way to avoid this question being raised, although it would mean
incorporating within a Will a particular provision of a type which I have never seen before. However,
I now offer it for your entertainment/consideration. My suggested solution has two aspects. Firstly,
expand the phrase “free of expenses” to “free of expenses and implementation”. Secondly add the
following wording
I declare that notwithstanding any other provision of this Will, in the event of any
beneficiary hereunder being missing and untraced at the time of and following my
death, I hereby authorise my Executors to expend such costs as they may in their sole
discretion consider it to be reasonable in tracing such beneficiary but always subject to
the provision that the whole costs of tracing that individual shall be borne by such
beneficiary and deducted from his/her legacy or share of the residue; In the event of
my having left a specific bequest to such beneficiary, he or she shall require to refund
the whole costs of tracing his or her whereabouts prior to receiving the object of such
specific bequest from my Executors.
I would hope that this would put the matter beyond doubt or dispute.
Digital Wills – Recent Developments and Best Practice This is perhaps the most glaring area where Scots law sadly lags behind what is happening in the
real world. I think it fair to say that for the most part, we all know exactly what physical assets we
own – a house, a car, cash deposits and Bank accounts, Stocks and Shares, insurance policies etc.
However, it is likely that the great majority of us own very much more than that – not physical
possessions which can be readily identified, but rather “digital assets”. Most of us, in this computer
age, are likely to die leaving a “digital estate”. The Office for National Statistics has indicated that
70% of 65-74 year olds are now “on-line”. This take up amongst our older clients will undoubtedly
increase as time goes by. Recently, I visited an 83 year old client at his home to discuss his Will and
Inheritance Tax planning. He opened up his PC and produced a real time valuation of his share
portfolio. He trades via his computer on almost a daily basis.
What if he were to lose capacity against a falling stockmarket? Where would his Attorney stand?
What if he died? How do his Executors access the portfolio if he does not have paper share
certificates – how do they access the programme in the first place if it is encrypted or password
protected?
Worldwide, it is estimated that there now nearly 3 billion individuals on line
One of the main problems with “digital assets” is that the old tried and tested methodology of
ascertaining just what a deceased person owned, or in the case of an incapax what he still owns,
would involve the family or Executors, or the Attorney etc going through the papers of the
deceased/incapax. Such an approach is still valid (and still necessary) but does not take into
account the possibility of the deceased having “digital assets”. The old approach may fail to identify
such assets.
What are the main issues for lawyers? These are likely to include:
1. Identification of Digital Assets – It is important that Executors and interveners establish just
what Digital Assets are owned by the deceased or the incapax.
2. Valuation – Many essentially “sentimental” digital assets may in truth have no value but
others, such as online Bank Accounts, may be of considerable value.
3. Access – How does the Executor or Intervener access the digital asset?
4. Transferability – Can management of the asset be transferred to the Executors or to the
Interveners?
It has only been in recent years that the significance of an individual’s “digital estate” has been
realised.
The matter was highlighted in 2005 when the family of a deceased US Marine, Lance Corporal
Justin Elsworth, applied to Yahoo! for access to Justin’s e-mails. Yahoo refused. Yahoo’s policies
in relation to subscribers stated that accounts “terminate upon their death”. However, John
Elsworth, the father of Justin, was adamant that his son would have wanted his family to have
access. John Elsworth stated
“He was wanting to forward his e-mail from strangers…which were letters of
encouragement. He said all their support kept him motivated. We thought back and forth
about how we were going to print them out and put them in a scrap book”.
Yahoo’s reason for refusing was that to allow John Elsworth access, would violate the privacy rights
not only of his son but also those with whom he had corresponded. Yahoo stated (via their
spokeswoman, Mary O’Sako)
“The commitment we have made to every person who signs up for a Yahoo mail account is
to treat their e-mail as a private communication and to treat the content of their messages
as confidential”.
The family pursued the matter through litigation and subsequently succeeded in obtaining an order
forcing Yahoo to hand over the contents of Justin’s e-mail account to his father. Notwithstanding
the success of the Elsworth family, Yahoo stuck steadfastly to its policy of refusing access to a
deceased individual’s e-mail account, justifying their position on the basis of “privacy”. Yahoo
issued a statement to the effect that the family of the deceased e-mail account holder would require
to secure a Court Order verifying not only the deceased family members’ identity but also their
relationship to the deceased.
The family of Eric Rash encountered similar problems. Eric (aged 15) lived in Virginia, USA. He
committed suicide in 2011. His family wished to establish why he had killed himself (perhaps to
ascertain if Eric had been subjected to “cyber bullying”). Having failed to guess Eric’s password to
his Facebook account, the family appealed to Facebook for help – but they refused. The family
raised a court action, but soon found that there was little or no legislation governing the
management of data which would assist them. The case indirectly resulted in Federal legislation
regarding the data of minors. Some US State legislatures have now recognised the problem.
The above cases are of course American.
One recent UK example was reported in the Times on Friday, March 7th 2014. The Times
technology reporter, Mourad Ahmed had posted the following report
“Apple has been criticised for refusing to unlock a dead woman’s iPad.
Josh Grant, 26, said his mother Anthea bequeathed the tablet to her family after buying the
computer during her treatment for cancer.
After her death, they had been unable to unlock it despite supply Apple with copies of her
Will, Death Certificate and a solicitor’s letter.
Apple has said that its security measures help its customers protect lost or stolen devices.
Mrs Grant used it for games and video calls with her sons. In her Will, she said her estate
should be split between her five boys, with the eldest, given the iPad.
After her funeral the family approached Apple about the iPad but the firm asked for written
permission from the owner, but was told she had died.
After the family supplied details of Mrs Grant’s death, Apple made more demands,
requesting a Court Order to unlock the tablet. The sons estimated that this would cost £200
in legal fees and said it was “a false economy”.
Mr Grant, from London wrote “I have always been a fan of Apple but this incident has
changed my opinion of them completely. Their utter lack of understanding and discretion in
a time of great personal sadness has been astonishing”.
Apple declined to comment”
However, it remains the case that very few countries, other than the USA, have legislated (or even
considered legislating) in this area. As indicated, some US States have legislated. The first US
States to issue legislation were Rhode Island and Connecticut. Laws enacted in Oklahoma,
Nebraska and Idaho were broader in their scope, including all electronically stored documents of the
deceased, and allowing executors some control over digital assets and social media accounts.
Indiana, Rhode Island and Connecticut have legislation but more restricted in its scope – covering
digital files and mail only. Throughout the world, legislatures are lagging behind digital
developments. Rights of Executors, those acting under a Power of Attorney, Financial Guardians
and beneficiaries with regarding accessing digital assets are extremely confused. This arises from
one simple fact – the ownership of and the ability to transfer digital assets remains confused and in
many cases extremely difficult. Are digital assets property at all? – if they are, are they “intellectual
property”. If not, into what category of property do digital assets fall? Some argue that, certainly in
relation to e-mails, these are not property (see below) and that they amount to no more than a
licence to utilise the service of a particular website. Licences, it is argued, are not transferable and
will certainly come to an end on death of the Licencee.
Some providers have responded to such concerns, but to date there has been little uniformity in
approach. Google now has a procedure allowing users to plan what should happen to their account,
and will on occasion (in appropriate circumstances and after “careful review”) provide the contents
of an email account where no specific instructions have been left by the user. Google has also
recently introduced what it calls the “inactive account manager”, advising on how to manage Gmail
messages etcetera if the account becomes inactive. The subscriber can choose to have the data
deleted if the account is inactive for a specified period. Alternatively, the subscriber can appoint
“trusted contacts” to receive data from Gmail, You Tube etc. Yahoo will still refuse to hand over data
without a court order being obtained.
There will need to be a solution which both the family etc of the deceased, as also Intervenors on
behalf of incapax digital account holders on the one hand and the service providers on the other can
find acceptable – viz. the attitude of Yahoo! in the Elsworth case. There is also the difficulty of
different international views on privacy and confidentiality. At present, France has stricter rules on
privacy than other Members of the European Community – and the US has a quite different view of
privacy than most EU member countries.
There will also require to be a proper definition of what is and what is not “property” in the digital
world and which actually belongs to the deceased user/account holder. The difficulties with “digital
assets” and whether or not they amount to “property” were illustrated in the English case of Fairstar
Heavy Transport NV v. Adkins (2012) EWHC 2952 (TCC).
Fairstar are a Dutch heavy marine transport company. Adkins had been their Chief Executive
Officer prior to the company being taken over. Fairstar had obtained a Court Order against Adkins,
restraining him from knowingly deleting or otherwise interfering with e-mails sent or received whilst
he had held the position of CEO prior to the Company takeover. Fairstar alleged that Mr. Adkins
had not revealed, during the period leaving to the takeover that Fairstar had incurred a very large
liability to a shipyard in relation to the construction of a new vessel. Fairstar’s problem was that it
had no access to electronic correspondence between Mr. Adkins and the shipyard in question. It
could therefore not determine the scope of its liability.
Fairstar sought access to both the incoming and outgoing e-mails in order to assess its liability,
claiming that it had a proprietary claim to the content of the e-mails on the ground that the materials
created by, or that had come into the possession of an agent whilst acting for his principal, are the
property of the principal. In reply, Adkins contended that the content of the e-mails was information
and that information cannot be property, notwithstanding copyright claims.
In effect, the Court had to decide whether or not a proprietary interest did exist in the content of the
e-mails. The Court held that the relevant case authorities pointed strongly against there being any
proprietary right in the content of information and therefore e-mails. However, perhaps leaving the
door open, the Court also indicated that this was by no means settled law. The Court did indicate
that it found assistance from the case of Force India Formula 1 Team v. Malaysia Racing Team
(2012) EWHC 616 (CH). Therein, the Court had held that confidential information was not property.
Fairstar, however, appealed the decision of the High Court to the Court of Appeal. The Appeal was
reported as Fairstar Heavy Transport NV v. Adkins (2014) FSR 8.
In the High Court, Fairstar’s claim had been dismissed on the basis that the contents of the e-mails
was “information” and that there was no property information. In its appeal, however, Fairstar
submitted that it had the right, as principal to require Adkins to produce and deliver up documents
held by him as a former agent so that it could inspect and copy them, and of the duty of the same
whether the documents were on paper or electronic form. Adkins had worked for Fairstar as its
Chief Executive Officer on an agency basis.
The Court of Appeal agreed with Fairstar. However, it would appear the Court of Appeal proceeded
on the basis that Fairstar had the right in question on the basis of the Law of Agency and “the legal
incidents of an agency relationship that survived its termination”. The Court of Appeal held that the
matter could be decided without a debate about the legal characteristics of “property” or whether or
not the contents of the e-mail was information in which property existed or could exist at all. The
quote which I read from the Report of the Fairstar Appeal stated
“The Court declined to enter into a controversy when it was not necessary to do so in order
to decide the case and its particular facts. It would be unwise to endorse the proposition
that there would never be property in information without knowing more about the nature of
the information and dispute and the circumstances in which a property right was being
asserted…..e-mails, and their content, stored in a computer should be treated as documents
for the purposes of determining the scope of the legal incidents of an agency that survived
its termination…the form of recording or storage did not detract from the substantive right of
the principal as against the agent to have access to their content”.
It would therefore appear to remain open as to whether there can be a right of property in an e-mail.
The cases quoted indicate the difficulties which can arise in relation to assessing whether or not a
digital asset is property over which rights can be asserted.
It should be borne in mind that not all uses of computers are benign or even neutral. Executors
(where they are given relevant access) may face difficult decisions – what if the deceased had an
account with a pornographic site, or their emails disclose a previously unknown affair or gambling
habit (in the latter case, explaining why the deceased never seemed to have any money whilst
apparently earning well)? What if the computer records of the deceased contain difficult or
embarrassing “family secrets”? Do the Executors disclose this information to the family of the
deceased (perhaps causing great hurt) or request that the relevant records be permanently deleted
– and what if the surviving spouse is one of the Executors?
The difficulties in weighing up the right to privacy against the right to access (if it exists) to a
deceased’s digital information was encapsulated by Professor Peter Swire who had served as a
former Chief Privacy Adviser to President Bill Clinton. Professor Swire stated
“People might decide what they want family members to see or keep secret sometimes for
family harmony reasons…they may know secrets of other family members that they hold in
confidence. The sister had an abortion, the father had a first marriage”.
In commenting on the Elsworth case, Professor Swire indicated that Yahoo’s policies was stricter
than those for access to medical records – and in his view, this was correct.
There are likely to be “clashes” between two perceived rights – to privacy and to freedom of
information.
The term “digital asset” can encompass various different things. It will include online accounts (e-
mails), financial accounts, online Bank accounts and social networking sites such as Twitter,
Facebook etc. Similarly, photograph sharing sites (Kodak Gallery etc) and Blogs fall to be regarded
as “digital assets” – as will online resources such as EBay, PayPal, Avatars and video games and
virtual worlds (e.g. “The World of War Craft”).
All of the foregoing “digital assets” have one common feature – they will be protected by a user
name and password.
Yet another category of “digital assets” can be seen in relation to files stored on a PC. This type of
“digital asset” can include personal documents, address books or contact lists, family photos and
memorabilia – the list of such personal information is long – and although perhaps of no economic
value they may have great sentimental value to those who survive.
Some “digital assets” have only sentimental value – but that is not to be discounted for those who
live on. Other such assets may, however, have a real financial value. Take the example of a
successful author who dies having completed a “computer manuscript” for his new book.
Posthumous publication of that book may be of great value to his heirs – but how do they access the
same? Such intellectual property may have great economic value - but only if it can be accessed
by the heirs.
How do we ensure that our heirs can succeed to such a digital inheritance? Frankly, as indicated,
it is only in very recent times that on line providers, but perhaps more importantly legislators,
throughout the world have begun to realise the importance (and in some circumstances financial
value) of a digital inheritance. It is likely to take some time for even computer savvy legislators to
introduce laws to clarify the difficulty issues which can arise here.
In the meantime, various internet companies have been set up to assist in this area (for example,
the “Digital Beyond” in the US and Cirrus Legacy in the UK). Such providers offer (for a fee) a
service which stores sensitive information and data which can be made available to the Executors of
the deceased digital account holder.
What advice can be offered?
The owners of “Digital Beyond” recommend three principal steps:-
(i) Keep an up to date list of all email/ on line accounts, regularly reviewing the same.
(ii) Consider what information may be required to obtain access to the accounts.
(iii)Set out your wishes as to whom access should be granted, as to what data might be passed on,
and as to what data should be destroyed.
The Scotsman of 26 May 2014 printed an excellent article (“Ensure a Will includes your online life
too”) by Paul Motion, the Conveyer of the Law Society of Scotland’s Technology’s Sub Committee.
Paul Motion indicated that, having pulled together all the current advice he had been able to source,
he indicated that the preparations that an individual should consider were as follows:-
1. Agree with someone you trust and who is IT literate that they will be your Social Media
Executor, in charge of all your “digital assets” after your death.
2. Say in your Will that a copy of your Death Certificate must be given to your Social Media
Executor, in case they need to prove they are acting on your behalf (for example, to close
your Twitter Account, to memorialise your Facebook Account).
3. Check and note all privacy settings and terms and conditions for your social networking
websites.
4. Create a list of your digital assets and digital accounts. Much easier said than done: Do
you know everything on your laptop, phone or PC etc? Can you name all the Accounts and
subscriptions you have, as well as all the logon details?
5. Give your Social Media Executor the list, logon details, user names and passwords. It is
safer not to list all the passwords on the same page as all your Account details.
6. State clearly in your Social Media Will what you would like to happen to each of your
ongoing Accounts e.g. continue, but managed by a friend, memorialised, or closed down.
7. Last but most important, your traditional Will must be linked to your Social Media Will
somehow so all your Executors know what is to happen to your digital assets.
Finally, this is Scotland. Most advice on the internet is American. Get a Scottish solicitor to check
what you are doing”.
It is not advisable for sensitive data such as passwords, to be included in the individual’s will or
Power of Attorney – for obvious reasons – a Will registered in the Books of Council and Session
may come in to the Public Domain very shortly after the death of the testator. Such data should be
retained in a separate document – but obviously if that document is not kept with the Will, then the
testator should still ensure firstly that the document itself is safely and securely stored and secondly
that his Executors/family are advised of its whereabouts and are able to access the same.
There remains yet more uncertainty – what view might the provider take of an
Executor/Attorney/other Intervener seeking access to an online account after the testator’s death or
the onset of incapacity? At the very least, any Will/Power of Attorney which deals with digital
assets should incorporate the specific authority of the consent of/on the part of the testator to his
Executor/Attorney accessing an online account. If the Executor uses the deceased’s user name
and the password without having the specific consent of both the provider and the user, could this
amount to a criminal offence – “unauthorised access” which is a criminal offence under the
Computer Misuse Act 1990?
There is no doubt that our profession (particularly the younger elements thereof) is now reasonably
computer savvy.
We need to bring those skills to bear when making Wills etc for clients.
One thing is certain at this time – our legal principles and current approach to digital assets lags well
behind developments in the real world.
Dealing with the Estate of a Deceased Lloyd’s Name
I think that the difficulties faced by Executors in relation to dealing with the Estate of a deceased
Lloyd’s name are very well set out in the copy article which I have appended to these notes.
On three separate occasions, I have been asked to give advice in relation to the Estate of a
deceased Lloyd’s name. Frankly, this whole area remains problematical and so far as I have been
able to establish, the position remains the same as detailed in the accompanying article.
Frankly, as the law presently stands, it would appear that the only safe way to proceed would be
proceed in terms of the type of Petition outlined in the accompanying copy article.
Threats to Scots Law of Succession from Abroad
There are forces at play of which I suspect many of you are unaware.
It is only very recently that the Scottish Government (the matter in question having brought to our
Government’s attention by the Law Society of Scotland) saw off what I consider to be a very
dangerous attempt to apply the Laws of England to Scots Law of Succession. In that connection
some of you may recall my article which appeared in the Scots Law Times in 2013 “Testamentary
Freedom Revisited – Further Erosion”.
Very briefly, the English Law Commission had suggested that the Inheritance (Family Provision &
Dependents) Act 1975 should be extended. Under Section 1(1) of the 1975 Act (which obviously
applies to England and Wales) a claim for family provision could only be made against the Estate of
an individual who died domiciled in England or Wales. The effect of that “domicile precondition”
was/is that no matter the size of the Estate of a deceased in England and Wales, no claim could be
made against the same if the deceased in question was not domiciled there. In the case of
Cyganik –v- Agulin (2006 EWCA Civ 129) a claim under the 1975 Act failed as the Court held that
the deceased had died domiciled in Cyprus, even although he left assets worth approximately £6.5m
in England – and his Will had been admitted to Probate there.
However, in its Report on Intestacy and Family Provision Claims on Death (Law Com No. 331)
issued in December 2011, the Law Commission in England and Wales reviewed the existing
working of the 1975 Act including the “domicile precondition”.
At paragraph 17.17 (page 129) of its Report, the Law Commission in England and Wales
recommended:-
“… that it should no longer by the sole precondition to an application under the Inheritance
(Provision for Family Independents) Act 1975 that the deceased was domiciled in England
and Wales.”
At page 133 of its Report, the English and Welsh Law Commission recommended:-
“… that an application for family provision under (the 1975 Act) should be possible in any
case where the deceased was either domiciled in England and Wales or English Domestic
Succession law applies to any part of the Estate.”
In effect, this meant that even where the deceased died domiciled in Scotland, if he owned heritable
property in England, a claim could be made against a domiciled Scot’s Estate under the 1975 Act,
even although it did not apply to Scotland.
Some of you may be wondering what all the fuss was about. Perhaps an example might assist
you:-
A domiciled Scottish testator has been estranged from one of his children who has lived in
England for many years. The Adult child is considered by all who know him to be “a bad
sort”. From what you and I consider might be entirely valid reasons, the testator instructs
that the child who lives in England is to be completely excluded from his Will. You do
explain, however, that the child in question will have an entitlement to claim legal rights.
Had the relevant law been enacted, however, there was a real danger – the English Court,
in receipt of an Application under the new law, might well have made an award from the
parent’s Estate to the child in England – but would this also have excluded a claim to legal
rights? This is one of the main points of “attack” adopted in seeking to persuade the
Ministry of Justice not to proceed with the proposed amendment.
The 1975 Act can produce some very strange outcomes. In fact, charities in England have
expressed concern as to how Courts in England and Wales are interpreting the 1975 Act. The
National Trust estimated two or so years ago that ten per cent of the 2000 or so legacies left to that
charity each year, are the subject of challenge by family members under the 1975 Act. In that
connection, I would refer you to the case of Ilott v. Mitson (2011) EWCA civ.346. In 1978, Heather
Ilott the only child of Mrs. Melitia Jackson, had become estranged from her mother who did not
approve of her boyfriend, Nick. The daughter and her boyfriend eloped and were later married.
Although there were attempts of reconciliation (the last in 2000), all of the same failed. In 2002,
Mrs. Jackson (her capacity was not in question) made a Will leaving virtually the whole of her Estate
to three charities and nothing at all to her daughter. The mother’s Estate extended to nearly
£500,000. The daughter made an application under the 1975 Act and the Court of Appeal in the
circumstances, found in her favour (with the charities request for permission to appeal to the
Supreme Court being refused). Not only had the charities lost their bequests but they had incurred
significant legal costs in seeking (unsuccessfully) to defend the same.
The Ministry of Justice was determined to see the relevant law enacted. The effects on the
administration of a Scottish Estate could have been drastic. However, even although the above
provision had been incorporated within a Bill under consideration by the House of Lords at the time
the matter was challenged, our Government (with considerable assistance on the part of our Law
Society) persuaded our English cousins that legislation enacted in England should not be allowed to
affect the proper administration of a Scottish Estate.
I think I can go so far as to say that, had our Law Society not recognised the potential problems and
brought this to the attention of the Scottish Government, we would now have an extension of an
English and Welsh Act to Scotland.
There are other threats. A few years ago, it was brought to my attention that there was a proposal
in Europe that there should be a Central European Registry of Wills. The difficulty arising here from
my perspective was that the proposal in question was that once an individual had made a Will, that
fact should be registered with a Central European Registry. The proposal was ludicrous – not only
would the testator require to pay a fee to have his Will registered, but the failure to do so would
result in the Will being invalid.
Again, I think it fair to say that our Law Society was very important in seeing off that particular
proposal.
However, there remains a proposal currently before the European Commission which causes me
great concern.
It is proposed that there should be transparency in respect of all private Trusts. This would include
not only giving details to a body set up by the EU of particular Trusts but also full details of the
identities of the Trustees and the beneficiaries interested therein. If you think about it for a
moment, this proposal is from the perspective of UK lawyers wholly unworkable. What about
Discretionary Trusts?
European countries which are “civil law” based seemed to hold the view that private Trusts are
merely a vehicle for money laundering. I find it astonishing that given the rights to privacy
embodied in the European Convention in Human Rights, countries such as France should be
insisting that the law in question be enacted.
I am pleased to say that once again our Law Society have made strenuous representations (in
support of the position adopted by the British Government) against the adoption of any such
legislative provision.
The Foreign Account Tax Compliance Act is even more disturbing, and has been active in the UK
since 1 July 2014.
The FATCA was introduced by the US Congress in 2010 as a means of restricting tax avoidance by
US citizens placing funds in Foreign Bank accounts. It has grown like “topsy” and has now been
adopted by many jurisdictions (probably under pressure/threat of/from the US Government). I have
heard numerous incorrect descriptions of the FATCA i.e.:-
(a) It only applies where there is an American beneficiary – wrong.
(b) It only applies if one of the Trustees is a US citizen – wrong.
(c) It only applies if the Trust invests in US assets – wrong.
In fact, the FATCA applies to virtually any UK Trust.
Trusts will require to register with HMRC etc. This is a complicated area and it is retrospective in
effect – it will apply to all existing Trusts. Have fun going through your Trust records!
Vigilance must be our watch word.
Necessary Changes to Scots Law (In my Opinion)
In my first draft of these Notes, the next two paragraphs were
“It is a matter of some regret from my perspective that we are still operating on the basis of laws of
intestate succession which were, frankly, conceived of 64 years ago. Why do I say that? Quite
simply, the Succession (Scotland) Act 1964 was based upon the Mackintosh Report which was
submitted to the Westminster Government in 1950. Arguably, the terms of the Succession
(Scotland) Act 1964 were outdated by the time that law was enacted.
In 1990, Scottish Law Commission recommended significant changes to our Laws of Succession.
Frankly, however, the 1990 Report was virtually ignored. I fear that the same is now happening to
the Scottish Law Commission Report on Succession of 2009. However, there are aspects of our
law in relation to Wills which I think should be changed (whether or not our laws on intestate
succession are amended).”
The Consultation document now issued by the Scottish Government (August 2014) perhaps has
taken the wind out of my sails but is to be welcomed. It deals with a large number of succession
issues. You should read the same as it presages perhaps long awaited and necessary changes,
although I understand that it is considered by the Scottish Government to deal only with non
controversial issues. A second Consultation document is to issued in respect of more difficult issues.
I have already commented on two of the proposals made by the Scottish Law Commission in
relation to the abolition of the conditio si testator and the amendment of the conditio si institutus,
now covered by the Consultation document
However, I think that it is also important that we should look very closely at the current law on
Revocation of Wills – in particular in relation to the revival of an earlier Will – but again this is
covered by the Scottish Government.
Regrettably, in Scotland we have what I consider to be an unfortunate state of affairs – where in
certain circumstances the revocation of an existing Will can lead to the “revival” of an earlier Will –
even although that earlier Will was itself completely revoked by the newer Will.
In his Article “Revival by Revocation of the Revoking Will” (1974 SLT (News) 153) the late Professor
Michael Meston railed against what many agree is an anomalous position, perhaps exemplified by
the case of Bruce’s Judicial Factor v. The Lord Advocate 1969 SC 296. Therein, the testator
had made an earlier Will which was revoked by an express clause of revocation in a later Will.
However, the testator himself had held the later Will in his own custody and following his death, the
later Will could not be found. This gave rise to the presumption (which can be rebutted) (see
Norman v. Dick 1938 D 59) that the testator had destroyed the later Will animus revocandi.
However, notwithstanding the fact that the later Will had expressly revoked the earlier Will, the
presumption was also to the effect that in such circumstances, the testator would be taken to have
destroyed the later Will with the intention of bringing back into force the earlier Will. This case is
often cited as a reason why earlier Wills should be destroyed by, or on the specific instructions of,
the testator. The case was also authority for the proposition for the making of the later Will was not
of itself implied authority granted to a solicitor to destroy an earlier Will.
In its Report on Succession (No. 124) 1990, the Scottish Law Commission confirmed that the
present law would indeed appear to be that “if a Will which revokes a previous Will was itself
revoked, then the previous Will revives unless, possibly, it can be proved by extrinsic evidence that
the earlier Will was not intended by the testator to have any continuing effect as a potential
testamentary document” (paragraph 4.67). The Scottish Law Commission went on to state:-
“The law on this point does not seem satisfactory. Indeed it is quite likely to produce effects
which would not have been intended by the testator...the way in which the law operates in
this kind of case does not seem sensible. A person who expressly revokes all previous
Wills would, it may be supposed, normally assume that they were dead and finished with.
He would not assume that they would remain in a Solicitors’ strongroom in a status of
suspended animation ready to spring into life at any time”.
Unfortunately, once again, in so far as our Laws on Succession are concerned, England was ahead
of us (in my view). In England, under Section 22 of the Wills Act 1837
“No Will or Codicil or any part thereof which shall be in any manner revoked shall be revived
otherwise than by the execution thereof, or by a Codicil executed in a manner hereinbefore
required and showing an intention to revive the same”.
The English viewpoint was reflected by the Scottish Law Commission in its Report on Succession in
2009 (No. 215). The Scottish Law Commission effectively restated the position it had adopted in
1990 with one exception. In 1990, the Scottish Law Commission had taken the view that an earlier
Will expressly revoked should not revive on revocation of the later Will. However, it had adopted a
different position in relation to a Will impliedly revoked by a later Will. However, Recommendation
55 of the 2009 Report stated:-
“A Will or any part of a Will which has been revoked, either expressly or impliedly, by a
subsequent Will, should not revive unless the testator re-executes it or executes another
document which expressly revives it”.
One final point which I would make is that Scottish Law Commission in its Discussion Paper of 2007
on Succession recommended abolition of the entitlement to legal rights for non-dependant adult
children. Fortunately (from my personal perspective) it would appear that this is a matter which our
own Commission is not pursuing. The proposal excited comment from various sources- most of it of
a critical/unfavourable nature – will it be revived in the second Consultation document?
The August 2014 Consultation Document deals with numerous matters – not claiming that the
following list is comprehensive:-
• Whether or not the necessity for Bonds of Caution in intestate Estates should be retained?
• Should a Sheriff retain a discretion to require a Bond of Caution in particular circumstances?
• Whether a Bond of Caution in a nominate case should be required?
• The effect of divorce on a Will
• Possible amendment of Section 29 of the Family Law (Scotland) Act 2006 by extending the
time limit for raising an Application under that Section to one year from the date of death – I
disagree with that proposal although not the timescale suggested – in my view, the one year
period should run from the date of grant of Confirmation whenever this might be – this would
remove any temptation on the part of the family (the beneficiaries on intestacy under
Section 2 of the 1964 Act) from deliberately delaying in doing anything to initiate the
administration of the estate in the hope that the statutory period for raising a claim under
Section 29 of the 2006 Act will expire.
I would hope that once the consultation exercise has been fully completed, a new law of succession
will be enacted.
Further changes to our approach to Will drafting might well be indicated by the terms of The Report
on Trusts (No.239) issued by the Scottish Law Commission on 26 August 2014.
Will the anticipated legislation be a new Succession (Scotland) Act and a new Trusts (Scotland) Act
or will there be a Succession Act and a Trusts Act i.e. two of the early legislative measures of a
newly independent Government of Scotland?
Be very careful out there!
John Kerrigan Morisons LLP 53 Bothwell Street Glasgow G2 6TS John.kerrigan@morisonsllp.com 29 August 2014
Appendix Delivery I Westlaw UK
Private Client Business 2003
Case Comment
Neilson's Executors, Petitioners: a breakthrough for Scottish L1oyd's Names
Ian Clark
Margaret Main
Subject: Succession. Other related subjects: Insurance
Keywords: Distribution; Executors; uovds Names; Scotland
Cases: Nellson's Executors, Petitioners 2002 S.L.T. 1100 (Ex Div)
Yorke (Deceased), Re [1997] 4 All E.R. 907 (Ch D)
·p.e.B. 120 In a landmark Scottish decision, the Court of Session examined the difficulties faced by
executors (and a possible solution) in winding up the estate of a deceased Lloyd's Name.
In the case of Neilson's Executors, Petitioners,' the deceased had been an underwriting member of two
syndicates. The accounts for each of the syndicates for each year had closed naturally, with the
exception of the account for the year 1982 In respect of one of the syndicates. The deceased's syndicate was affected In the same way as many others, by the uncertain level of liability for claims,
particularly on policies covering asbestos and environmental pollution, and because members of a syndicate remain liable to pay claims for an Indefinite period. The Court acknowledged that, although
Equltas had assumed the liabilities of Names for 1992 and earlier years, Names have not been released from those liabilities and so there remains the hypothetical possibility, should Equltas fall to meet those liabilities, that Names will be required to meet them.
The problem
The problem In administering the estate of a deceased Name In Scotland Is that, as In England,
executors are bound to meet all of the deceased's liabilities, before distributing the estate to the beneficiaries. If the executors do distribute the estate to the beneficiaries and at a later date a liability for
a Lloyd's syndicate were to arise, the executors would be personally liable to the syndicate. The effect of this is that the relevant estates become "frozen" and the beneficiaries cannot be paid out.
Even If the executors and the beneficiaries are exactly the same people, and so those who have the
responsibility to meet the liability are also those who have received the Inheritance, the difficulty Is that executors have Joint and several *P.C.B. 121 liability, which means that If one of the executors falls to
pay up, the others, or even one executor alone, will be faced with paying for the whole liability.
One way in which executors might try to reduce their personal liability is to seek Indemnities from the
beneficiaries so that, should a liability to a syndicate or otherwise arise, the beneficiaries would be duty bound to repay what they had Inherited, or part of what they had Inherited, to meet the executors' liability. However, in reality, an Indemnity offers little protection to the executors. Whilst the beneficiary
does have an obligation to meet the executors' liability, enforcement of the Indemnity Is difficult, and the beneficiary may have spent or lost the Inheritance, perhaps through bankruptcy, in which case the
Indemnity is not worth the paper It Is written on.
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So, in many cases, as in the Neilson case, executors cannot complete the administration of the estate of a deceased Lloyd's Name.
The Re Yorke decision in England
The same situation In England, and five years ago In the case of Re Yorke2 similar circumstances were
examined. There the Court decided, on the facts of that case, that It should allow the executors to
distribute the estate to the beneficiaries. Following that decision, there Is an abbreviated procedure In the English courts to authorise distributions In such circumstances.
But until now, no Scottish court had been asked to look Into the Situation, and It was thought that there would be difficulties In getting a Scottish court to agree to a Re Yorke distribution, particularly at this time,
as there is some commentary, as a result of recent Equltas accounts, that Equltas Is financially vulnerable because of the extent of asbestos claims.
The solutions
The Court in the Neilson case decided that It did not need to enquire further Into the financial adequacy of Equltas, and could rely partly on the pronouncements of the English court to the effect that Equltas
was a sufficient and proper security to executors.
The Court's view was that the likelihood of the executors being left with any personal liability to the
Lloyd's syndicate was very small, because the reinsurance with Equitas had to prove to be Inadequate
before there would be a claim against the estate. Lord Abernethy, who delivered the Opinion stated, "the possibility that a liability may emerge ... would be discounted by any reasonable person as so remote as to be merely speculative or hypothetical .. ",
In the light of that, the Court pronounced an order allowing the executors to distribute the estate without
any provision being made for potential claims In respect of the deceased's membership of the syndicate. The Court also made an *P.C.B. 122 order which relieved the executors from any personal
liability arising out of the deceased's membership of Lloyd's or for distributing the estate.
The lingering problem
Whilst the decision will give executors of the estates of deceased Lloyd's Names some comfort, It
should not be assumed that the case gives the executors automatic protection from personal liability.
Indeed, the contrary is true. The Court acknowledged that executors would be personally liable for syndicate claims and that, without an order of the Court, there would be no protection against such claims. The decision is not considered to be broad enough to allow other estates to be wound up on Its
strength.
The Practice Note
Following on from the decision In June 2002, the court, in mid· November, Issued a Practice Note
setting up an entirely new procedure to be followed In cases of this type.
The procedure will only apply to cases where all Lloyd's syndicates' liabilities have been reinsured (directly or Indirectly) through Equltas, and where the only reason for delaying distribution of the estate Is the potential liabilities to Lloyd's syndicates.
The fact that there is now a procedure in place Is of significant help to any further applicants to the Court. In addition, the procedure is abbreviated as compared to procedures for other quite different
types of case, because the Practice Note appears to anticipate that If there are no objections to the application, It might be granted without a court hearing. That would, however, also be dependent on
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the Court receiving a favourable report from the Court appointed "Reporter" who looks Into the facts of the case, Including, the financial status of Equltas.
However, depending on the particular circumstances of the estate In question, the costs to
make the application might be considerable.
Conclusion
Whilst the decision In Neilson certainly has not brought an end to the entire problem facing
executors of deceased Names, It has at least shown that the Scottish Court recognises the
problem. However, a number of procedural hurdles remain, and the application procedure will not be straightforward. It is understood that no application under the new procedures have been made to date, but several are currently being considered by the writers' firm
which will allow the new procedure to be tested.
This article first appeared in the December 2002 issue of The Equltaslan published by the
Association of Lloyd's Members, with whose kind permission, together with that of the writers, it
is produced.
P.C.B. 2003, 2, 120-122
I. [20021 S.L.T. 1100. 2. [199714 All E.R. 907.
Q 2014 Sweet & Maxwell and Its Contributors
Westlaw.UK
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