So, my trust needs a review. What might that mean?

We have seen a number of instances in recent times where people have been reviewing a trust arrangement. In particular individuals who have placed a house, investment bond or cash into a trust. A trust to which they are able to benefit. These trusts have tended to focus on asset protection and control. We thought it would be useful to give an overview of some of the points that might be the subject of a review.

Who are the trustees?

A key point for any trust is who is in office as the trustees. The trustees will have wide powers. They might also have discretion to decide who benefits from the trust, when and to what extent.

Getting the ‘right’ trustees in place is vital.

The default position in Scotland is that trustees can take decisions by way of a majority. All trustees must be consulted before the decision can be made. [Moving away from the general to a specific current point we are aware of, this might not be the right and effective way to deal with a trust where one trustee is viewed as being problematic. As well as the decision to end the trust possibly not being correct, majority decision-making does not necessarily mean the title (to e.g. a house) can be validly dealt with by only a majority of the trustees. And new rules coming in at the end of June 2024 on majority decisions to remove trustees also might not help due to the need for the “trustee to provide professional services“. In these situations we are seeing, the trustee has not provided any services. I think we will mull over these new rules further.]

The trustees, in their capacity as trustees of the trust, are the owners of the trust assets. That means, for example, it is the trustees who can decide to sell a house in a trust.

Trustees can be changed. This will often involve a document being signed by the current trustees to record any new trustees and state if any existing trustees are resigning.

The ‘type’ of trust

There are different types of trust.

It many trusts where a review has been encouraged, we see two types of trust:-

• A liferent trust which becomes a discretionary trust.

• A discretionary trust.

Let’s look at these type of trusts in a little more detail.

A liferent trust which becomes a discretionary trust

This will give someone (or some people) a ‘liferent’. A liferent is a right, during a person’s life, to occupy a property held in the trust or the right to the income from trust assets. On income, if the trust e.g. had cash in the bank, the interest would be available to the person with the liferent (called the ‘liferenter’) but not the original cash itself. That original cash is called the ‘capital’.

In many trusts we have seen the initial liferenter’s surviving spouse then benefits from a liferent after the death of the initial liferenter. On the death of the surviving spouse, the trust then becomes a discretionary trust. A change in the type of trust.

As the name (discretionary trust) suggests, at that point there is then discretion given to the trustees to choose from a class of beneficiaries (stated in the trust deed (make sure these are correct)) who will benefit from the trust.

It can be more than one person who benefits and it can be equally or in different shares and at different times. Unlike a liferent, this will also apply to the capital of the trust and not just the income generated. On beneficiaries, you might want to write or update any letter or statement of wishes. That would guide but not instruct the trustees as to who should benefit from the trust and in what way.

A point to note on this is that, unless steps are taken, until the surviving spouse’s death no capital can be accessed. We have seen this issue have two main consequences.

• First, if the trust holds an investment bond, withdrawals from the bond cannot be validly taken out of the trust. Due to bonds only paying out capital.
• Secondly, if the person who set up the trust wants, for example, ownership of a house transferred back to them, the trust does not, without further steps, permit that to happen.

Where a trust gives a liferent, it means a house in the trust will be treated as the principal private residence of the liferenter. Broadly, that means there would be no capital gains tax on the sale of the house relating to the period treated as the principal residence of the liferenter. That is good.

A discretionary trust

This has more flexibility. The points noted above about the bond and transfer of the house would not apply.

However, this type of trust might not be so well placed to evidence that a house held in the trust is a principal private residence. That is not so good. It is better to document that there is a right to live in the house.

Taxation of trusts

This is in no way a full summary of trust taxation. Rather an overview of key points for the trusts where we have seen reviews being recently encouraged.

Inheritance tax

No more than £325,000 per person should be put in a trust even seven years. If more value is put in a trust, there is an immediate 20% inheritance tax charge on the value above £325,000.

Many people have talked about the 10 year charge for inheritance tax. This will only apply if the value of assets in the trust is more than £325,000. If that is the case, on the value above £325,000, 6% inheritance tax is charged. A report to HMRC is required where the trust assets exceed 80% of £325,000. Even if no tax due.

There can be other inheritance tax considerations when assets are distributed out of a trust.

Income tax and trusts

Broadly, trusts pay tax at the highest rate of income tax. We mention one particular point on this.

If the trust holds an investment bond, care should be taken about encashing (part of) the bond in the trust. That is because the tax regime applicable to bonds is income tax. It might be better to assign (part of) the bond to an individual beneficiary to then encash based on their own personal (and likely to be more favourable) tax position. We would, however, refer to the point above about a liferent trust and getting capital out of the trust – i.e. without step being taken, the trust may not allow this to happen.

Capital gains tax and trusts

Trusts pay capital gains tax.

A trust has one-half of the annual allowance that a human has.

For many trusts we have been asked about, the main capital gains tax point is in relation to a house in the trust and principal private residence relief.

If there is more than one property in the trust, you should check to see what benefits from principal private residence relief. It is possible for two houses in a trust to benefit from principal private residence relief. It will however depend on the documentation.

Interaction between personal and trust inheritance tax 

If someone puts assets in a trust and they can benefit from the trust, the value of the assets in trust are, for inheritance tax, treated as your own. You are said to have ‘reserved a benefit’.

So, for inheritance tax, your taxable estate is:-

Value of assets in own name + value of assets in trust = taxable estate 

If this total is above £650,000 (for a married/civil partner couple) or £32,5000 (for an individual), you should seek advice promptly.

That is because this situation is likely to create an unnecessary inheritance tax liability on death. Unnecessary because had the house been held in a personal name rather than the trust, no inheritance tax would be due unless the taxable estate is over £1,000,000 (if married/civil partnership with children) or £500,000 (if single with children).

This is because of how rules on the ‘residence nil rate band’ work. A house in trust does not mix well (at all) with the residence nil rate band. The residence nil rate band has been a consideration since 2015.

HMRC trust registration service

This has been with us for a while. Trusts that existed as at September 2022, should already be registered. We realise many are not. 

This HMRC registration is not about tax really. It does not mean your trust will have a tax liability. Of course, if a trust has a tax liability it must report and deal with that.

But for trusts where no tax arising, HMRC trust registration is about money laundering and transparency. The government (via international rules) needs to know about assets held in certain structures.

HMRC registration is necessary but not a big deal. Unless there are changes to the trust or trustees, once done there is no annual update required.

Insurance – houses

If a house is held in the trust, make sure the insurance arrangements are properly in place. The insurer will need to know about the house being held in trust.

The right ‘person’ needs to take out the insurance. That will probably be the trust itself. Why? Because if the house burns down, it is the trust that suffers the loss.

Title to assets… are they ‘in’ the trust?

The public property registers will show if a house is held in the trust. The trustees will be noted as the owners. For a house in the Land Register of Scotland, this will be noted in section B ‘proprietorship’ on the title.

For investment bonds, policies and the like, it is worth contacting the financial institution to confirm the position.

In some cases, we have seen house titles that have not been registered into the names of the trustees. This is usually where a mortgage is in place. In such a situation, there will often be a signed ‘disposition’ (document that is the basis of a transfer of title) but the disposition has not been registered (and so title has not transferred).

While it means the trustees have an entitlement to the house title, the title has not been transferred. This can be administratively annoying (and add cost and delay) on death.

There is also the potential for problems with the lender as there might have been a breach of the mortgage conditions.

Advice should be sought if the title has not been registered in the name of the trustees.

If you change trustees, there is no need to change the actual title deeds. It is fine if it continues to show the ‘old’ trustees. The document changing the trustees is then the link for a purchaser to connect up the original trustees (shown on the title deed) to the current trustees who are selling. 

There are however newer rules (which really took effect this April) that where there is a difference between the names on the title and those in control of the property, an entry in the Register of Persons Holding a Controlled Interest in Land (RCI) must be made. Not a huge task, but it needs to happen. A bit like HMRC registration.

Annual reviews

This will be horses for courses.

As a general rule of thumb, if a trust owns solely a house, there is unlikely to be the need for an ‘annual review’. If a house and bond, probably a financial adviser review could be worthwhile but probably no need for an annual review of trust legal matters.

Trustee expenses 

Costs and expenses which a trustee incurs directly and in relation to that specific trust could be a proper cost for that trustee to have reimbursed. If not directly incurred in respect of that specific trust, costs sought would not appear to be a proper thing to reimburse from trust funds. 

And, as an expense, the cost must actually have been incurred. An expense is something to be reimbursed so that the trustee is then in a neutral position. Not so they make a ‘profit’.

The bottom line: should I keep the trust?

The vast majority of cases, our view is ‘yes’. That is not always to say we agree there should have been a trust in the first place. But it is the right answer based on the current position. By keeping the trust, it is likely to be more cost-effective (now and in the future) as well as reduce administration and delays in dealing with the assets on death. 

It is likely that if the trust is to remain that it will need a ‘spruce’ and the key bits of legal sprucing will be:-

• changing the trustees

• understanding the type of trust

• HMRC registration

• confirming the assets are indeed in the trust and any RCI entry

These steps are not ‘awful’ to undertake and you should be able to get an upfront, fixed cost on carrying out these steps. You should also check the insurance position.

We said the vast majority of cases. There are the minority. The main situation where it is likely to be better to bring the trust to an end is where the value of personal assets plus trust assets exceeds £650,000 (if married with children) or £325,000 (if single with children). This is due to the point noted above about the residence nil rate band. Advice should be sought in this scenario.  

Are trusts ‘good’ or ‘bad’?

As with so many things, the answer is ‘it depends’.

Our general view is that, used in the right situation, a trust is a very useful succession and asset protection tool. If not deployed in the right way or in the right situation, there can be issues connected to trusts. They need handled correctly.

This overview is just that; an overview of popular issues we see coming up. But while each trust is separate and distinct, the popular issues in this area do arise with consistent regularity.

We can help on trusts and succession matters. Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.” “Alan is a very articulate individual who is clearly an expert in his field.”  Chambers High Net Worth 2023 directory

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

Time for the Euros! Yes Sir, I can succession plan

So, the Euros are about to literally kick-off with Scotland in the opener… no Scotland, no party after all. It naturally means we must consider some European (and international) aspects of succession planning.

There are, for us, four critical points to consider when dealing with succession across borders. Domicile, land and buildings, will validity and the EU Succession Regulation. We also mentions a newer charities point.

Domicile

Very broadly, domicile is the country to which you are most legally connected. You start off with a domicile of origin but that might change. You must ‘lose’ that original domicile for a new one to be acquired.

Many legal points flow from domicile (or similar other concepts used in some countries). It will affect the validity of wills and decide which law governs succession to, at least, your moveable estate. Moveable estate being essentially all assets apart from land and buildings. We will return to land and buildings in a moment.

Domicile can also have an important role in the application of any forced heirship systems that determine that certain parts of an estate must go to certain family members irrespective of the terms of a will. One to watch.

For more on domicile (via Rod Stewart) click here.

Land and buildings

We just mentioned the role of domicile in succession to moveable assets. For many, many countries the law of the jurisdiction in which any land and buildings is physically situated will govern succession to such land and buildings. (We do English but those that like Latin call that the lex situs.) This role of that country’s law in personal estate planning with that foreign situated asset needs to be considered.

It means one might need a will in that other country. There might be forced heirship that applies to land to factor into thoughts and planning. The process and administration to transfer title following death requires attention. Getting good and reliable local advice that connects with your Scottish estate planning is the critical step to get this right. We can help on that to make the right connections to help create a coordinated international succession strategy.

Where do I sign up? Validity of wills

Domicile, habitual residence, the assets involved and physical location at the time of making a will can all affect how a will is validly signed. Getting a will validly signed is of critical importance. And might not always be straightforward as to what are the necessary signing requirements. Again, the right advice is important and can be the difference between a will that ‘works’ and one that is entirely ineffective and invalid.

Even after Brexit… the EU Succession Regulation

We have talked about this before in more detail (click here) but a reminder now about the role of the EU Succession Regulation. This can be very useful. It can affect will drafting in Scotland. It can affect the form of any will in the other relevant country. If there are to be two wills, they need to coordinate with each other.

Planning based on the EU Succession Regulation can also have a positive impact on the application of any forced heirship rules. Getting early advice on this can enable a plan to be created and also to be forearmed on how forced heirship regimes might work and interact.

Again, joined up Scottish and foreign advice is needed to navigate this. The way the regulation works can be a very useful. It can be critical to smooth succession and ensuring the ‘right’ people inherit your estate.

Charities and charitable bequests

New applications for charity tax recognition from 15 March 2023 must have met a new definition. The new definition would affect some legal drafting in documentation for charities. It should also serve as a reminder in charity and succession drafting that the tax definition of ‘charity’ and ‘charitable’ is critical.

These rules mean that donations to non-UK charities no longer benefit from tax reliefs after 5 April 2024. There had been transitional rules applicable up to that point.

For help on international succession and charities issues, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

Alan is the Scottish author for the textbook, International Succession.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.” “Alan is a very articulate individual who is clearly an expert in his field.”  Chambers High Net Worth 2023 directory

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

“Alan is highly experienced in advising third sector organisations on governance and constitutional issues, including charity establishment and modernisation… He blends excellent technical advice with both pragmatism and plain communication.” Chambers and Partners 2023

“And the haters gonna hate”: a guide to disinheritance in Scotland

The world is going Taylor Swift dizzy. It would therefore be remiss not to get some inspiration from the global pop and country music icon. And with that, we look at a cheery guide to disinheriting your family. In Scotland, that means considering the effects of legal rights among other things. As we shall also see, disinheritance is not all about ‘hate’ (very harsh word) and can be about managing an inheritance in a more prudent fashion.

Key message on disinheritance: need to be ‘lightnin’ on my feet‘ and take action

If you wish to have control of an estate and potentially disinherit family members, you must take action during life. A will is not enough in Scotland. You need to, erm, ‘shake off‘ some rules (especially ‘legal rights’).

Here’s the ‘sick beat‘ on steps that need to be considered:-

• Make a will. It might not be enough but it is the starting point
• Update any pension nominations
• Update any death in service expression of wish forms
• Give away ‘moveable’ assets (see more below on ‘moveable’)
• Gifts can be to individuals or trust (check values and capital gains)
• Turn ‘moveable’ assets into land and buildings
• Put life policies in trust
• Consider the effects of any joint accounts
• Check title deeds
• Move abroad (extreme and might be frying pan into the fire)
• Depending on the value, put assets in a trust for yourself

Who is entitled to legal rights?

The definition does not say ‘liars and the dirty, dirty cheats of the world‘. Instead, legal rights are available to spouses/civil partners and children. They apply to the estate of a deceased who was domiciled in Scotland. We have looked at domicile before (via another music icon… Rod Stewart).

What assets form a legal rights entitlement?

Legal rights relate to a share of the ‘moveable’ estate.

The moveable estate is broadly all assets in the deceased’s personal name apart from land and buildings. So, cash, investments, premium bonds and private company shareholdings are all examples of moveable assets.

Your home, commercial property or country estate are not moveable and not part of a legal rights entitlement. It should be noted that a property owned via a company becomes part of legal rights as the asset is the shareholding not the actual property. Property held in a partnership raises further points including ways to seek to avoid the effects of legal rights on that property.

What matters is the net moveable estate. That is the moveable estate after the settlement of applicable debts and other obligations. Debts might be clear. “Other obligations” opens up considerations to manage and reduce a legal rights entitlement. That is principally owing to the effect of contracts that are enforceable against the estate. Such contracts could form an agreement as to where an asset must go on death and trumps both legal rights and the will. Possible food for thought as we will return to later.

The entitlements: the shares of moveable estate under legal rights

A spouse/civil partner is entitled to one-third of the net moveable estate if there is a surviving child. Similarly, children, as a group, are entitled to one-third, if there is a surviving spouse. Where there is more than one child, they each get a proportionate share of the one-third.

If there was no surviving spouse/civil partner, then children, as a group, would be entitled to one-half of the net moveable estate. The same applies for a spouse/civil partner if no surviving children. 

“But I want to disinherit my son!”

If you want to disinherit a spouse/civil partner or child some thought is required.  We should say that not all attempts at disinheritance follow from a family feud. There may be situations where one wants to restrict what someone inherits in order to actually provide for a beneficiary but in a more appropriate way to their individual circumstances. Classic examples of this tend to relate to providing for disabled or incapable family members as well as younger children. More on such things here (wills and trusts) and here (trusts for vulnerable beneficiaries).

A will cannot limit legal rights in the estate of the person who made the will (we will return to this). Action must be taken during life to alter the net moveable estate. That will involve either changing moveable assets into land etc, funding wealth outwith the personal estate such as pensions, gifting assets, putting assets in trust, entering into certain contractual obligations and even creating debt. On the transfer of assets, it might be ‘can’t stop, won’t stop movin” those assets to disinherit. But it must be a real transfer… ‘and the fakers gonna fake, fake, fake, fake, fake‘ and the courts have struck those down.

As action needs to be taken during life, there are aspect’s of this that mean on death the result is ‘what they don’t see‘… and that’s what matters. The assets have been moved away from being a target for legal rights. The assets are no longer in the estate of the deceased.

The important point is these steps must be taken before death. At date of death, the legal rights entitlement crystallises. It is then an entitlement that needs to be settled (if it is taken) before then distributing the estate under the terms of the will. Those entitled to legal rights take their entitlement in preference to the beneficiaries under the will. It is as if the legal rights is a debt to be settled. 

With that preference, the ‘track listing’ in the division of an estate is as follows:-

• Tax

• Funeral expenses

• Secured debts

• Other debts and obligations

• Legal rights

• Beneficiaries under the will

The right kind of will can reduce legal rights in another’s estate

We said we would return to the role of wills in reducing legal tights. We said a will cannot solve the legal rights problem for the estate of the person who made the will. However, the right kind of will can prevent the legal rights situation in someone else’s estate being made worse. If, for example, husband and wife wish to restrict the inheritance of a child, the right kind of will by the first spouse to pass away can help reduce or avoid the effects of legal rights in the surviving spouse’s estate.

For some, don’t make a will… shock news!

In some cases, by not making a will legal rights can be avoided. This applies where there is a surviving spouse/ civil partner. A surviving spouse/civil partner where there is no will (i.e. interests estate) has additional rights called prior rights. These relate to the house (up to £473,000), cash and furniture in the house. So, if there is no will, the spouse will take up to £50,000 cash and up to £29,000 in furniture before then turning to legal rights. Prior rights sit above legal rights in the hierarchy. But this only applies where there no will. The strategy of having no will depends on the value of the estate and the assets in the estate. If prior rights exhaust the estate, then great as far as knocking out the child’s legal rights! Get the values wrong with no will and there is a sting the tail. After prior rights there is legal rights and then the rest of the estate after that would be inherited by children. 

Care needs to be taken before embarking on the intestate/ no will strategy. Even with new rules, instestacy is to be avoided.  

Happy families… usually no legal rights are taken

When legal rights is an issue, it is a big issue. But for most estates it passes as an academic exercise. Children have legal rights but they do not accept them and the estate passes in terms of the will.

An aside on European succession and European versions of legal rights (so, you can enjoy these thoughts on the continental legs of the Eras tour)

Other countries have versions of legal rights (under the general banner of ‘forced heirship’). England does not (but has a court based system for some disappointed beneficiaries). 

For Scottish people, overseas legal rights issues are a possibility where that other country applies some form of legal rights to land and buildings situated in that country.

If e.g. the Spanish equivalent of legal rights might cause your estate an issue because you own a Spanish holiday villa and don’t want a child to inherit part of it, when making your will arrangements in Scotland and Spanish, consideration should be given to the EU Succession Regulation. And that is still the case post-Brexit. You may be able to elect out of the the effects of the Spanish rules. 

The international effects of forced heirship needs careful consideration. Especially as some countries (e.g. France and Germany) try to make it difficult to opt out of their forced heirship rules.

Key takeaways 

• Legal rights exist for Scottish estates
• They apply to spouses/civil partners and children 
• The value of the net moveable estate is critical
• One can manage or even avoid legal rights with action taken during life
• Not all about Scotland- consider any foreign versions of legal rights

So, if disinheritance is something you need to consider, take action and get advice. If you do:-

‘It’s like I got this music in my mind
Sayin’ it’s gonna be alright‘

For help and advice on succession matters (including legal rights, disinheritance and being a disappointed beneficiary), get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.” “Alan is a very articulate individual who is clearly an expert in his field.”  Chambers High Net Worth 2023 directory

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

New succession law: intestacy is still pretty bad

The Trusts and Succession (Scotland) Act 2024 received Royal Assent yesterday (30 January 2024). Three months from then (30 April 2024), we will have a change to the intestate succession rules. The Act makes one quite significant change to the laws of intestacy. A positive and sensible change in our view. But a change that still leaves intestacy as an unattractive option in managing and governing succession to an estate.

What is the change to the intestacy rules? Where the deceased has no children, the surviving spouse or civil partner will inherit the estate.

The current rules of intestacy state that after certain provision for the spouse (the house up to a value of £473,000, a cash entitlement of £89,000 and furniture in the house up to £29,000 and then one-half of the deceased’s moveable estate) the remainder of the estate will pass to the deceased’s surviving siblings and parents.

The remainder not passing to the spouse/civil partner could be fairly disastrous in some situations. This is particularly the case where the deceased has a larger moveable estate – that could be from investments or a private business. It can be bad for a business if it is then effectively split between e.g. siblings/parents and a spouse. Siblings/parents and a spouse who might not get on with each other at all.

So, with the change in the Trusts and Succession Act, is the law of intestacy going to be fit for purpose in regulating succession to an estate? Do we still really need wills? We suggest the answers are ‘no’ and ‘yes’.

Why the laws of intestacy are still often bad?

For a start, you don’t really get to choose what happens. The law, rather than you, decides. Unless you fall into the rare group where intestacy does work better (we have talked about this rare situation before and something to do with careful advice), you are allowing your estate to be divided according to the family make-up, age and stage of family members, size/type of assets held and rules as at your date of death. That could all still be quite random and have quite unexpected and unfortunate outcomes.

Having no will adds to the timescales of dealing with an estate. One definite additional piece of process and time delay stems from the need to apply to the court to have an executor appointed. That should take around a month to happen but if there are delays at the court (or in the family), it could be longer. So, the estate will be running at least a month behind to start. And that can mean a month or so longer, at least, to have control of the assets in the estate.

It might give you the ‘wrong’ executor(s). The court does not have carte blanche to appoint the best or most appropriate individual(s) to be executor(s). There is an order of entitlement for the court to follow. That can create issues and risks. It can also bring together executors who are unlikely to work well as a team. If there is more than one person at the level of entitlement to be appointed as executor, all of them are entitled to be appointed. That can lead to an in-built tension in the estate’s decision-making.

A costly ‘caution’-ary tale. Where there is no will, executors (subject to a few exceptions) need to obtain a ‘bond of caution’. It is an insurance contract. For most intestate estates, it is an absolute requirement. This adds extra process. It also adds extra cost. A cost that in itself will usually eclipse (and in many, many cases by a long way) the cost of making a will. The bond of caution cost will be based on the value of the gross estate. In some larger estates, the bond of caution premium will be thousands of pounds. A completely unnecessary expense, some might say. So, even if the new law got the estate to the ‘right’ person in the form of the surviving spouse, they are literally paying a premium for it. 

It’s like giving lots of candy to a baby. Where there are children, the law prefers them to a spouse/civil partner where there is no will. This can create a whole host of problems. Not least, the children might now be wealthier than their surviving parent. The control dynamic in the family might be partly flipped. The laws of intestacy for the period until children are 16 puts in place a rather clunky management and inflexible system for a child’s inheritance. After 16, it is over to the children to do what they want without any management system in place. Sports car anyone? A will can put in place a proper and flexible management structure for younger beneficiaries. And one that can help protect family wealth for the family. It also ensures the management system for younger beneficiaries can be responsive to the assets in the estate (e.g. investments or business interests).

There is a lack of effective and protective management structure for vulnerable beneficiaries. Vulnerable beneficiaries can receive large and complex assets outright which might be difficult for them to manage or not be in their interest to receive directly.

It can be very bad for business. Allowing the laws of intestacy to govern what happens to your estate means a business you own might end up with some unexpected shareholders. Your business partners might find they have children or people who do not get on with each other (at all!) as their co-owners of the business. A will helps avoid this problem (as does the right corporate documentation).

Cohabitants are very vulnerable. If you are unmarried/not in a civil partnership, the intestacy rules create significant uncertainty. It can involve a court to sort out what happens. It also can involve the surviving cohabitant essentially having to raise a court action against the deceased’s surviving parents/siblings… does not make for a great Christmas dinner! The clear message is: if you are cohabiting, make a will.

The laws of intestacy can ‘infect’ other sources of wealth. Some ‘assets’ such as pension death benefits and death in service through work exist outwith one’s estate. But if the paperwork for those benefits has not been completed/kept up-to-date and there is no will, the rules on intestacy can impact what happens to those benefits. This can compound an already not fantastic situation… all due to the lack of a will.

Intestacy can be tax inefficient. Particularly where the law places a spouse/civil partner behind children, siblings and parents, the starting position is that the spouse/civil partner inheritance tax exemption will be lost. Generally, the laws of intestacy can be more difficult to take post-death steps to make the estate as tax efficient as possible.

Back to you don’t get to choose: loved ones and charitable causes. The laws of intestacy decide who benefits. If you want particular people to inherit, a will is the best thing to have. Looking at it somewhat more negatively, a will (and sometimes related planning) is the way you can control your estate including preventing/restricting certain people inheriting. And if you wish to make provision for charity, again, a will is the way to do that.

The law of intestacy: it is what it is. You get whatever the rules are at that given time based on the family make-up and value of the estate. You give up control of your the inheritance of your estate to (arguably out-of-date) legal rules and the roll of dice on the size of your estate and who has survived you. The Trusts and Succession (Scotland) Act 2024 improves matters but only to a certain extent. Intestacy is still not a good idea. Make a will and related steps to make sure you control what happens to your estate in the best possible way.

Taking control of your estate: the next step

To take control of succession through a will and related planning, get in touch: Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.” “Alan is a very articulate individual who is clearly an expert in his field.”  Chambers High Net Worth 2023 directory

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

Spooky but with treat not trick: deeds of variation

What’s more ghoulish than private client law. Death this, calamity that!

Sometimes private client law can work in spooky ways. One that allows the will of a dead person to be changed. Yes, you heard that right. And in doing so to save tax, support charity or hold an inheritance in a better and more appropriate way to suit a beneficiary and their family.

The trickery we speak of is a a deed of variation. But it is not really trickery and is something that is (or at least should be) considered regularly in estates. In some ways the ‘trickery’ is that the deed of variation legislation treats what is decided to happen post-death as legally having happened at date of death and as if that was in the deceased’s will. The rules also give some unique inheritance tax opportunities. A real treat and no trick.

What is a deed of variation?

A deed of variation is a document. The document must contain certain key requirements prescribed in the tax legislation. It must be completed within two years of a death.

But it is much more than just a document. It feels magical!

A deed of variation allows a beneficiary to re-write history (to cast a spell, if you will). You can be transported to the past to change the future (like a time-machine). To re-write a will as far that beneficiary’s entitlement is concerned. The re-writing allows the beneficiary to create a more appropriate way to hold their inheritance taking account of their own circumstances. It also allows the re-writing to be more tax efficient than under the will.

Not only are there immediate tax efficiencies, but a deed of variation can also set the platform for future tax advantages. The effect of a deed of variation is that the re-written history replaces the position as at date of death. That can provide some unique and valuable opportunities.

What are the benefits of a deed of variation?

The time-machine characteristic brings great opportunities and flexibility. Here are a few of them:-

• A deed of variation allows a beneficiary to re-direct an inheritance to another person or persons.

• It allows legacies to charity to be made post-death. Not only does this help good causes, but could also lead to less tax for the family beneficiaries.

• Varying a will can create a protective environment. Some situations (either because of the asset or individual(s) involved) mean it is better not to have an individual(s) owning an asset personally. It could be better held in trust with the asset protection and control qualities it offers.

• Due to the time-machine, re-directing an inheritance to another person or trust is treated as coming from the estate of the deceased. Not the person doing the re-directing. It means no need to survive seven years for the re-directed (gifted) value to be out of your estate for inheritance tax purposes. Indeed, no need to survive for any period of time. Most spookily, the person re-directing might even be dead when the re-direction is done (do ask me for more on that)!

• A variation to a trust can be of an unlimited amount. Trusts set up during a person’s lifetime are limited to £325,000 (unless reliefs apply). A trust set up with a deed of variation is not restricted by that and can hold any amount.

• The normal inheritance tax rule is that you cannot continue to benefit from something you have gifted. Not so with a deed of variation. A variation of an inheritance to a trust has the extra bonus of being outwith your estate AND that value can still be accessed and enjoyed by you.

• A deed of variation can minimise or avoid certain potential capital gains tax liabilities.

• As well as re-writing a will, a deed of variation can be used where there is no will. It can play a part in resolving difficult claims where a cohabitant dies without a will.

Deeds of variation are great, but not a reason to avoid reviewing a will!

The re-direction of an inheritance has been with us forever really. The inheritance tax benefits have been with us for decades. But the benefits could be taken away.

There have been at least two serous reviews of the ability to use a deed of variation. So, it is better to keep a will under review than rely on your beneficiaries being able to use a deed of variation to ‘sort’ any issues. Also a deed of variation reflects a beneficiary’s own circumstances, which you might not know (or they change). Your will is the opportunity to set out what is important to you. Indeed, your will can be an opportunity to avoid a beneficiary seeking to re-write certain things!

An up-to-date will can avoid beneficiary’s being spooked when they see the will and avoid them then needing to consider re-writing portions of it.

For help on estate planning and succession law, get in touch with Alan Eccles – alaneccles@bkf.co.uk / 07359001038.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.”

“Alan is a very articulate individual who is clearly an expert in his field.”

Chambers High Net Worth 2023 directory

What a load of politics: IHT change in the air

There appear to be kites in the air. Flags being hoisted up the mast. And other horrible phrases. The weekend media was in a minor frenzy… “abolition of inheritance tax“!

In the dim and distant past we had a thing called the Office of Tax Simplification. The OTS was itself recently ‘simplified’. Media spin… “bureaucrat bonfire“!

Whenever the OTS issued a review of inheritance tax, my conclusion has consistently been that it will be a government need to pursue a particular (economic) policy agenda that will result in changes (of whatever sort) to inheritance tax. The political/economic mix matters a lot; technical tax reform less so. Who knows whether or not we have the political/economic (the former being the important and overriding factor) element in the present circumstances to drive change. History has given us some examples of this.

“History never repeats itself, but it does often rhyme.” (maybe Mark Twain)

The history of major changes to inheritance tax indicate there needs to be a few ingredients before reform happens. The ingredients in question seem to be: (1) the tax is too complicated; (2) the tax is not ‘fair’; and (3) the macro-economic situation creating a political momentum for change. The final ingredient (the politics) is the decisive one. It is the politics “wot won it” in terms of the inheritance tax reform before.

Horrible Histories? What has happened before?

1894 saw the introduction of the modern notion of an inheritance tax: estate duty.

The late 1940s however saw significant reform and tax rates increasing (hitting 80%). The vital mix for change was present (1) the tax in its existing form had become complex and unwieldy with overlapping regimes in place; (2) the tax was considered to be ‘unfair’ as modest estates were likely to attract a higher marginal rate (marginal rate ‘oddities’ prevalent at the moment across taxes) than larger estates; and (3) the United Kingdom was funding post-war reconstruction (perceived economic necessity and the political direction of travel).

Fast-forward to the March 1974 Budget. While top rate inheritance tax (estate duty) went up to 85% in 1969, the 1974 restructure was even more dramatic. The rates came ‘down’ slightly to 75%. But, and this was a significant ‘but’, the tax was greatly widened. As well as capturing what happened on death, the tax now captured gifts made during life. The tax was now re-branded as capital transfer tax to reflect its wider scope as a more general wealth transfer tax. Again, the critical elements were there: (1) estate duty was viewed as needing streamlined and made ‘comprehensive’; (2) estate duty was said to give some in society ‘unfair advantages’; and (3) there was the Three-Day Week, an oil crisis, inflationary pressures and industrial unease.

In 1986 inheritance tax was the new name on the block. The ingredients for change seemed to re-appear for Nigel Lawson’s Budget: (1) capital transfer tax was viewed as two taxes meshed into one; (2) it was unfair and an “unwarranted impost” that deterred passing on assets; and (3) the mid-1980s UK economy was in something of a sweet-spot and liberalising the economy was en vogue. The new inheritance tax removed the tax on lifetime gifts to individuals. It also ultimately led to the current system of nil rate band and 40% rate (in 1988), 100% Business and Agricultural Property Relief (in 1992) as well as being able to ‘use’ a nil rate band every seven years.

Let’s looks at the roaring (for there is a lot of noise nowadays) 2020s. Inheritance tax has had some changes since 1986, but no fundamental re-think. In 2019 and 2020 the OTS (ed: RIP)and the All-Party Parliamentary Group on Inheritance & Intergenerational Fairness (“APPG”), amongst others, reported on reform. The OTS recommended reform in a number of areas to make the tax less complicated. So, we have ingredient one.

The APPG’s review concluded that inheritance tax is “distortionary” and “unfair” as well as there being wealth inequality that tax was not responding to address and understand. The second ingredient had been identified.

What about the third usual suspect ingredient? Well, that is not difficult to find. On the one hand, we have had some tumultuous economic times… from funding a pandemic to inflation, a cost of living crisis and war. Government will now be anything but flush. The Chancellor with his other kites is noting no real room for slashing taxes (even with an election looming).

With that looming election, we will also be moving into new territory and blank paper for political promises. Remember the Conservative Party manifesto pledge from the last election not to increase the rates of income tax, national insurance or VAT. George H W Bush’s pledge of “Read my lips: no new taxes” and what happened next is one to send shivers down the back of any government. So, an election and fresh manifestos means there is new scope for change.

How might inheritance tax change?

We don’t know. We are not the government. And that is the point.

Will we have tinkering or something more fundamental? Inheritance tax is not a big tax-taker. But it is political emotive. And that matters.

Maybe something a bit 1974 could happen. Abolition seems unlikely. But if it was abolition – watch out for the replacement. We might even see some elements of OTS and APPG thinking. The APPG was in favour of bringing back lifetime transfer taxes. It also favours removing the very valuable reliefs for trading businesses and farms (but what is the economic impact of big changes on these? Behavioural economics issues here too). There were recommendations to remove the use of a nil rate band every seven years as well as abolishing the important, but for many obscure, capital gains tax (a non-inheritance tax point but intimately connected) ‘uplift on death’. That assets are revalued to date of death value and all gains are ‘washed out’.

It also interests us (maybe not others, but we accept that) to look at Australia. It does not have inheritance tax. We have calls for abolition; down under there are calls for reinstatement! And those calls seem to come with the exact same magic ingredients we noted above. See… it is all a load of politics.

Whatever happens have a plan

You never know what tax changes could happen. Depending on one’s own position reform can be viewed as good or bad. Whatever happens on the tax front (or any other front – other things can change – financial, family, legal rules etc), think about what the overall plan is for individual and family wealth. Have a plan and objectives to see through, and then adapt those to take account of things that change – including the tax landscape – but always with that overall plan remaining the focus.

For help and advice on Scottish private client and estate planning law issues, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07470808717.

“Alan is a caring and empathetic private client solicitor who is dedicated to providing the best outcomes for clients. He has the technical knowledge and professionalism to meet client needs.” “Alan is a very articulate individual who is clearly an expert in his field.” Chambers High Net Worth 2023

Who do you think you are? Charities, mergers and legacies

It may be worthwhile examining a charity’s ‘family tree’ in order to secure future legacy income.

Has your charity ever been part of a merger, restructure or the recipient of the transfer of all assets from another charity? If so, the charity should be identifying key information about that. It may be that a merger or other restructuring moment happened many years ago. Charities should revisit their ‘family tree’ to find out if there has been some from of previous merger activity. 

The record of charity mergers

Why should this be done? To ready the charity to be able to submit information to OSCR for the ‘record of charity mergers’. This new process will give protection for legacies in wills destined for a charity that has been the subject of a merger or similar. 

Lost legacies

If the charity does not take this action, a legacy might fall. Whether or not it falls will depend on the random and uncontrollable issue of how the will has been drafted. The default law in this area can seem quite harsh and result in charitable legacies being ‘lost’. Lost in the sense they cannot pass to the defunct charity and will not transfer to the successor charity. The legacy will fall to the residuary beneficiaries or even fall to distributed according to the rules of intestacy. 

To help avoid disappointment (from beyond) and to protect legacy income, charities should put this issue on the ‘to do’ list for this year. It would also seem to be a topic that auditors/independent examiners and other advisers could usefully put on the agenda when next discussing financial matters with charities with which they work.

Closing legacy charities?

Once the record of charity mergers comes onstream, charities who have retained an ‘old’ charity to help capture any stray legacies may wish to decide to close off the old charity for good. That will help bring a bit of streamlining with not having an essentially dormant charity continue in existence.

The power of legacies: opening the conversation

These helpful new rules also underline the importance of legacies as an income stream. For charities with existing legacy programmes, this will help secure legacies that are ‘already out there’. For charities that do not have a legacy campaign, they should perhaps consider how they might engage in the legacy conversation. And it is, we think, just that: the opening of a conversation. It is conversation topic that all charities can have. It is not, bluntly, the preserve of charities that might be viewed as having a connection to the issue of death. Charities should consider how they might benefit from human desire to support good causes and a desire that appears to continue to be strong in terms of overall legacy income year on year and anticipated for the future.

 

For help and advice on Scottish charity law issues including legacies, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is highly experienced in advising third sector organisations on governance and constitutional issues, including charity establishment and modernisation… He blends excellent technical advice with both pragmatism and plain communication.” Chambers and Partners 2023

“Alan advises on a range of issues and has particular experience in charities work. A source notes: “Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022

You don’t need to think about having a will or power of attorney

OK, that is a statement for the start of April.

Everyone needs to think about having a will and power of attorney. And also thinking about having the right will and power of attorney in place.

The cruel April Fool that can be played on people is that the default law will help them and pass their estate to the ‘right’ beneficiaries and on the ‘right’ basis. It often (in the vast majority of situations) won’t. If you leave it to the default rules then disappointment or a random outcome will follow. Not a great way to arrange things.

Without a power of attorney assets will be frozen and no-one (even a spouse, civil partner, partner, child) has automatic (or really any) power to discuss and give any instructions on health and welfare matters. Delay and stress is likely to follow while a (slow) court process is gone through to get a guardianship order. As well as delay, in some cases it opens up the debate as to who should be able to make decisions for you (think Britney Spears!).

A power of attorney allows you to choose who makes decisions and enables those chosen attorneys to discuss matters and make decisions as soon as required without delay. To put it one way… third parties (bank, doctor etc) want to speak with an attorney rather than a spouse… even if your attorney is your spouse, if you see what we mean.

On wills, where there is no will, the default law can prefer as the main beneficiary of your estate the brother you hate to the spouse you love. True fact… yikes! There are all sorts of other unhelpful scenarios to go through that highlight that the default laws of intestacy are invariably bad (and all a bit random). And, as we have blogged on ,even with changes to intestacy law making their way through the Scottish Parliament, intestacy is not a good place to be… at all.

Having no will also causes delay and extra cost around the processes needed to appoint an executor. And while those processes are in some ways not overly onerous, if courts are busy, you can immediately add two or more months to the process of accessing accounts and being able to deal with assets (e.g. sell a house or investments). It can cause significant issues and stresses (financial and otherwise) to have that delay in being able to use bank accounts and other assets which are stuck frozen in the estate.

Not having a will also means the issues of having the ‘wrong’ beneficiaries, not having proper protective management mechanisms in place to hold wealth and tax inefficiency all make an appearance.

And beyond wills, one should also consider the assets not always thought about… death in service, pension death benefits and insurances. Are these dealt with correctly and tax efficiently? Or are there disappointing surprises yet to unfold?

Is there ever a situation when no will is better than a will? You will note that the heading to this blog is “You don’t need to think about a will or power of attorney.” Everyone needs to think about a will and succession planning. There will be some cases – due to the mix of types of assets, asset value and family situation – where no will might be better. I had a situation last year where the advice (if that is what the advice indeed was) to have a will could not have been right. Not right as having a will has meant that part of the estate will actually go to an unintended beneficiary in the form of an estranged child. That happens though the automatic rights of children called ‘legal rights’.

In that estate the correct answer would have been to have no will and the spouse (the intended sole beneficiary) would have scooped the whole estate (albeit with some of the extra hassles where there is no will but in that case it would have been worth it). So, with all of these things, a bit of thought and proper advice is needed to get to the right answer (especially if the answer is something counterintuitive and tactical such as not having a will)… everyone needs to think about succession and wills and powers of attorney as they apply to their own particular situation.

For help and advice on Scottish private client matters, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022

Why have a will?

The broccoli from a time when veg was hard to come by… when the seemingly ‘basic’ turned out to be more fundamental when it was missing. A bit like a will.

Making a will is an important step. It will help you take care of loved ones and give you comfort that you have done the right thing to help them as much as you can, at what will be a difficult time. Here are some reasons why you should make a will and how we can help you and your family. A will also gives you an opportunity to support causes and charities close to your heart.

Protecting loved ones

A will helps you choose how to provide for and protect loved ones or causes that matter to you or others, such as charities.

Control and choice

A will allows you greater power to choose how your estate will be managed and divided. It enables you to control who benefits, in what way and when. It helps you decide who does and does not benefit from your assets.

Certainty

By giving you choice, it gives you certainty over what will happen to your estate. By making a will, you set out what happens to your estate and you will then have the comfort of the knowledge that you are clear about what will happen.

Speeds up the process

If you make a will, you will select executors. That means it is known from the outset who can administer the estate. It helps deal quickly with third parties such as banks. It also avoids the need to go to court to have executors appointed. You decide who will make decisions (such as on selling a house) about your estate.

Reduces scope for disputes

Making a will and considering how your estate should be managed and divided will reduce the scope for disputes over who will make decisions and inherit your estate.

Securing family wealth… for the family

The right type of will can be the basis for ensuring hard-earned family wealth stays in your family and is not put at risk by relationship breakdowns, financial issues with beneficiaries, creditors and other threats. A will can keep assets in a blood line.

Caring for young children or vulnerable adults

A will allows you to select who should be guardian to children under 16. It can also provide a protective environment, such as through a trust in the will, to manage funds for a vulnerable adult. You will then know the legal structure is in place to protect those needing extra support.

Business stewardship

A will could be a critical tool in the stewardship of a private or family business. The right type of will and the right combination of executors can be essential. It enables the right decisions to be taken for a business asset. This all gives the foundations to protect and even grow value after the death of a shareholder and key individual in a business.

The law can create bad outcomes where there is no will

The laws of intestacy can throw up very strange results. Rules that can favour an estranged sibling over a spouse or require a long-term partner to ask the court for permission to inherit anything from their partner’s estate! The laws of intestacy can mean leaving the destiny of your estate to chance and outdated rules. And even with anticipated changes to the intestacy rules, intestacy as compared to having a will is not an attractive outcome. Broadly, intestacy is bad and to be avoided.  

Other points to consider

Alongside making a will, you will want to think about points such as any benefits under death in service at work, pension death benefits, life cover arrangements, shareholder/partner/business protection as well as granting a power of attorney. 

Taking control of your estate: the next step

To take control of succession through a will and related planning, get in touch: Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

“Alan Eccles is an excellent lawyer with a brilliant manner with clients – he relaxes them and builds confidence,” while another comments: “He is diligent, makes the complex understandable and is very approachable.” Chambers High Net Worth 2021 directory

Succession Bill: intestacy is still not good

The Trusts and Succession (Scotland) Bill makes one quite significant change to the laws of intestacy. A positive and sensible change in our view. But a change that still leaves intestacy as an unattractive option in managing and governing succession to an estate.

What is the change to the intestacy rules? Where the deceased has no children, the surviving spouse or civil partner will (once the Bill becomes law) inherit the estate.

The current rules of intestacy state that after certain provision for the spouse (the house up to a value of £473,000, a cash entitlement of £89,000 and furniture in the house up to £29,000 and then one-half of the deceased’s moveable estate) the remainder of the estate will pass to the deceased’s surviving siblings and parents.

The remainder not passing to the spouse/civil partner could be fairly disastrous in some situations. This is particularly the case where the deceased has a larger moveable estate – that could be from investments or a private business. It can be bad for a business if it is then effectively split between e.g. siblings/parents and a spouse. Siblings/parents and a spouse who might not get on with each other at all.

So, with the change in the Trusts and Succession Bill, is the law of intestacy going to be fit for purpose in regulating succession to an estate? Do we still really need wills? We suggest the answers are ‘no’ and ‘yes’.

Why the laws of intestacy are still often bad?

For a start, you don’t really get to choose what happens. The law, rather than you, decides. Unless you fall into the rare group where intestacy does work better (we have talked about this rare situation before and something to do with careful advice), you are allowing your estate to be divided according to the family make-up, age and stage of family members, size/type of assets held and rules as at your date of death. That could all be quite random and have quite unexpected and unfortunate outcomes.

Having no will adds to the timescales of dealing with an estate. One definite additional piece of process and time delay stems from the need to apply to the court to have an executor appointed. That should take around a month to happen but if there are delays at the court (or in the family), it could be longer. So, the estate will be running at least a month behind to start. And that can mean a month or so longer, at least, to have control of the assets in the estate.

It might give you the ‘wrong’ executor(s). The court does not have carte blanche to appoint the best or most appropriate individual(s) to be executor(s). There is an order of entitlement for the court to follow. That can create issues and risks. It can also bring together executors who are unlikely to work well as a team. If there is more than one person at the level of entitlement to be appointed as executor, all of them are entitled to be appointed. That can lead to an in-built tension in the estate’s decision-making.

A costly ‘caution’-ary tale. Where there is no will, executors (subject to a few exceptions) need to obtain a ‘bond of caution’. It is an insurance contract. For most intestate estates, it is an absolute requirement. This adds extra process. It also adds extra cost. A cost that in itself will usually eclipse (and in many, many cases by a long way) the cost of making a will. The bond of caution cost will be based on the value of the gross estate. In some larger estates, the bond of caution premium will be thousands of pounds. A completely unnecessary expense, some might say.

It’s like giving lots of candy to a baby. Where there are children, the law prefers them to a spouse/civil partner where there is no will. This can create a whole host of problems. Not least, the children might now be wealthier than their surviving parent. The control dynamic in the family might be partly flipped. The laws of intestacy for the period until children are 16 puts in place a rather clunky management and inflexible system for a child’s inheritance. After 16, it is over to the children to do what they want without any management system in place. Sports car anyone? A will can put in place a proper and flexible management structure for younger beneficiaries. And one that can help protect family wealth for the family. It also ensures the management system for younger beneficiaries can be responsive to the assets in the estate (e.g. investments or business interests).

There is a lack of effective and protective management structure for vulnerable beneficiaries. Vulnerable beneficiaries can receive large and complex assets outright which might be difficult for them to manage or not be in their interest to receive directly.

It can be very bad for business. Allowing the laws of intestacy to govern what happens to your estate means a business you own might end up with some unexpected shareholders. Your business partners might find they have children or people who do not get on with each other (at all!) as their co-owners of the business. A will helps avoid this problem (as does the right corporate documentation).

Cohabitants are very vulnerable. If you are unmarried/not in a civil partnership, the intestacy rules create significant uncertainty. It can involve a court to sort out what happens. It also can involve the surviving cohabitant essentially having to raise a court action against the deceased’s surviving parents/siblings… does not make for a great Christmas dinner! The clear message is: if you are cohabiting, make a will.

The laws of intestacy can ‘infect’ other sources of wealth. Some ‘assets’ such as pension death benefits and death in service through work exist outwith one’s estate. But if the paperwork for those benefits has not been completed/kept up-to-date and there is no will, the rules on intestacy can impact what happens to those benefits. This can compound an already not fantastic situation… all due to the lack of a will.

Intestacy can be tax inefficient. Particularly where the law places a spouse/civil partner behind children, siblings and parents, the starting position is that the spouse/civil partner inheritance tax exemption will be lost. Generally, the laws of intestacy can be more difficult to take post-death steps to make the estate as tax efficient as possible.

Back to you don’t get to choose: loved ones and charitable causes. The laws of intestacy decide who benefits. If you want particular people to inherit, a will is the best thing to have. Looking at it somewhat more negatively, a will (and sometimes related planning) is the way you can control your estate including preventing/restricting certain people inheriting. And if you wish to make provision for charity, again, a will is the way to do that.

The law of intestacy: it is what it is. You get whatever the rules are at that given time based on the family make-up and value of the estate. You give up control of your the inheritance of your estate to (arguably out-of-date) legal rules and the roll of dice on the size of your estate and who has survived you. The Trusts and Succession (Scotland) Bill improves matters but only to a certain extent. Intestacy is still not a good idea. Make a will and related steps to make sure you control what happens to your estate in the best possible way.

Taking control of your estate: the next step

To take control of succession through a will and related planning, get in touch: Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022 directory

“Alan Eccles is an excellent lawyer with a brilliant manner with clients – he relaxes them and builds confidence,” while another comments: “He is diligent, makes the complex understandable and is very approachable.” Chambers High Net Worth 2021 directory