The simple answer to this question is yes. In the words of Benjamin Franklin "In this world nothing can be said to be certain, except death and taxes". Whilst I hope that everyone reading this article has a long and happy life, the best advice is (with very limited exceptions) to prepare a Will.
During my years in practice I think I have heard every excuse for postponing the day when you have to consider who should inherit your estate when the inevitable day arrives - "my husband/wife will get it all anyway", "I don't own enough to need a Will", "I'm too young to think about my death" and "I don't want to think about it, that might just make it happen sooner!".
If you die without a Will you are said to have died "intestate". In Scotland the law relating to the succession to an intestate estate is governed by the Succession (Scotland) Act 1964. This Act sets out a number of rules and formulas for working out who inherits a deceased's estate. In terms of this Act, a surviving spouse or civil partner is entitled to what are known as "Prior Rights" in the estate. These Prior Rights are a claim to the main residence to a maximum value of £300,000, the house contents to a value of £24,000 and a cash sum. The value of the cash sum varies depending on whether the deceased is survived by children or not - £42,000 where there is a child or children and £75,000 when there are none.
If any surplus estate is left after payment of the Prior Rights, the next stage is to calculate what are known as "Legal Rights". Legal Rights are payable from the moveable element of a deceased's estate namely, everything except the heritable property/bricks and mortar. Legal Rights are only payable to a surviving spouse/civil partner and/or children (or grandchildren if the deceased's child predeceased him or her). The Act states that where a deceased is survived by a spouse/civil partner and children then they are each entitled to a one-third share of the moveable element of the estate. It should be noted that the children inherit this one-third share as a group so that if there are three children each child would inherit a one-ninth share (a third share of a third share). However, if the deceased is survived by only a spouse/civil partner or children then they are entitled to a half share of the moveable estate. So what happens to the remaining one third or one half share of the moveable estate? This is dealt with under the rules relating to what is known as the "Free Estate".
The Free Estate is what is left in an estate after Prior Rights and Legal Rights have been settled. As Prior Rights and Legal Rights are only paid to the surviving spouse/civil partner and children, the Free Estate could be the whole estate if the deceased left no spouse/civil partner or children. The Succession (Scotland) Act 1964 sets out an order of succession and one must simply work through that list and identify who should inherit. The order of succession is 1) children 2) parents and brothers and sisters 3) brothers and sisters (if no parents) 4) parents (if no brothers and sisters) 5) spouse 6) uncles and aunts and 7) grandparents and so on to include the wider family.
One other point to cover when dealing with intestate succession is the position of cohabitants. The Family Law (Scotland) Act 2006 came into force on 4th May 2006. This Act, amongst other things, fundamentally changed the law in Scotland for cohabiting couples. A "cohabiting couple" is a man and woman who are living together as if they are husband and wife, or two persons of the same sex who are living together as if they are civil partners. Under this Act a cohabitant has a right to apply to the Court for an award from a deceased's estate if the deceased died without leaving a Will. The survivor can apply to the Court to ask it to consider awarding him/her a share of the assets in the estate. The applicant may be awarded either a capital sum or a property transfer out of the deceased's estate. This application must be made within 6 months of the deceased's date of death. The Act states that the cohabitant will never receive more than if they had been the spouse or civil partner of the deceased (namely the amount a spouse or civil partner would have received under Prior Rights and Legal Rights).
It should be noted that cohabitants are different from Civil Partners. A Civil Partnership is the relationship introduced by the Civil Partnership Act 2004 and is often referred to as a same sex marriage (although legally speaking it is not a marriage). This Act gave Civil Partners the same succession rights as spouses.
I hear you asking "So why should I prepare a Will when the Succession (Scotland) Act 1964 seems to have it all covered?" Well there are a number of reasons why it is better to write a Will and not rely on the provisions of the Act. The first, and as I see it the most fundamental, is that we work long and hard to accumulate our wealth and it seems extremely laid back not to take the time to set out who should inherit those assets. The second is linked to the cost of winding up your estate after your death. If you die intestate and the whole of your estate does not pass to your surviving spouse/civil partner then your Executors must obtain an insurance policy known as a bond of caution. The premium for this policy is based on the value of your estate and can cost several hundred pounds. The last reason is one relating to your family and personal circumstances. It may be that there are reasons why you would not want your estate to pass to your spouse/civil partner and would prefer than it passes to the next generation. Also, whilst you may love and care for your siblings would you want them to inherit your estate?
When considering what should be included in your Will the starting point is who should be appointed as your Executors. Executors are the individuals who will provide the Solicitor with all the information required to complete the papers to be lodged with the Court and the Inland Revenue. They are responsible for distributing your estate to your named beneficiaries. Ideally you should appoint more than one Executor and they should be the same age as you or younger. There is nothing to prevent one of your beneficiaries being appointed as one of your Executors.
Those who benefit from your estate can either receive a legacy (a specific item or a cash amount) or a share of the residue of your estate. The residue of your estate is what is left after debts, funeral expenses, Inheritance Tax and legacies have been paid. The Will should include initial beneficiaries and substitute beneficiaries who will inherit your estate if your first named beneficiaries predecease you.
It should be noted that Scots Law does not allow a person to disinherit their spouse/civil partner and/or children. The Legal Rights referred to above can be claimed by a spouse/civil partner and children even where a deceased left a Will. In the event that a deceased left a Will leaving his entire estate to charity but was survived by a wife and children, the wife and children would each be entitled to claim a third share of the moveable element of the estate. The right is an automatic one and one that does not have to be claimed by the family in a Court action.
In addition to all of the above when discussing Wills with clients I need to know what assets form part of their estate and the approximate value. The reason for this is so that I can ascertain whether the client requires Inheritance Tax planning advice. The Chancellor's announcement regarding the Transferable Nil Rate Band in October 2007 meant a fundamental change to Inheritance Tax planning. The basic principle is that if a spouse/civil partner inherits his or her spouse or civil partner's estate then on that person's death they will have not only their own Nil Rate Band (currently £325,000) but also their partner's Nil Rate Band. Based on current figures, this means that the value of the assets would have to exceed £650,000 before Inheritance Tax is payable.
I hope that this article has provided sufficient food for thought. Please contact me if you have any questions or if you would like to meet to discuss your own Will.