We welcome this opportunity to submit a response to the consultation on technical issues relating to succession.

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1 Introduction STEP is the worldwide professional association for practitioners dealing with family inheritance and succession planning. STEP members help families plan for their futures, specialising in a wide range of activities, from drafting a relatively simple will to more complex issues surrounding international families, protection of the vulnerable, family businesses and philanthropic giving. STEP helps to improve public understanding of the issues families face in this area and promotes education and high professional standards among its members. STEP has over 19,000 members across 95 jurisdictions from a broad range of professional backgrounds, including lawyers, accountants, trust specialists and other practitioners in this area. In the UK, STEP has almost 7000 members and an extensive programme of training and continuous professional development. We welcome this opportunity to submit a response to the consultation on technical issues relating to succession. Consultation Response: Questions and s Chapter 2: Executors and Bonds of Caution Q1. Do you agree or disagree that the requirement for Executors Dative to obtain a Bond of Caution should be abolished? Reasons Apart from serving as a useful reminder that an Intestate Estate should be paid to the correct beneficiaries the cost of obtaining a Bond of Caution is an unnecessary expense in the administration of an Intestate Estate. The costs of the insurance premium often outweigh any benefits in the administration of an Estate, particularly where there is stable family with little likelihood of there being unknown beneficiaries. We are aware of one case where the Estate was around 5,000,000 and the deceased was survived by a spouse and two children. The deceased had been married for 60 years and the premium for the Bond of Caution would have been 17,000 had there not been an application to the Court to reduce the premium. It was reduced to 10,000.

2 Q2. If the requirement for Executors Dative to obtain a Bond of Caution is abolished, are there any concerns about the impact on the insurance market and increased cost of the provision of Bonds of Caution for others who may be required to obtain them, for example judicial factors? Premiums for Bonds of Caution will be set by the insurance companies providing them but there seems little doubt in our minds that if the market reduces that there will be a rise in the cost of insurance premiums for Bonds of Caution. Q3. Are there any other impacts (positive or negative) of removing the requirement for Executors - Dative to obtain a Bond of Caution? Yes. Please explain. One of the most important impacts of removing the requirement to obtain a Bond of Caution would be to make it more difficult, at least initially, for a disinherited beneficiary to claim their inheritance from an Executor Dative. The advantage of the Bond of Caution is that the disinherited beneficiary makes a claim against the Insurance Company and then leaves the insurance company to recover from the Executor Dative. We would caution against relying on professional indemnity insurance as a way of making up the shortfall. As the market for Executry services is deregulated there is no guarantee that all providers of Executry services will carry the same level of insurance or require the same professional indemnity insurance. A competent solicitor will request that an Executor Dative provides a full family tree and his advice on the division of the Estate amongst the intestate beneficiaries will be based on that. If the Executor fails to provide the correct advice then the likelihood is that the division of the Estate will be incorrect. The solicitor will have provided advice on the basis of the family tree provided and there will be no claim against the solicitor s professional indemnity insurance as his advice was based on incorrect information from the Executor. One of the perhaps unintended consequences of completing the Insurance Proposal Form for a Bond of Caution is that it focuses the Executor-Dative on who is entitled to receive payment from the estate and requires the Executor-Dative to effectively produce a Family Tree to show the beneficiaries who are entitled to receive payment. The Executor-Dative is also made acutely aware of the requirement to pay the correct beneficiaries and the Bond of Caution provider double-checks the Family Tree to make sure that the correct beneficiaries are being paid. These advantages would be lost by removing the requirement for a Bond of Caution and, in our opinion, should be replaced by requirements for the Executor-Dative to produce a Family Tree to the Court at the same time as

3 applying for Confirmation and also a note showing how the estate is to be divided between the beneficiaries. We consider that the provision of both of these documents should be mandatory and, as a protection to the beneficiaries, a Lawyer or other suitably qualified and insured professional should certify the proposed division as complying with the Laws of Intestacy. These documents should be required to be lodged at the same time as the Application for Confirmation and Confirmation should not be issued without these documents being produced. In the event of other beneficiaries coming to light during the administration of the estate, it should be an obligation on the Executor-Dative to lodge an amended Family Tree and Scheme of Division with the Court before making payment to the beneficiaries. The Family Tree and Scheme of Division should form part of Confirmation, as issued by the Court. That becomes a public document and is available for inspection by any member of the public. Q4. Do you agree or disagree that the requirement for Executors nominated to obtain a Bond of Caution should also be abolished? There are extremely few situations in which an Executor nominate has to obtain a Bond of Caution and it would seem unfair if the requirement to provide a Bond of Caution applied to the Executors nominate but not, in similar situations, to Executors Dative. Q5. Do you agree or disagree that if a Bond of Caution was only occasionally required, the costs of Bond of Caution would rise? While we have no direct experience on how the insurance companies access premiums it appears to us that if the number of Bonds of Caution which are underwritten reduce the premiums will increase. We have no way of assessing the impact on the premiums payable for Bonds of Caution which Guardians have to obtain but it is hoped that the requirement for obtaining Bonds of Caution under the Adults with Incapacity Act, will be re-assessed in the light of any abandonment of the requirement for an Executor-Dative to obtain a Bond of Caution. Q6. Do you agree or disagree that if the costs of occasional Bonds rose, this would argue in favour of not providing for discretionary power for the Court to require Executors Dative to obtain Bonds of Caution. Disagree.

4 To take away the Courts discretion to request Bond of Caution would be a retrograde step especially in the case of a dispute about the appointment of the Executor Dative and his or her suitability. There is no facility for the Courts to appoint an independent Executor Dative apart from a judicial factor which is an extremely expensive process. Consideration should be given to allowing the Court to appoint an independent Executor Dative particularly in the case of concern being raised about the suitability of an Executor Dative or there being a contest about the appointment of an Executor Dative. Q7. Do you agree or disagree if the Courts were given a discretionary power to require an Executor Dative to obtain a Bond of Caution, the discretionary power should extend to Executors nominate? A discretionary power to require both Executors Dative and Executors Nominate to obtain a Bond of Caution would be the ultimate sanction reserved to the Court where it was felt there was some concern about the deceased s wishes in terms of his or her Will being implemented correctly. Q8. If the requirement for Executors Dative and in some cases, Executors Nominate, to obtain a Bond of Caution is abolished and the Courts did not have a discretionary power to require Caution to be obtained, do you agree or disagree that measures should be put in place to minimise the risk to Estates? These situations arise very infrequently but when they do the ability for the Executor s actions to be checked independently would be useful. Rather than relying on an action of account and reckoning, perhaps one possibility would be for the Executors to produce an account of their actions for approval by the Court, or a suitably qualified person acting on behalf of the Court. The expenses of the Supervisor could then be either an expense of the administration of the Estate or if the Executor is found to have failed in his duties then perhaps personal liability could fall on the Executor. The idea being to allow earlier intervention or supervision of an Executor-Dative s actions by the Court. If an Executor Supervisor is appointed by the Court, then the beneficiaries should be told about that person s appointment so that if they have any concerns which are not addressed by the Executor-Dative, they can apply to the Executor Supervisor to intervene on their behalf. This allows earlier intervention than having to raise an expensive action of account and reckoning.

5 Q9. Do you agree or disagree that the Court should be given discretion to refuse, on cause shown, to appoint the Executor Dative? The normal order in which Executor Datives are appointed is laid down in Section 2 of the Succession (Scotland) Act There are occasions when the normal order should be departed from, for example where a spouse is incapax or one of the potential Executors Dative is wholly unsuitable to the position i.e. having been convicted of fraud or a similar criminal conviction. Consideration should also be given to allowing the Court to appoint and independent Executor where no suitable Executor-Dative can be appointed from the list in Section 2 referred to above. Q10. Do you agree to disagree that the Court should be given discretion to refuse on cause shown to confirm the Executor Nominate? Reasons: After some debate, we have reluctantly, and surprisingly, come to the conclusion that there are circumstances where it would be appropriate for the Courts to refuse to appoint an Executor Nominate, or at least to allow the facility for an Executor Nominate s appointment to be refused by the Court on cause shown. This facility would have to be at the complete discretion of the Court and probably via the Court s Special Warrant procedure currently available in Executry matters. By way of example, we are aware of an ex-solicitor who was accused of fraud and removed from the role of Solicitor. That person was appointed as Executor in several Wills in the Firm s Will Safe and, in some cases, as the sole Executor. Clearly, that person is not an appropriate person to be appointed Executor Nominate and has sought to extract money from the beneficiaries before agreeing to decline office or assume new Executors. The remedies available for removal of the former Solicitor are limited and the facility to petition the Court to appoint other Executors Nominate would have been extremely useful in this situation. The appointment of an Executor Nominate by a deceased is a personal appointment at the discretion of the deceased. There is always an element of delectus personae in the appointment of an Executor nominate. Q11. If the requirement for Executors Dative and in some cases Executors Nominate to obtain a Bond of Caution is abolished to you agree or disagree that providing the

6 Court with discretion to refuse to appoint an Executive Dative is sufficient alone to mitigate the risks to Estates? Disagree. The major cause of beneficiaries not receiving their share of an Intestate Estate is either ignorance of the family tree or the beneficiary concerned being unknown to the family due to the deceased having deliberately covered up that beneficiaries existence. In our opinion consideration should be given to obliging an Executor Dative to lodge a family tree together with a proposed Scheme of Division as mentioned in the to Question 3 above with the application for confirmation and certify to the best of his knowledge this reflects the deceased s family and the recipient of the Intestate Estate. Q12. Do you agree or disagree that the intimation period for a petition to appoint an Executor Dative should be extended to fourteen days or twenty one days? The protection available to a potential Executor Dative is to lodge a caveat with the appropriate Sherriff Court. The potential Executor Dative will then be warned of the application by another to be appointed as Executor Dative and allowed to lodge objections. In cases of urgency, for example where a house is in the process of being sold and the deceased concluded missives to sell the house but died before the date of entry waiting an additional seven days would delay the sale process for no real benefit to the beneficiaries. Q13. Do you agree or disagree that the requirement to intimate the petition for the appointment of Executive Dative should be extended to other/all beneficiaries? Disagree. The current ability to lodge a caveat should be sufficient protection to any other potential Executor Dative without the requirement for extensive serving of Court Writs on other beneficiaries. There are often situations where a family member cannot be traced and if the petition for appointment of Executor-Dative had to be served on all known beneficiaries, that would not be possible. In addition, serving a Petition abroad is time-consuming and could considerably delay the appointment of an Executor- Dative. Q14. What do you think the impact of implementing these proposals would be?

7 on individuals - limited, but the saving on not having to pay for a Bond of Caution should be welcomed. However, it must be clear how an individual who does not receive his or her entitlement from an Intestate Estate should claim against the Executor Dative. on families - the impact is similar to that on individuals. on the legal profession - the legal profession should not be expected to take on the role of unpaid supervisor and as an underwriter of unpaid beneficiaries via their professional indemnity insurance. Solicitors will have to obtain the same information as currently has to be obtained for the application for Bond of Caution although under the proposed new system it is hoped that a Bond of Caution will not have to be obtained. In addition, we would encourage the consistency of time limits to avoid time limits being missed and six months seems a suitable time limit within which any action on the family or law act should be raised. On the courts this could create more work for the courts which will have to be properly financed. Chapter 3: Technical Recommendations Q15. Comment is invited on any or all of the recommendations discussed in this chapter in particular it would be helpful to know whether or not you agree with these recommendations? Recommendations in order set out in Chapter Recommendation We are in agreement that succession to moveable property should be governed by the personal law of the deceased. We would highlight that not all jurisdictions recognise the concept of domicile and that in any matter of Private International Law there requires to be reciprocity between jurisdictions Recommendation Agree 1.3. Recommendation 50

8 Agree 1.4. Recommendation Agree 1.5. Recommendation We agree subject to the caveat that in relation to Recommendation 52(b) we believe that the testamentary appointment of a spouse/civil partner as trustee or executor should only be automatically revoked in the event that the testamentary document appoints one or more other executors or trustees. Automatic revocation of a former spouse/civil partners appointment as Executor nominate where there are no alternative executors will create additional costs and uncertainty in the administration of a testate estate Recommendation Agree 1.7. Recommendation Disagree we do not agree that the conditio si testator sine liberis decesserit should be abolished. Whilst we sympathise with the unfortunate situations which may arise as set out by the Commission, we believe that there an equal number of unfortunate situations that may arise if the conditio were to be abolished. While modern, competent Will drafting will cover most circumstances where children are born to the testator subsequent to execution of a Will, not all wills are so carefully drafted Recommendation Agree 1.9. Recommendation We disagree that a revoked Will should not revive unless expressly revived by the testator. We consider that where a later Will is successfully challenged because of the testator s incapacity or as a result of facility and circumvention, the earlier Will should revive. If it were not possible for an earlier Will to revive then the testator would become intestate. We believe that this could result in an increase in

9 challenges to Wills where a claimant may have a vested interest in the estate being intestate. We would also highlight that in modern practice, most clients direct the destruction of previous Wills which means that they cannot revive in any event Recommendation Agree Recommendation Agree Recommendation Agree Recommendation In the circumstance postulated in 3.29 we would agree but there may be other circumstances not explored with which we would not agree with the recommendation Recommendation We agree that there should be a presumption of conditional institution but believe that this presumption should be rebuttable Recommendation Agree Recommendation Agree Recommendation We agree provided there is a statutory statement of the law of forfeiture Recommendation 63

10 Agree Recommendation Agree Recommendation Agree Recommendation Agree Recommendation Agree Recommendation Agree Recommendation Agree but there should be a clear statutory position specifying whom to sue in the event of there being no Executor Dative appointed within 6 months of death. Q16. What do you think the impact of implementing these proposals would be? No comments. Chapter 4: Cohabitants Q17. Do you agree or disagree that Section 29 Family Law Scotland Act should be amended to allow one year from the deceased s death for a cohabitant to make a claim? Disagree. Under general law an Estate should not be paid out until at least six months have passed since the date of death to give creditors sufficient time to make the necessary claim

11 against the Estate for repayment of their debt. The cohabitants claim under the Family Law Scotland Act is akin to a debt and it should be treated no differently than any other debt. Q18. Do you agree or disagree that extending the claim period would lead to significant delay/create uncertainty in the administration of an Estate? As the cohabitant s claim depends on a Sherriff s judgment and is not a fixed claim extending the period of claim that simply extends the period during which there is an uncertain claim against the Estate. In many situations claims are raised and then sisted pending the obtaining of confirmation and it may be several months if not years after confirmation is obtained that the inheritance tax liability of the Estate is ascertained. All of these impact on the cohabitant s claim. Q19. What do you think the impact of implementing these proposals would be? No comments. Chapter 5: EU Regulations on Wills and Succession Q20. Do you consider that any aspects of EU Regulation (No 650/2012) on Succession might be usefully implemented in Scots Law? No. There are still far too many uncertainties with regard to the proposed regulations and they would form a convenient way for domiciled Scots to evade Legal Rights Claims by electing for the Law of another jurisdiction to apply. We also refer you to STEP s response to the consultation on the regulations by the UK Government. STEP Scotland 6 November 2014