Case Studies - Scots Law
George and Dorothy are an unmarried couple. They have two children aged 10 and 8. George dies in a road accident, leaving no Will. George owns the home in which they live which is worth £300,000, less a £120,000 mortgage.
George’s death results in a successful claim against the driver of the car which killed him. Damages are assessed at £1m. George has some life assurance (£200,000) and some savings in his own name (£75,000). George and Dorothy have a joint bank account with a credit balance of £15,000 at his death. Because George made no Will, his whole estate goes to his children and Dorothy receives nothing other than George’s share of the joint account. The children’s inheritance is substantial (£1.575m less £120,000 mortgage). If George and Dorothy had no children, the children’s share mentioned goes to George’s relatives or, if there are none, to the Crown as ultimate heir. Dorothy’s only remedy then would be an application to the Court in which she would have to show “economic disadvantage” as mentioned above.
If there are children, Dorothy has, by law, parental responsibilities for her children - she can act as legal representative on their behalf and sign documents for them until they attain the age of 16. However, two things will prevent Dorothy from having a free hand. Because George died without a Will, the Court will require a security bond for his executors. The insurance company issuing that bond will want to control where the children’s inheritance is invested and may stipulate what, in their view, is an appropriate sum to be paid to Dorothy from the children’s funds to look after the children. Dorothy will be very annoyed by this time with George for not making a Will.
The second thing is the damages award. The Court will instruct that the investment and spending of this is controlled by the Accountant of Court who will stipulate how it is invested and what sums are paid to Dorothy for the children. Dorothy will be fuming with George by this time for not making a Will.
Also, once the children reach 16, they assume full control of their inheritance and Dorothy, at worst, may be excluded or, at best, be dependent on her teenage children for funds.
Same facts as before except that George and Dorothy are married. In this situation, Dorothy is entitled to the house up to the value of £473,000, its contents up to £29,000 and £50,000 in cash. The damages award (assessed at £1m as the children’s loss of their father’s support) would probably be more, say £1.5m, to cover Dorothy’s loss of support by George. Dorothy would receive £500,000 personally but the rest would go to the children and be dealt with as before. George’s estate amounts to £575,000. Dorothy’s Prior rights would give her £365,000. Of the remaining £210,000, Dorothy would be able to claim one-third as Legal Rights amounting to £70,000, giving her a combined amount of £435,000. The two children would be able to claim their Legal Rights and remaining free estate which would give them £70,000 each. Result – Dorothy has £135,000 in cash, ownership of the house and its contents but also the monthly cost of the mortgage. Combined with the damages award, Dorothy has £935,000 and the children £1,140,000 between them. £1m of would be managed by the Accountant of Court and the remaining £140,000 would be managed by Dorothy as their legal guardian.
As B, except there is no damages award – George has died from a heart attack. Result – Dorothy has £135,000 in cash (£65,000 from Prior Rights and £70,000 from Legal Rights), ownership of the house and its contents but also the monthly cost of the mortgage. The children will again receive £70,000 each.
Moral of these examples
Make a Will! It will not help the damages scenario mentioned. Money awarded to children by a Court will always be subject to the supervision of the Accountant of Court. But if George had made a Will bequeathing his estate to Dorothy, Dorothy would not be in the precarious situation she is in, in these three examples. The children still have Legal Rights even if the Will fails to mention them. But neither the Accountant of Court nor the insurer will be involved. The situation is much more manageable.
If a single person dies without a Will, his/her estate goes to the nearest relatives. Children (whether legitimate or illegitimate) have first preference. If there are no children, brothers and sisters share 50% and parents share the other 50%. If there are no parents, brothers and sisters share 100%. To choose who inherits, make a Will. The concept of Legal Rights is applicable only to children and spouses.
Bonds of Caution
This is the technical name for the security bond mentioned earlier. It is required in most cases of intestacy (dying without a valid Will). Such a bond is costed by the insurance company on the basis of the size of the estate and will cost at least £500. Bonds are not required where a Will contains an appointment of executors. Moral - make a Will.
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