Frequently, individuals choose not to make a will for varying reasons. These reasons may include the cost of preparing a will, the belief that the ‘Intestacy Rules’ of the country in which they reside will govern the distribution of their estate in accordance with their wishes, or simply not wishing to consider ‘what happens’ after they die.
However, what is often not appreciated is the complexities which may arise from dying intestate, particularly in a changing world where travel, emigration, and owning overseas assets is increasingly common. This article will discuss some of the issues which can (and often do) arise when an individual dies intestate, particularly where domicile issues arise, and where they own assets in a country different to where they are domiciled. Whilst tax considerations must undoubtedly be considered in their own right in such situations, they will not be discussed in this article.
The ‘domicile’ analysis
The laws governing succession matters in different jurisdictions vastly diverge and it is therefore extremely important to carefully assess where an individual is domiciled at the time of their death to ensure the laws of this country may be given effect. Importantly, one cannot simply assume the deceased’s domicile based on the country in which the deceased resided before their death; instead, many factors must be considered.
If a deceased dies testate, their domicile analysis tends to have been carried out before the preparation of their will. Any complexities would usually therefore be identified and resolved prior to death. It is also the case that where individuals die owning assets across EU member or third states, the EU succession regulation allows us to prescribe via a will that the law of that person’s nationality will govern succession to their whole estate (wherever that estate might be located across the particular European countries at issue). That can reduce many of the problems associated with the conflicts of private international law which would otherwise arise.
However, in all cases of intestacy, English law’s specific approach to succession matters becomes relevant. This approach broadly means English law prescribes that:-
- The laws of the country in which the deceased is domiciled will govern succession to the deceased’s moveable assets (i.e. cash or investments) anywhere in the world; and
- The laws of the country in which the deceased owned any immoveable assets (i.e. real estate) will govern succession to those assets.
Complexities therefore arise where the deceased owned immoveable assets in another jurisdiction, as we must begin to consider the law of that other jurisdiction, and how it interacts with the law of England & Wales.
England and Wales v Scotland intestacy rules
Whilst it is common knowledge that England, Wales and Scotland are different countries, it is generally lesser known that the laws of these countries are very different. Whilst England and Wales share the same laws, Scotland does not. This is especially true in relation to the ‘Intestacy Rules’. The administration (and distribution) of an estate belonging to an intestate English-domiciled individual is therefore very different to that of an intestate Scottish-domiciled individual.
Intestacy rules – an example
For example, if an English-domiciled individual died intestate, leaving a surviving widow and two children, the first £322,000 of the deceased’s estate, all jointly owned assets, and all personal belongings of the deceased will pass outright to their widow. Half of the remaining estate will also pass to the widow, with the remaining half passing equally between the two children.
However, if that same individual died intestate and domiciled in Scotland, their estate would be distributed very differently. Their widow would receive the value of the home (up to a maximum sum of £473,000 but only if the survivor was resident at the house), household contents (capped at a value of £29,000, again only if the survivor was resident at the house), and up to £50,000 in cash. This is known as 'prior rights'. The spouse and children would be entitled to legal rights, which applies only to the moveable estate - the spouse would receive a 1/3 share of the net moveable estate and the children would receive a 1/6 share each. The remaining free estate would pass one third to the spouse and the two children would receive the remaining two-thirds of the estate equally between them.
In theory, a situation could arise where an English-domiciled individual never resides in Scotland but solely owns a property there. In such situation, the Intestacy Rules of England and Wales will not govern the distribution of the Scottish property. Instead, the laws of the country in which that immoveable asset is located (i.e. Scotland) will govern the succession to that asset. In this situation, the widow of the deceased will receive proportionately less than they would have done had the Intestacy Rules of England and Wales applied to this asset. Although the deceased was English-domiciled, the assumption that English law will govern the distribution of their entire estate is strictly incorrect and can lead to unintended, unforeseen and undesirable outcomes.
Whilst the above case study provides an example of unintended outcomes in intestate estates, it is important to note that the administration of an intestate estate only becomes more complex when more ‘distant’ family members are due to benefit from an estate.
Consideration of beneficiaries
A further complication which may arise in an intestate estate is when a beneficiary survives the deceased but dies shortly after. Whilst the Intestacy Rules of England and Wales may govern an intestate estate of an English-domiciled individual, if a beneficiary of this estate dies intestate shortly after in a different jurisdiction, the Intestacy Rules of that country will apply to that deceased beneficiary’s estate. If the beneficiary dies without the first deceased’s estate having been fully administered, the situation can become particularly complex when ascertaining who may act as the personal representative of the estate as this is also governed by the Intestacy Rules. Additional complexity and lack of clarity arising here only adds expense, confusion and stress to family members during an already distressing time.
Cross-border intestacy further afield
Whilst this article focuses on the possible issues arising from a cross-border intestacy in relation to England & Wales and Scotland, the same issues may arise in relation to overseas assets and are particularly problematic in intestate estates. Again, immoveable property generally passes in accordance with the jurisdiction of the country in which the asset is located.
The importance of a will
Unforeseen issues and complexities can arise in intestate estates, which creates uncertainty, stress, and expense for the family members of the deceased. Whilst such issues can always arise in estates where there are no cross-border elements, it is important to bear in mind that such issues nearly always increase when cross-border complexities are introduced. Whilst it is understandable for various external factors to delay or deter an individual from making a will, the importance of making a will cannot be disregarded. A will provides clarity, certainty, and ease in estate administration at an already distressing time.
To ensure assets will pass in accordance with specific wishes, and any potential problems are identified at an early stage, legal advice should be sought and an appropriately drafted will should be prepared by a lawyer with specialism in this area. For more information, please get in touch with our Scottish will and estate planning lawyers or our English will and estate planning lawyers.
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