Scotland and Singapore are two nations which boast strong links with the financial services industry: the former, as part of the UK, where Edinburgh and London (amongst other cities) are known as leading financial centres, and the latter as a renowned global economic hub. This has, over time, contributed to the flow of people from one jurisdiction to another (and back again).
Many people spend some, if not all, of their lives somewhere different to where they were born establishing familial links and acquiring assets in the other jurisdiction. This presents challenges in the context of estate planning and succession given that the laws of both nations need to be considered.
Scotland it has its own set of rules regarding succession. Individuals have testamentary freedom subject to some restrictions. Where someone dies 'domiciled' in Scotland - unlike in the rest of the UK - Scottish 'forced heirship' rules will apply. Spouses / civil partners and children are, to a degree, protected from disinheritance.
When a will exists
Regardless of the terms of a will, the spouse / civil partner (the "Surviving Partner") and children will be entitled to 'Legal Rights' from the net moveable estate of the deceased. The level of Legal Rights' entitlement depends on whether the deceased is survived by a Surviving Partner or children alone or is survived by the Surviving Partner and children.
When no will exists
Surviving Partners have 'Prior Rights' – these are only relevant where there is no will and they rank ahead of 'Legal Rights'. Prior Rights entitle the Surviving Partner, subject to certain financial limits, to the deceased's interest in their home; the contents of the deceased's home; and a cash payment (the level of which will depend on whether the deceased is survived by children).
Provided Prior Rights do not exhaust the estate, Legal Rights will then be payable to the Surviving Partner and / or the deceased's children.
Scotland does not provide any automatic entitlement per se to a deceased's cohabitee– the cohabitee will be entitled to make a claim on the deceased's estate before the Scottish courts provided there is no will, they satisfy certain criteria and make the claim within the appropriate time limit. The level of award under any successful claim will ultimately be at the discretion of the court.
Singapore does not have any system of forced heirship. Individuals are free to determine succession to their estate as they see fit. The only exception is in relation to Singapore-domiciled Muslims – the distribution of their estate will need to observe the requirements of Shari'a Law and Malay custom. In the event of intestacy in Singapore, the estate will be distributed according to the intestacy legislation or, in the case of Singapore-domiciled Muslims, Shari'a Law and Malay custom.
Inheritance tax (IHT)
Unlike in Scotland, Singapore does not apply any IHT on the death of an individual.
As a part of the UK, Scotland applies the UK's rules regarding IHT. Where someone dies 'domiciled' in Scotland – indeed any part of the UK – their entire estate, regardless of where it is physically located in the world, will be subject to UK IHT. Broadly, the UK's rules allow everyone to pass assets on death up to a value of £325,000, including the value of gifts made in the preceding 7 years, to their beneficiaries free of IHT. This is known as the Nil Rate Band (NRB). There is also scope for an additional allowance of £175,000 available on the value of the deceased's main residence provided it is being inherited by their 'direct descendants' (the Residence Nil Rate Band "RNRB"). Any estate passing to a Surviving Partner passes free of IHT. The NRB and RNRB are transferrable between spouses/civil partners so married couples can leave up to £1M free of tax on the second death. Subject to available reliefs and allowances, IHT is generally payable at a flat rate of 40%. The situation is more complicated in the case of UK domiciled persons leaving their assets to a non-domiciled Surviving Partner where the spousal exemption is not available. The clear message here is that cross border estate planning and succession matters are complex and expert advice is crucial.
As with succession, Scotland has its own set of laws (distinct from those in the rest of the UK) where trusts are concerned. Trusts are regularly used in Scottish estate planning. Singapore too permits the use of trusts and they a common feature in succession planning. Both jurisdictions have their own tax regime and specialist guidance should be sought on how they apply to trusts.
Both Scotland and Singapore permit individuals, with the requisite mental capacity, to grant a power of attorney appointing chosen attorney(s) to make decisions on their behalf. In both jurisdictions, it will be open to an individual to grant their attorney power to make decisions regarding their welfare and / or financial affairs.
Where an individual loses mental capacity without having put a power of attorney in place, there is scope for the courts to appoint an individual to act on their behalf: in Scotland, that person is known as a Guardian; and in Singapore they are known as a Deputy. Regardless of location, both processes involve an element of procedure and professional advice is key.
If you have connections to multiple jurisdictions and would like to discuss plans for the future, please contact one of our experts.