England and Wales is the jurisdiction in which I'm qualified to practice, as a solicitor specialising in all things estate-planning related.
Working daily with Scots-Law qualified colleagues, and dealing with cross-border matters, has made me particularly aware of the unique nature of certain rules governing succession in my 'home' legal system.
In this series of articles, I aim to shed light on some of those principles.
Testamentary freedom: The premise, its boundaries, and competing factors
We'll start with a big one. Somewhat surprisingly, the freedom to dictate how precisely your estate should pass via your will can legitimately be termed a 'quirk' of the law of England and Wales.
Complete 'freedom to testate' simply doesn't exist in the vast majority of other European jurisdictions, including Scotland.
As with many of the rules I will consider in this series of articles, the principle derives from the fact that England & Wales is a 'common law' jurisdiction.
In very broad terms, this describes a system of law which has developed mainly from precedents based on judges’ decisions, as opposed to strict written rules.
In 'civil law' jurisdictions, in contrast, the main source of law is a codified set of rules. Most civil law systems of continental European countries have their roots in Roman law.
The vast majority of these legal regimes prescribe that the children (or other descendants) of a deceased party have automatic fixed entitlement to a 'reserved share' of the deceased's estate. In some countries, spouses are also entitled to a fixed share.
The circumstances of the deceased, spouse or descendant in question do not matter. The entitlement to the reserved share applies to the relevant assets 'caught' by it, regardless of the terms of the deceased's will.
By way of example:
- In Spain, an individual leaving a spouse and children has freedom to decide only where one-third of his death estate should pass. The first two-thirds must pass to surviving children.
- In France, in the same circumstances, the deceased's surviving children would be entitled to between 50% and 75% of the death estate, depending on how many survived the deceased.
- In Scotland, "legal rights" dictate that the spouse and children of a deceased party are entitled to a fixed share of the moveable estate (so implicating cash, shares, policies, etc). If both a spouse and children survive the deceased, the spouse is entitled to one-third of moveables, and the children are also entitled to one-third (equally between them).
In England and Wales however, it is very different. An individual domiciled in England & Wales with a spouse and children is free to pass his/her entire estate to charity via their will.
Regardless of the type of assets the deceased owns, and the identity and circumstances of relatives left behind, those parties have no automatic entitlement to any of the "death estate".
Yet this key principle of testamentary freedom is one that will bend in certain circumstances. Where it can be shown that to slavishly adhere to the basic rule would create an injustice, the law of England & Wales will generally step in to moderate its effect.
The Inheritance (Provision for Family and Dependants) Act 1975 ('the 1975 Act')
If an individual (or a party able to act on their behalf) considers a deceased's estate does not make reasonable financial provision for his/her needs, a claim for such provision may be made under the 1975 Act.
This Act does not exclusively seek to protect a disinherited spouse or children. There are four other potential classes of claimant also able to claim for provision. Except in the case of a spouse however, the merits and quantum of any claim will be assessed against the standard of what is required for that claimant's maintenance only. In the case of an adult child who was not therefore dependant on the deceased when he/she died, any such claim is therefore unlikely to succeed.
Equity and her maxims
'Equity' previously existed as a distinct branch of the law of England & Wales, and developed as a direct response to the fact that rigid application of common law rules could, in individual circumstances, create injustice.
In that event, a claimant could appeal to "the court of equity" (distinct from the court of common law), for a remedy. Equity is now intertwined with the common law but her 'maxims' still apply with the aim of achieving fairness.
Equitable principles apply in contexts I now take for granted, but my Scots-law colleagues find intriguing and confounding in equal measure. 'Equity' is simply not a concept that exists in the Scottish legal system, nor those on the continent.
In reality, equity operates in some instances to exclude certain assets that individual may legitimately pass via their will (their "death estate"). In other scenarios, equitable principles may serve indirectly to 'enhance' an individual's death estate where it can be shown the deceased did not intend to truly 'surrender' assets in life.
Some of equity's key constructs will be explored in further articles in this series which I hope will illuminate the impact of their application.
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