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Law and border

Issues often arise over the differences between the laws of England, Wales and Scotland. There are fundamental differences in criminal and property law. For example, in Scotland, there are 15 people on a jury and there is the option of a third verdict – not proven.

Case law and statute is different and will not apply in Scotland unless specified.

In areas such as corporate employment and pensions law, there are very few differences. However, it is worth noting some of the differences which apply to financial planning if a client lives or is domiciled in Scotland.

It should be noted that all reference to the law of England means the law of England and Wales. In addition, any reference to spouse also includes civil partner.

1. You can never disinherit your spouse or children in Scotland

In England and Wales, there are rules about intestacy and division of assets. In Scotland, similar rules on intestacy apply. However, in Scottish law, even if they have been excluded in a valid will, a spouse and children are still entitled to legal rights. This means that a spouse would be allowed one-third of the moveable (anything which is not property) estate or one half if there are no children. The children would collectively be entitled to one-third of the moveable estate, unless there is no spouse or civil partner, and then they would be entitled to one-half of the moveable estate. If a child has died, then their share would go to any children.

For example, a woman dies leaving property worth £500,000 and £200,000 in cash. She bequeaths £100,000 each to her husband and two children. The amount which could be claimed under legal rights (£66,667 to the husband and £66,667 between the two children) is worth less than the bequest. In this situation, it would be best to accept the bequests rather than claim legal rights.

In recent years, legal rights have often been claimed by children after one of their parents has remarried and bequeathed all of their estate to the new spouse, excluding the children.

If a client really wants to make sure that they do not leave their spouse and children any money, they need to make sure that there are very few moveable assets or trusts so that the assets don’t form part of the estate.

2. Capacity to contract

In Scotland, anyone over the age of 16 has full capacity to contract. Most people know about this because it’s possible to marry at 16 in Scotland without parental consent.

In reality, this does not have much impact as the terms and conditions of many products will specify that the customer must be 18.

3. Trust Law

There are fundamental differences in the historical development of English and Scottish Trust Law. For example, there is no concept of a division between law and equity in Scotland as developed in England. Also, in Scotland, the beneficiary has no real rights in the trust property, where in England the beneficiary has beneficial ownership of the trust property.

In England, the Trustee Act 2000 applies to statutory trustee investment powers but in Scotland, the Charities and Trustee Investment (Scotland) Act 2005 applies.

Some of the terms used in Scottish law are different; “settlor” is “truster” in Scotland. From a trustee’s point of view, there are additional administrative complexities; for example, there must be an actual deed of resignation for each trustee.

It is important to recognise that there is a difference and that is the reason why most providers have trust documents for both jurisdictions.

4. Divorce and pensions

The main difference is that in Scotland the court usually only takes into account pension benefits earned during the marriage. In England, there will be no proportioning by the courts for the period of the marriage. This means that all pension benefits, including those earned before marriage, are taken into account (except any already earmarked from an earlier divorce).

A short first marriage later in life and then a divorce in England could prove to be very costly in loss of pension. However, the same scenario in Scotland would result in a much smaller loss of pension.

5. Annuities

Although the Scots are generally a good-looking, witty bunch, unfortunately their health is not always quite as good. It is well known that a 65-year-old male living in Kensington and Chelsea in London may live for 10 years longer than the same 65-year-old living in Easterhouse in Glasgow. This is reflected in the annuity rate that is paid.

It is useful to know about the main differences in English and Scottish law in relation to financial planning in case it affects clients.

Of course, in financial planning terms (ignoring complex domicile issues), the best situation for a wealthy individual would be to get divorced in Scotland, then move to a postcode in the Glasgow area to buy an annuity, swiftly followed by a move to England so that they live a bit longer.

Also, if they have married again and/or have children but do not want to leave them any money, then this move means that when they die they can exclude them from their will.

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