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“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorises it and a moral code that glorifies it.”
Frédéric Bastiat, Economic Sophisms, 2nd series (1848)
As the Scottish Government moves ahead with its long-awaited plans for land reform, its legislative programme for 2015 is also likely to include a new bill governing inheritance law. The current law on testate and intestate succession is the Succession (Scotland) Act of 1964. The new bill is expected to implement many of the recommendations made in the Scottish Law Commission Report of 2009.
While there is certainly a need to make the law on succession “fairer, clearer and more consistent”, in the words of the Scottish Government, the main shortcomings for many are not the law itself, but (1) the mechanism by which estates are divided between heirs; (2) the possibilities that this allows for corruption; (3) the absence of any proper oversight and the inadequate complaints procedure.
Basically, the executor (usually an interested party high up in the pecking order of who gets what) hires a lawyer, whose services are paid for out of the common estate (not by the executor), yet whose allegiance belongs to only one of the many heirs of the estate (the executor). The possibilities for abuse of power are endless and a goldmine for teams of executors and lawyers who know how to exploit the system.
The complaints procedure involves taking the matter up with other lawyers in the form of a self-regulating body known as the Law Society of Scotland. Perhaps unsurprisingly, the success rate of complaints made to the Law Society of Scotland is lower than the figure for acquittals in criminal cases in the Soviet Union under Stalin.
The office of the final instance of appeal, the Scottish Legal Services Ombudsman, was never fit for purpose and was replaced by the Scottish Legal Complaints Commission in 2008. A study and comparative analysis of the professional standards of these two organisations put Scotland on a level with nations ranked near the bottom of Transparency International’s corruption index.
Finally, the most blatant failing is the absence of a national register of wills. It is the simplest thing in the world to physically destroy a document and either completely or partially disinherit others.
Given all these opportunities for crime and corruption to flourish, it is hardly surprising that executors and lawyers have come together to develop clear strategies, which they employ over and over again. So how does the mechanism work in practice?
Basically, there is a division of labour. The executor falsifies the figures and values assets due to be shared out to other heirs at around half of their real value. This means that, in real terms, the executor gets more by increasing the share in his or her pot.
The role of the lawyer is to not only rubber-stamp the false accounting, but to also give out misleading information to the other heirs, so that they often do not even realise they have a claim on the estate. If this share is not claimed, it goes, illegally, to the executor.
A favourite ploy is when a person dies and leaves a house, which is to be sold and the proceeds divided up between the nearest heirs of the deceased. The house may be worth £150,000, for example, but the executor values it at £100,000 (this works particularly well if the heirs live abroad and are not familiar with house prices in a particular district of Scotland).
But the executor does not sell the house on the open market. Instead, the executor sells the house at this undervalued price to a close friend or relative. The buyer is very often not prepared for such a sudden purchase and needs up to a year to find the money or even to sell an existing property. But this is no problem, as the lawyer will simply write to the heirs and state that there are “unforeseen delays in winding up the estate.”
In fact, a delay plays right into the executor’s hands because, in a period of rising house prices, it is not uncommon for a house costing £150,000 to sell for £200,000 a year later. The house is then acquired by the executor’s friend or relative, who has made £100,000 out of the deal, while the legal heirs have been cheated out of £100,000. Alternatively, the new house owner can sell it on the market for £200,000 and split the profit with the executor.
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The lust for money even leads executors to continue to receive a pension and then to hide it from the accounts.
remove insurance policy from books.
The mechanism for both undervaluing estates and openly stealing money (executor) and for engaging in institutional corruption and fraud (lawyer) seems clear enough, especially when backed up with concrete examples. In 2006, a detailed report complete with figures and accompanying documents was offered to representatives of all political parties in Scotland, the police authorities and the office of the Lord Advocate. Not one public official was interested.
Is Scotland destined to continue on the same level as third-world countries with no safeguards against corrupt lawyers and executors, with no legal oversight or political will among public officials to combat white-collar crime? There are no figures, but the levels of fraud must run into tens of millions of pounds every year.
The only solution is to seize the opportunity provided by the proposed changes to the Succession Law in Scotland. By introducing radical change and real safeguards to the procedure for distributing estates, taking control away from executors and lawyers, Scotland can combat institutional corruption and the flourishing cottage industry in defrauding citizens.
(1) The entire distribution of estates needs to be taken out of the hands of lawyers and a European institution of notaries introduced into Scotland, complete with a national register of wills. (2) Upon a death, heirs need to be automatically be able to log in and receive free online advice from a government website or database, not from a lawyer employed by a rival heir. (3) There needs to be independent policing of the activities of lawyers in handling testate and intestate succession with proper and appropriate penalties.
It is interesting that, if a member of the public sees a person stealing from another person, whether it is snatching a purse or climbing out of a window with a television set, they can contact the police and the action is immediately classified as a crime. Yet when lawyers and executors engage in the theft of enormous sums of money, there is absolutely no organisation to contact and the onus is on a private individual to prove the crime in an extremely costly court case.
Those who have previously raised the question of institutional corruption in succession procedure with elected public officials got nowhere and have basically “given up on Scotland”. One of the problems is that so many of our politicians are drawn from the legal profession with the potential for conflict of interest when attempting reforms in this field.
However, the country has changed greatly in the wake of the independence referendum and there is now a real will for change in every area of Scottish life and society. Let us hope that this new-found zeal for transforming Scottish life and society can also be used to break with the past, join our advanced European neighbours and stamp out Scottish legal corruption once and for all.
As the Scottish government plans to reform succession law in 2015, it needs to do more than just alter the letter of the law. It needs to completely overhaul the procedure governing testate and intestate sucession. For even in countries with a written constitution, the law matters not a whit if the mechanism of its implementation is badly written, poorly governed, inadequately policed and fundamentally open to abuse.