Alison Paul : Laws protecting assets of deceased need to be widened

Published on Wednesday 25 August 2010 17:19

IF YOU want to sell your services as a writer of wills or an administrator of deceased persons' estates, Scots law allows you almost complete freedom. You do not have to be a solicitor and, if you are not one, your business can operate virtually unregulated.

It is true that some new measures now going through the Scottish Parliament are aimed at protecting buyers of will-writing and estate services from crooks and cowboy outfits. However, these proposed safeguards will not protect beneficiaries of wills from the risk they most commonly face - namely the danger of being cheated by the person responsible for distributing the dead person's assets.

Many readers will have seen the recent BBC Panorama programme on the damage done to consumers by cowboy firms in this field. On that programme, Fergus Ewing, the Scottish minister for community safety, assured viewers that the new legislation would protect Scots from such abuse. Once the legislation is in place, anyone who charges a fee for writing a will must have appropriate qualifications and indemnity insurance. "The public have a right to be protected, and in Scotland they will be", said Ewing.

Yet, the large majority of consumer horror stories regarding wills are not about errors in the drafting. Instead they result from crooked or incompetent handling of the estate after the person's death. That activity is quite separate from the will-writing and is often done by someone other than the person who originally drafted the will.

To get from writing the will to pay-out you need to go through three stages. First there is the drafting of the will itself according to the wishes of the person concerned (called the testator) during his or her lifetime. The will usually nominates somebody (the executor) to put it into effect after the testator dies. After death comes a process called confirmation, when the executor registers the will with the authorities and obtains control of the deceased's assets.

Last of all comes the estate or "executry" administration, when the executor distributes the assets to the heirs according to the instructions set out in the will. The evidence is that most malpractice takes place at this final stage, when the funds are actually in the administrator's hands.

And it is a serious problem. In a survey, nearly half the members of the leading professional association in the field, the Society of Trust & Estate Practitioners (Step), reported coming across suspected cases of fraud or theft from an estate. Charities are often the victims of such frauds and the Royal National Institute for the Blind have estimated the amount stolen from estates throughout the UK is between 100-150 million each year.Some of the cases cited by Panorama were merely cases of incompetence rather than deliberate fraud, although in one case, the will-writing firm added extra charges when it came to administer the estate - despite the testator having originally been told that all costs would be covered by a one-off fee he paid when the will was made.

But the programme's main horror story featured the firm Willmakers of Distinction, whose two directors were jailed for stealing more than 400,000 from estates they were administering. That scandal took place in England, but Scotland's system has the same weaknesses and similar cases have occurred here. A typical example came to court in Edinburgh last year - that of Michael Karus, who embezzled over 400,000 while administering the estate of an old lady, and used it to pay off his own debts.

Such fiascos would not be prevented by Mr Ewing's measures as they stand, because they do not impose regulation on the executry process. As long as estate administration can be carried out under the radar by unregulated people or firms, this sort of fraud and/or bungling will be almost impossible to prevent, and may often pass undetected.

So while Mr Ewing's new measures are a move forward, they do not go far enough. Several organisations, including Step, and the Scottish Law Agents Society, have now written to Mr Ewing urging him to extend the legislation to cover estate administration.

Estate administration must be regulated to ensure it is only undertaken by qualified persons who hold professional indemnity insurance. That, we believe, is the only way to give real reassurance and protection to people who want to pass on their property safely to their loved ones.

• Alison Paul is chairman of the Society of Trust and Estate Practitioners in Scotland and a trust and tax partner at Turcan Connell.