Duncan Lewis

Residential Property

Commercial Property

Can someone be entitled to the interest that has accrued on inheritance money during the time it was held by the lawyer handling the estate?

Date: (8 April 2013)    |    

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The answer is not very straightforward as one might imagine. Jim Clarke a chartered accountant would found out the same after his mother had expired last year.
As reported in the Herald the estate was worth around £240,000, much of which was held by his probate solicitor for six months. Yet when the estate was finally settled, Mr Clarke was told he would get no interest because of a little-known ruling by the Law Society of Scotland in November 2011.
The ruling allows the legal firms to keep interest earned on invested estates if it comes to less than £100. Since in the instant case the accrued interest was just £67 as it was saved in an account which paid only 0.25% interest the same would be retained by the firm but Mr Clarke said as per his estimates the money would have earned £400 interest on the same funds over the same time period.
He made a complaint to the Scottish Legal Complaints Commission which was rejected as there was a conflict of interest involved in the case he was right to raise the issue.
Here even his probate solicitors had not broken any rule or acted illegally but as he pointed out there could have been a perverse incentive at work here and the incentive could have been to keep the returns on the money to the minimum so that it earned less than £100 interest to retain the same.
The Law Society of Scotland talks of these arrangements being subject to "rigorous rules" but the arrangements in Scotland for handling the interest on clients' money appear to be less stringent than those that apply in England and Wales, following the 2007 Legal Services Act. South of the Border regulations stipulate that clients should be aware of the terms of a company's interest policy. And though a "de minimis" rule can be applied to interest, the suggested threshold is £20 on accounts opened in clients' names.
Though the Law Society of Scotland suggests the interest retained by legal firms was "to ease administrative processes and associated costs of setting up an individual account for every client" it could fair and clearer if a set charge is made for this, if necessary, and itemise it on the client’s account.
To be fair to the solicitors, clients should not expect highest interest rate on their money as such accounts are to be the instant access variety but the lowest interest aspect is also not appropriate. This matter needs further scrutiny since two thirds of households are now homeowners and the typical value of an estate is between £150,000 and £250,000. Legal firms should have a written policy on payment of interest that provides a fair outcome and they should ensure that clients know the rules.

 

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