Where are we now and where are we going?

The Law of Succession is one of the areas where there are key differences between Scots law and the law of England and Wales. Scottish succession law applies to anyone domiciled (broadly the country that an individual treats as their permanent home) in Scotland and the rules are of huge significance for families and businesses.

This is the first of a three part summary outlining (1) the current position; (2) the proposed amendments to the law introduced in the Succession (Scotland) Bill in June 2015; and (3) the wider Scottish Government Consultation announced on 29th June 2015.

Current Position

At present, Scots law provides protection to spouses and children whether or not a deceased has left a Will. If there is no Will (intestacy) and a person is survived by a spouse or civil partner (from here on referred to as “spouses”), that survivor is entitled to receive “Prior Rights” from the deceased’s estate. This consists of an interest in a home, an interest in personal effects and a cash interest, all of which have statutory values placed on them. Currently £473,000 for an interest in the house where the deceased’s surviving spouse or civil partner was “ordinarily resident”, £29,000 towards furniture on either £50,000 or £89,000 towards cash, the lower amount if there are surviving children, the higher amount if there are no surviving children.

In addition to Prior Rights, surviving spouses and surviving children of an intestate deceased are entitled to “Legal Rights”. At present, this consists of a fixed share of the deceased’s moveable assets (broadly everything except land and buildings): a surviving spouse is entitled to one-third of the net moveable estate where there are surviving children; where there are no children, this entitlement increases to one-half. Similarly, surviving children are entitled to one-third of the net moveable estate where there is a surviving spouse and one-half where there is no surviving spouse. The remainder of a deceased person’s estate (known as the “free estate”) will then pass to the deceased’s family in accordance with statutory intestacy rules, which can produce some surprising results. For example, if there are no children then the deceased’s surviving siblings would inherit before a surviving spouse.

It is not just spouses who have a right to inherit on intestacy. The Family Law (Scotland) Act 2006 conferred on surviving cohabitants the right to apply to the court for payment out of a deceased cohabitant’s estate in particular circumstances. Section 29 of the Act provides the opportunity to claim within six months of the date of death. “Cohabitant” is defined quite loosely in the legislation and broadly means a couple living together as if they were spouses.

The award may take the form of a capital sum and/or the transfer of property. However, the value of the award cannot exceed the amount which a surviving spouse would be awarded under the laws of intestacy and it will only be payable after any claims for Prior or Legal Rights have been satisfied. The court has discretion to consider a number of different factors when deciding if the survivor was a cohabitant and the form and value of any award, such as the duration of the cohabitation, the nature of the relationship and the extent of any financial arrangements which subsisted during the relationship.

Crucially, a surviving spouse or surviving children are entitled to Legal Rights regardless of whether the deceased left a Will or not (Legal Rights were intended to reflect the view that a person should not be able to dispose of his or her estate entirely according to individual preferences but should be bound to leave something to those with whom he or she had the closest ties - this is a long established principle of Scots law and of many other jurisdictions).

Under current rules, an individual can avoid a Legal Rights claim by structuring his estate so that he owns heritable property only or by gifting his moveable property before death. However, reforms have been proposed by the Scottish Law Commission in their Consultation on the Law of Succession (as will be seen in Part 3 of this summary) to remove the distinction between heritable and moveable property when considering a claim to Legal Rights. If the new proposals are introduced, a Legal Rights claim could be made on the whole estate regardless of property type. However, careful lifetime planning can still go some way to ensuring that an individual’s assets pass as intended.