Consultation on the Law of Succession
On 29th June 2015 the Scottish government issued a consultation paper on some fundamental reforms of Succession Law in Scotland. The proposals are of potentially huge significance for anyone who is domiciled in Scotland at the time of their death.
As mentioned in Part 1, the rules on intestate succession govern the succession to a person’s estate if he or she dies without leaving a valid Will and also occasionally govern the succession to part of a person’s estate when he or she leaves a Will but it does not deal with all of his or her assets.
At present, the division of a person’s estate varies depends on whether the deceased owned heritable or moveable property and the Scottish Law Commission recommend moving away from these “property specific” rights and looking instead at the individual’s whole estate. Simplification is the main goal of the reforms and the proposal is that a surviving spouse should inherit the whole of the deceased’s estate if the deceased is not survived by any children or grandchildren. If there is no surviving spouse, the children of the deceased should inherit the whole estate.
Where there is a surviving spouse or civil partner and the deceased is survived by children, it is suggested that the spouse should receive a lump sum figure to be set by statute (to be known as the threshold amount) with the rest of the estate being split equally between the surviving spouse or civil partner (one-half) and the deceased’s children (who share the other half between them).
The Scottish Law Commission proposed setting the threshold amount at £300,000 but the Scottish government is proposing to make it significantly higher than this, and the consultation paper mentions figures ranging from £335,000 to £650,000.
Interestingly, despite the potential impact on land ownership in Scotland, the consultation paper makes no mention of the Scottish Government’s land reform agenda – see our Land Reform Hub for more information on Scottish land reform.
Protection from Disinheritance
The consultation also deals with long-awaited amendments to the Legal Rights rules which apply whether or not the deceased left a Will and regardless of what any Will says. These are the rules mentioned in Part 1 by which a surviving spouse and the children and grandchildren of a deceased can claim a specified portion of the deceased’s moveable estate.
Like the intestacy rules, Legal Rights are “property specific” and can lead to arbitrary results depending on the make-up of the deceased’s assets at death. The paper proposes that a surviving spouse should be able to claim a fixed share equal to 25% of the amount to which he or she would be entitled under the proposed new intestacy rules discussed above.
Two alternative proposals are put forward for a new type of claim by the deceased’s children. The first proposal is that the deceased’s children would share a fixed proportion of the whole of the deceased’s estate (including land and buildings). Again, the suggested figure is 25% of the value to which they would have been entitled on intestacy. All children of whatever age would be able to claim this “legal share” (as it is to be known). This would mean that, in smaller estates where the total value did not exceed the threshold amount (see above), that would pass to a surviving spouse on intestacy and there would be no funds available for the children to make a claim.
In order to mitigate the impact of these changes it is proposed that executors will be able to apply to the court to be allowed to pay a person’s legal share claim in instalments. This may be useful where the estate is particularly asset rich but may be cash poor and a claim would otherwise force the sale of historic or sentimental assets.
The alternative is that adult children should no longer be able to make a claim on their parents’ estates at all. However, dependent children would be entitled to apply for a capital payment. The level of that capital sum would be determined by the needs of the children in question and it would take into account the family’s lifestyle and position.
The paper contains a section devoted specifically to the implications for agricultural units of the inclusion of heritable property in succession claims. The concern is that including land and buildings in the property from which claims can be made could lead to a situation for agricultural families where the family farm needs to be sold or divided in such a way as might make it unviable. The consultation paper asks for views on whether agricultural units might be exempted in some way.
A cohabitant (a vaguely defined term broadly meaning a couple living together as if they were spouses or civil partners) has been able to make a claim to part of his or her partner’s estate since the introduction of the Family Law (Scotland) Act 2006. As mentioned in Part 1, this is done by way of an application to the court, which then has wide discretion as to the amount of any award, up to the maximum of what the survivor would have received if the couple were actually married or in a civil partnership. These claims are currently only possible where the deceased dies without leaving a Will, but the recommendation is that the ability to make a claim should be extended to estates where the deceased did leave a Will. It is also suggested that the discretion of the court should be narrowed so as to provide a level of consistency and a cohabitant should be awarded a percentage of what a spouse or civil partner would have received.
The Consultation also covers various other more technical matters. In particular, views are also sought on whether a marriage or civil partnership that takes place after the execution of a Will should render that Will revoked unless it specifically provides otherwise. This is currently the position in England. The change is not being actively recommended but the views of the public on the matter are being requested and, depending on the outcome, this could be reviewed again in the future.
There are some useful recommendations contained in the Consultation but the proposed extensions to the rules restricting testamentary freedom (to include heritable property as well as moveable property) are the most significant.
Taken together, the Succession (Scotland) Bill and the Consultation propose significant changes to the law of Succession. Individuals and family business owners should review their succession plans (including their Wills and business structures) to ensure that they are well-placed for the future.