Considerations For Will & Estate Planning
Author: Alison McKean
Posted: May 2018
In terms of Scots Law even though you may have made a perfectly valid Will, your children - and spouse - have certain rights (upon your death) in your estate given by law called ‘legal rights’. It is difficult, although not impossible, to defeat the legal rights entitlement of a child or spouse, as the options available to minimise such a claim are limited (and often impractical). Whilst it is possible to ask a child or spouse to Discharge his/her legal rights in advance of your death, this can cause difficulties amongst family members and to be effective, all relevant information needs to be given to the child or spouse, who is also entitled to independent legal advice. Where there is a spouse and children who survive the deceased and a valid Will is left, the deceased persons’ children can claim such sum as represents a one third share of ‘net moveable assets’ (what is left after funeral expenses, tax, any liabilities etc settled). The definition of ‘moveable estate’ currently excludes land, houses and buildings (known as ‘heritable property’ - but see note below). The deceased person’s spouse can also claim a one third share of net moveable assets where there are surviving children of the deceased and a valid Will is left - but, if legal rights are claimed by a child or spouse, they cannot also accept a benefit under the deceased person’s Will. Accordingly, if a wife is named as sole beneficiary in the Will of her late husband, it would be highly unlikely that she would decide to claim legal rights as she would forfeit the right to inherit the estate under the Will. To take a straightforward example, if someone who made a Will dies owning half a house and net moveable assets of £90,000, currently by law the value of the house would be excluded from a legal rights claim. Where there is a surviving spouse and surviving children, the children would be entitled to claim in total £30,000 and the spouse would be entitled to claim £30,000. The children’s legal rights entitlement remains at a total of one third moveable estate irrespective of how many children there may be - if only one child he/she can claim the full entitlement of one third, if 3 children, a one ninth share each, etc. It is not necessary for all children to claim, eg one child out of 3 may validly claim, but the others may decide to waive or discharge their entitlement. Please note that in this context ‘children’ means your biological or adopted children, not step-children. Where the deceased is not survived by a spouse, the children’s legal rights claim totals 50% of net moveable assets; similarly where no children survive, the spouse can claim 50% of net moveable assets.
At the time of writing this note, the Scottish Government has made proposals for substantial changes in the law relating to legal rights. It is likely that the value of heritable property will also require to be taken into account in the future, and it is understood the claim will be known as ‘legal share’. At present the position regarding the final version of the new law which will govern the operation of legal rights/legal share in Scotland is not known;
In certain circumstances where you own or have an interest in a business with heritable property involved, depending upon your interest in the business and how heritable property is owned and/or shown in your business accounts, different rules apply as to what is ‘moveable property’ and can greatly increase the value of a potential legal rights claim. It is highly recommended that specific legal and accountancy advice is sought as to the implications of legal rights being claimed upon death. This is not a matter which can be dealt with in a general note as individual circumstances must be discussed.