Succession shake-up

Sunday, 01 November 2015
Debbie King provides an overview of the proposed changes to Scottish succession law.

It is widely accepted that the law of succession in Scotland is outdated. Currently, if someone dies without a will, the estate will be distributed under the Succession (Scotland) Act 1964; many assume their assets will be distributed among loved ones fairly, but that is not always the case.

The Scottish government has published a consultation paper by the Scottish Law Commission on the law of succession, with the aim of ensuring ‘that the law in this area is fairer, clearer and more consistent’, and reflects society’s expectations. Some of the recommendations will be included in the new Succession (Scotland) Bill at the same time as views are sought on the paper’s recommendations. The paper addresses three key issues: intestacy, protection from disinheritance and further protection for cohabitants.

Intestacy

The proposed changes as to intestacy are:

  • If no issue, spouse inherits the whole estate. 
  • If no spouse, issue inherits the whole estate.
  • If spouse and issue, the spouse receives a threshold sum (GBP300,000, reviewed annually) and the residue is split equally between spouse and issue.

The reasoning behind introducing a threshold sum is to ensure a spouse can remain in the family home. Concern has been expressed that this figure does not reflect variations in property prices and may lead to unfairness. Views are being sought on whether there should be a threshold sum and, if so, what would be a reasonable amount.

Disinheritance

The second key issue is protection from disinheritance even where a will is in place. In Scotland, a spouse and issue are entitled to legal rights (either half or a third of the net movable estate). The Commission deems the current system flawed as there are ways to defeat legal rights by converting movable assets into heritable. It has recommended a spouse be able to claim a ‘legal share’: 25 per cent of their entitlement under the new rules on intestacy, over the whole estate.

Responses to the proposals regarding issue have been ‘sharply divided’. Two options are being discussed. Under the first, all children would be entitled to a legal share: 25 per cent of what they would have received under the proposed new intestacy provisions over the entire estate. If the estate is below the threshold sum, however, issue would not inherit anything. Under option two, only dependent children (under 18 or under 25 and in education or training) have a right to a capital sum, determined by the needs and resources of the child and the family. This would only be payable in the unlikely event there is no surviving individual under an obligation to aliment the child.

One of the most radical changes is to remove the distinction between heritable and movable property, which has caused a great deal of controversy, particularly among farming families, which fear they will be forced to sell land to meet claims which may then render the business unviable. The Commission has concluded no exemption for agricultural units is necessary as farming families can reach agreements among themselves and take appropriate advice.

Cohabitants

The Family Law (Scotland) Act 2006 introduced rights for cohabitants. It allows a cohabitant to make a claim within six months of the death, up to the amount a spouse would be entitled to under intestacy. The Commission believes there is ‘strong public support’ for protection for cohabitants to be extended to testate estates, legislation should be simplified, the court’s discretion narrowed and a fixed percentage introduced.

The Commission previously sought views on extending the time period but no consensus was reached. Other issues are: potential conflicts of interest, the court has no guidance as to the purpose of any award, relevant factors to be taken into account are too extensive, and there is a lack of case law.

The new regime would involve a two-stage court process: establish whether the person making the claim is a cohabitant and fix the ‘appropriate percentage’. Only three factors would be considered: how long the couple have cohabited; the nature of the interdependence; and what contribution the surviving cohabitant made to their life together.

The proposed reforms would achieve the aim of simplifying and modernising the current system, but this should not come at the cost of testamentary freedom. While Scottish legislation should reflect societal changes, it is impossible to ensure fairness in every possible familial scenario and a balance of interests must be struck. It will be interesting to see how the Scottish legal community responds to the paper. 

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Debbie King

Debbie King TEP is an Associate at Lindsays.

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