Inheritance - some welcome changes for surviving relatives, but no change to what can be claimed

  • Insight

22 November 2018

Wills and inheritance were reviewed again in October, when the Scottish Government published a response to its 2015 consultation on the law of succession.

The consultation had been seeking views on a range of recommendations, from the Scottish Law Commission for reform of the existing law, some of which were controversial.  

The response addressed three major themes:

• The law of intestacy (where a person dies without a will)
• Protection against disinheritance (the Scottish concept of ‘legal rights’)
• The rights of cohabitants where a deceased cohabitant dies without a will

Further consultation is planned on some of the more difficult areas, so new legislation will be some way off.

Intestacy

There will be change, to simplify the rules surrounding intestacy (when a person dies without a will).

Currently, where a person dies without a will, a strict set of rules is applied, dividing up their assets amongst their surviving relatives. These rules were set down in 1964 and can occasionally serve to produce some unexpected results. For example, where someone without children is survived by their spouse (taken throughout to include civil partner), the rules and circumstances can conspire to benefit in part the deceased’s parents instead of the surviving spouse. This is not often the result a married couple would want.

Under the new plan for reform, in that same scenario, the whole estate will now be inherited by the surviving spouse.  Conversely, if there is no surviving spouse, the surviving children of the deceased will inherit the whole estate. These new provisions will be introduced in future legislation and will bring some much-needed simplicity to the current system.

The consultation response did not, however, clarify the situation of the deceased being survived by both a spouse and children.  Deciding the division is particularly difficult where the deceased left a spouse and children by a previous relationship. The Government will seek further consultation before introducing provisions to deal with how the estate should be split. The objective is to have a default rule that delivers outcomes that individuals and families expect. The range of models for modern families and what these families expect may, however, make consensus difficult to achieve.

It goes without saying that these difficult situations can be avoided and the best outcomes for succession planning are achieved by having a well thought out will in place.

Disinheritance

Scots law provides protection from disinheritance of a surviving spouse and children through the concept of ‘legal rights’. As things stand, spouses and children have an entitlement to a share in the estate left behind by their spouse or parent irrespective of what a will provides.

These legal rights have long been criticised as they apply only to ‘moveable’ property (cash, investments, personal possessions etc.) and not ‘heritable’ property (land and buildings). Given that the family home is the most valuable asset for the vast majority of Scots, this means that legal rights can often be worth little in practice.

The Scottish Government had therefore considered extending legal rights to cover all of the assets in an estate and remove the distinction between the different types of property. This proposal was proving controversial, in that land based businesses such as family farms with high asset values but disproportionately low income generation capacity could face break up to meet legal rights claims.

It seems that views on what shares a surviving spouse or children should be entitled to claim are as diverse as ever.  Also, the Scottish Government recognises the potential negative impact to the rural economy from compromising the viability of land based businesses.

Surprisingly, the outcome of the consultation is that the system of legal rights where someone dies with a will is not to be changed.  In particular, the distinction between moveable and heritable property will stay in place.   This distinction will also remain for entitlement to shares of an estate where there is no will.  The system of legal rights, whilst highly criticised, at least provides a balance between testamentary freedom and limited protection for spouses and children.

Cohabitants

The third key topic covered by the Government’s response is cohabitants’ rights. Currently, a surviving cohabitant has no claim against the estate of a deceased cohabitant who left a will unless there is a contractual right under a Living Together Agreement. Where there is no will, whilst a surviving cohabitant has no automatic right to claim anything from the estate, they have a right to make an application to the court to claim a share of the deceased’s assets and claim under a Living Together Agreement

Views on change remain mixed and the Scottish Government will consult further on how cohabitation is established for succession purposes and on what a cohabitant may be entitled to where the deceased did not leave a will. In the meantime, however, it is proposed to increase the time limit for making an application to the court for an award from the current six month window to a year.

The Scottish Government confirmed that there would be no change to the existing position that a surviving cohabitant has no claim against the estate where a cohabitant dies with a will.  Individuals should be free to order their affairs as they please.

What next?

It’s perhaps not surprising that, with a lack of consensus surrounding the most controversial areas of the Scots law of succession, the Scottish Government is reluctant to make major changes which could have divided opinion just as much.

That being said, the proposed changes to the rules regarding intestacy where the deceased is survived by only their spouse or children are undoubtedly welcome and provide a much needed update to the half century old Succession (Scotland) Act 1964. A fresh approach to cohabitants’ rights on intestacy is also to be welcomed. We await with interest the outcome of the next round of consultations.

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