You may be surprised to learn that your closest family members can make a claim on your estate on death regardless if you have made a Will, and regardless of whether or not they are included as a beneficiary. This is due to the long established concept of Scots law known as legal rights, which essentially prevents you from disinheriting your civil partner and children. In turn, this quirk can have a significant impact upon the distribution of your estate, and it is something that you should be aware of, particularly when making your Will.
What assets do legal rights apply to?
Legal rights apply only to your net moveable estate on death, which means your bank accounts, investments, furniture, paintings, personal items, jewellery etc. but not land and property, such as your home.
Who can claim legal rights?
Those entitled to claim are the surviving civil partner/spouse, children (including adopted and illegitimate, but not step-children) and grandchildren (the latter only if children have predeceased at the time of your death) but not cohabitants. However, it is important to stress that a beneficiary cannot pursue a legal rights claim and also benefit under your Will. It is one or the other.
What is the value of a legal rights claim?
A surviving civil partner/spouse is entitled to a half share of the net moveable estate. This is reduced to a one third share if there are any surviving children. Likewise, children are entitled to claim a half share among them of the net moveable estate where there is no surviving civil partner, which is reduced to a one third share where there is a surviving civil partner.
In relation to children, it should be borne in mind that if a child decides to claim their legal rights, they can only claim part of the respective half or one third share for children, for example:-
Jill dies and is survived by her civil partner Sarah and their two sons, James and Ben. Ben claims his legal rights in Jill’s estate. First, the value of the net moveable estate is split into three equal shares. Second, as Jill has two sons, Ben is entitled to half of the one third share for children.
- Jill’s net moveable estate: £300,000
- Legal rights fund for children (1/3 of the net moveable estate): £100,000
- The value of Ben’s claim (1/2 of the fund for children): £50,000
Is there a time limit?
You have twenty years following the death to claim your legal rights. If you do not want to claim them then you will be probably be asked to disclaim them.
For those in the middle of separation discussions or a dissolution/divorce procedure, a civil partner/spouse’s right to enforce his or her legal rights continues throughout the dissolution/divorce procedure until Decree of Dissolution/Divorce is finally granted. One way to prevent this continuing right is to enter into a separation agreement prior to the conclusion of the dissolution/divorce process. In this way civil partners/spouses may discharge their respective legal rights in each other’s estates.
Minimise the legal rights pot?
If you wish to minimise the effects of legal rights, one bold solution is to convert the majority of your estate into land and property, leaving a small moveable estate. However, this is highly impractical. Another option is to create a trust in order to reduce the impact of legal rights, with a discretionary trust being the most popular choice. By establishing a trust, you can transfer both money and assets to the trust vehicle, as well as choose the trustees who will manage the trust and the beneficiaries who will benefit. This provides a flexible method for controlling the distribution of your estate should you wish to prevent certain family members claiming their legal rights on your estate.
Overall, even if you have made a Will, it is important to fully consider and keep in mind the potential effects of legal rights when planning for your future and your loved ones.
If you are ever in the position of deciding whether to accept or disclaim your legal rights, it is an important decision making process requiring careful consideration and you may wish to discuss this with your solicitor.
Lindsay A Watson
Maclay Murray and Spens LLP