Usually the way in which someone chooses to deal with their estate upon their passing is a private matter discussed between themselves, their lawyer, and possibly those who stand to inherit. However, James Bond actor Daniel Craig has been in the news recently to discuss his plans to disinherit his children from his large fortune made from a successful acting career. This may make you wonder just how easy it is to prevent your children inheriting from you upon death?
Very easy, you may think – simply write a Will leaving your estate to whoever you please (or, as the old adage goes, to the cat and dog home!). While this may be possible for Mr Craig in England where the principle of “testamentary freedom” is absolute (essentially, it’s your money and you can give it to whomever you like, subject to minor exceptions), Scots Law operates somewhat differently. Yes, you are still free to pass your estate to whomever you see fit but this is conditional on the principle of Legal Rights.
What are Legal Rights?
The concept of Legal Rights is long-standing in Scots succession law and must be addressed by your Executor upon your death. This entitlement prevents complete disinheritance of the deceased’s spouse or civil partner (estranged or otherwise) and/or their children. Essentially, a claim for Legal Rights has the ability to (partially at least) override wishes stipulated in a Will. So, you can leave your estate to the cats and dogs, but only once those entitled to Legal Rights have had their share.
What will Legal Rights cost my estate?
First, it is important to note that Legal Rights only attach themselves to moveable items in your estate i.e. everything except land or buildings. Therefore, this would include any cars, money, investments, personal possessions and so on.
Where the deceased is survived by a spouse or civil partner and children, the spouse/civil partner is entitled to one third of the movable estate, and any children are entitled to a further one third of the movable estate divided equally among them.
Alternatively, if the deceased is only survived one category i.e. only a spouse/civil partner, or only children, their respective entitlement increases to one half of the movable estate.
It is important to note that someone entitled to claim Legal Rights is not obliged to do so. It would be open to them to disclaim their Legal Rights and for the entire estate to pass in terms of the deceased’s Will.
Legal Rights in Practice
How does this work in practice? Let me give use Mr A an example to illustrate this point. Mr A is survived by his wife and two children. Let us assume his estate is worth around £1,000,000 after debts and taxes and Mr A wishes to leave his whole estate to charity.
We can first exclude the value of any houses and land as they do not contribute towards Legal Rights and we will assume they are valued at around £100,000. This leaves £900,000 open to a claim from his wife and children.
If they all survived Mr A, 1/3rd of the moveable estate could be claimed by Mr A’s wife (£300,000), 1/3rd could be claimed by his two children (£150,000 each), and the remaining amount (£300,000) and the value of the house (£100,000) would pass to his nominated charity.
As a result, whilst it was Mr A’s intention to have his whole estate pass to charity, in reality, after a claim of Legal Rights, the charity would receive only 40% of his entire estate.
Can I avoid a Legal Rights claim?
The short answer is no. Legal Rights are a part of Scots Law and available whether or not you put a Will in place. However, there are a variety of ways to mitigate a potential Legal Rights claim and this should be considered as part of your overall succession plan in your lifetime. Your solicitor should be able to advise of options which are suitable to your individual circumstances.
If you have any questions about legal rights and putting in place a personalised succession plan, get in touch with the BTO Personal Team at email@example.com or call 0141 221 8012 to arrange a consultation or visit www.btopersonal.co.uk for more information.