The Law of Succession, which regulates how a person’s property and belongings are inherited following death, is one of the most important areas of the law and one which affects everyone. It is an area which suffers from many misconceptions and misunderstandings amongst the general public. Despite advice from the legal profession that almost everyone should make a Will, many people die without setting out their wishes in a Will. Failure to do so can cause delays, difficulties and sometimes conflict for the families left behind.
Proposals to change the law regarding the Legal Rights of children and spouses could have a major impact on farming families. Legal Rights are claims available to spouses and children whether or not the deceased person made a Will.
The current law is very long standing and allows children and spouses to claim Legal Rights on the Estate of the parent/spouse. Legal Rights are, however, only claimable against moveable Estate and thus land and buildings are excluded from such a claim.
The claims to Legal Rights have been reviewed by the Scottish Law Commission as part of a wider review of the Law of Succession. Their recommendations have been influenced in part by a desire to give surviving spouses greater rights and to give protection to co-habitees. The Scottish Government has carried out, but not yet completed, consultations in regard to the proposals. Lindsays have been involved in the consultation process and have identified some of the ramifications for farming clients of the proposed changes.
The Scottish Law Commission have proposed that Legal Rights (to be renamed as “Legal Share”) should apply to land and buildings also. This will raise additional issues for farming families in planning for who should, or should not, inherit the farm and its lands. Most farmers will have made their current Wills and Partnerships in reliance on the current law.
At present, farmers can avoid claims to Legal Rights from non-farming members of the family by not including the farm as a partnership asset. It is therefore heritable estate for succession and Legal Rights cannot be claimed against the value of the land. If the farm is included as a partnership asset, or within a farming company, it becomes moveable property and is vulnerable to a claim for Legal Rights.
As the law stands at the moment, Farmers should think very carefully about whether or not they include the farm within a partnership because it increases the amount of moveable Estate upon which a child/spouse could claim Legal Rights;
Whether or not the law is going to be changed is uncertain, but the possibility warrants a conversation between Farmers and their advisors as to how the title of the farm should be held and how succession might be affected by the current proposals. The particular circumstances of each family need to be taken into account and the possible changes in the law weighed up carefully.