Personal Law

Land (and buildings) will continue to be protected from legal rights claims by children when a parent dies, the Scottish Government has decided. This is particularly important for land and rural business owners. It means that they can continue to write a will leaving land to their intended heir, without another child having the ability to make a claim on it, potentially forcing the land, and therefore often the business, to be broken up to pay the claim.

Legal rights are payable out of the deceased’s moveable estate (that is, all assets apart from land). The Scottish Law Commission had recommended that the law be changed so that legal rights would come from the whole estate, including land. The Land Reform Review Group report for the Scottish Government had also recommended that land be included in legal rights, although more as a matter of social justice, as they felt such change would be unlikely to have a significant influence on the pattern of land holding in Scotland.

The potential impact upon land and rural businesses was reviewed by the Scottish Government following consultation. It was considered that paying out legal rights claims on land would compromise businesses, particularly those with high land values but with low amounts of income being generated. This could have a wider negative impact on the rural economy. It was thought too difficult to create exemptions for certain businesses which would be rendered unviable by a legal rights claim on land; and that the creation of a two-tier system would be unfair.

The Scottish Government have concluded that land will continue to be excluded from the legal rights pot because individuals should be able to manage their affairs as they wish; because of concerns about the negative impact on land and rural businesses; and because making a change would not in itself change the pattern of land ownership in Scotland, it being thought that if smaller land and rural business had to be sold to pay legal rights then they may well be bought by larger businesses.

Assets other than land continue to form part of a child’s claim on a person’s death but planning can be done to mitigate that. There is a risk that reform may be brought in at a later date to include land in legal rights. Advice should be sought from your usual contact at Brodies.

For more on legal rights in farm businesses please see the previous blog https://brodies.com/binformed/legal-updates/farm-businesses-and-wills-and-tax-planning

 

Leigh Gould

Partner at Brodies LLP
Leigh advises Personal clients on succession planning, being the passing on and protection of assets, in the most tax efficient way. This includes wills, trusts, executries and powers of attorney, but Leigh also advises on using additional structures for holding and passing on wealth and minimising tax, such as charities, partnerships and family investment companies. She has a particular focus on advising clients with land and rural businesses and also on contentious trust and executry issues.
Leigh Gould

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