Legal rights claims remain a key consideration for clients seeking to structure their estates efficiently while honouring personal wishes.
In Scotland, spouses/civil partners and children have an automatic right to cash to the value of the deceased’s net moveable estate, regardless of the terms of their will. While this protects family members, it can disrupt testamentary intentions, particularly in cases involving blended families, estranged relatives, or estates with complex business assets.
When an individual dies testate:
- A spouse or civil partner is entitled to one-third of the moveable estate if there are children, or one-half if there are no children.
- Children are entitled to one third if there is also a spouse/civil partner or one half if there is not.
These rights cannot be excluded by a will, though they can be discharged during life or waived after death. Estates must retain sufficient liquidity to meet these claims, which can lead to forced sales or business disruption.
While legal rights cannot be contracted out of, several strategies can reduce their impact depending on family dynamics, asset composition, and goals.
Lifetime gifting
Gifting during life can reduce the moveable estate's value by:
- Outright gifts of cash or shares.
- Transfers into trust.
- Gradual gifting using annual exemptions.
Timing is crucial meaning the earlier such gifts are made, the more secure they are against later challenge.
Use of trusts
Lifetime trusts can remove moveable assets from the estate while retaining control over distributions. They can also be structured to retain the person's use of and access to the assets in their lifetime while still protecting those from legal rights.
Trusts can be structured to:
- Hold moveable assets outwith the estate on death.
- Provide for future generations without increasing their legal rights.
- Protect young or vulnerable beneficiaries.
Careful structuring is essential to ensure that the trust is effective for legal rights planning.
Favouring heritable over moveable assets
As legal rights attach only to moveable estate, where appropriate, individuals can be encouraged to invest in heritable property. This is particularly relevant for farming and landed estates clients and can offer a valuable buffer against erosion of the estate by legal rights claims.
A frequently underappreciated nuance in legal rights planning is the treatment of heritable property held within a partnership. Under Scots law, heritable property is not a heritable asset - the deceased owns an interest in the moveable asset of the partnership, which interest includes the value of the heritable property. This can unintentionally expose heritable assets to legal rights claims.
To mitigate this risk:
- Section 22 of the Partnership Act 1980 permits contracting out of this. This can preserve the heritable nature of land and shield it from legal rights claims.
- Partnership agreements and accounts should be clear, documented and regularly updated as property and partnership interests evolve.
This area is often overlooked, especially in informal or family-run partnerships, but failing to address it can inadvertently expose significant heritable value to legal rights claims. By proactively addressing the treatment of heritable property within partnerships and making strategic use of section 22, clients can utilise this as an effective tool in managing their legal rights exposure.
Pre-nuptial or post-nuptial agreements
Pre-nuptial or post-nuptial agreements can allow spouses/civil partners to waive legal rights, provided they are entered into freely, with legal advice and full financial disclosure.
They are particularly useful where family businesses are involved or where clients wish to ring-fence assets for children from a previous relationship.
Legal rights discharge
Family members can voluntarily discharge their legal rights, during lifetime or after death. Lifetime discharges must be executed with care to ensure validity and prevent later disputes. They may be used in the context of succession planning for family businesses or to rebalance inheritance where provision has already been made.
Post-death negotiation may allow for variation, but the risk of dispute or challenge remains.
Final thoughts
Legal rights are a persistent feature of Scottish succession law. No single strategy fits all, but combining lifetime planning, asset structuring, and trust planning can significantly reduce exposure. Early advice is essential, delays often limit available options therefore, proactive discussions, especially for business owners or those with complex family arrangements, can make a substantial difference.
For tailored advice, please get in touch with our wills and estate planning experts. For pre or post nuptial agreement, out family law experts are also here to help.
Contributor
Solicitor
