Property (and in particular a person’s home) is often one of the most valuable assets in an individual’s estate. However, what is less widely appreciated is that succession does not simply depend on what a will says. In many cases, the way in which title to a property is owned will determine the outcome on death.
For private client practitioners, this means that ownership structures are not just a matter of title—they are fundamental to understanding how an estate will be administered and whether a client’s intentions can be achieved in practice.
When property falls outside the estate
A common misconception is that all property owned by an individual will pass under their will. In reality, certain ownership structures operate independently of succession law.
Joint ownership with what is known as a “survivorship destination” is a clear example. Where this applies, the property will pass automatically to the surviving owner on death, without forming part of the deceased’s estate.
While this can be entirely appropriate in some cases, it can lead to unintended outcomes where personal circumstances have changed, particularly in later life or in more complex family situations.
For example, in second marriage scenarios, or where wills include liferent or trust structures (for instance, to protect assets for children from an earlier relationship or as part of care cost planning), it is often important that the deceased’s share of the property passes in accordance with the will rather than automatically to the survivor. If a survivorship destination remains in place, it can override those intended arrangements, meaning the property does not fall into the estate as expected.
When preparing wills, it is therefore important to review the title to ensure that any survivorship destination aligns with the overall estate planning, and to take steps to evacuate it where appropriate so that the intended will structure can operate effectively.
A similar point arises in the context of trust structures. Where property is held by trustees, it will generally be the terms of the trust deed (rather than the individual’s will) which determine how and when the benefit passes. This distinction between legal ownership and beneficial entitlement is an important one, and can often differ from a client’s expectations.
Indirect ownership and complexity
Property may also be held indirectly, through companies or partnerships. In those cases, an individual may not own the property itself, but rather an interest in the entity which holds it. For example, a portfolio of buy-to-let properties might be owned through a property investment company, with the individual holding shares in that company, or farmland may be held within a farming partnership, with the individual holding a partnership interest rather than the land itself.
Equally, property may be held within a trust structure, in which case the individual will not own the asset outright, but instead be a beneficiary of a trust fund which includes the property.
In both situations, it is important to look beyond the underlying asset and consider the legal structure through which it is held, as this will determine how value passes on death and how it can be controlled as part of wider succession planning.
On death, it is that interest, such as shares or a partnership entitlement, that forms part of the estate. This can have important implications when considering Scotland’s forced heirship rules, known as legal rights. While the underlying property still carries value, the route to realising or transferring that value can also be more complex and may depend on governing documents such as articles of association or partnership agreements.
These structures can be commercially sensible during lifetime, but they introduce additional considerations when it comes to succession planning and estate administration.
Where succession law applies
Where property is held in an individual’s sole name, and no alternative mechanism applies, it will generally form part of the estate and pass under the will (subject to legal rights) or the rules of intestacy
Even in these more straightforward cases, the practical position can be influenced by a range of factors, including how a property is occupied, how an estate is to be funded, and whether there are competing claims. As a result, property is rarely dealt with in isolation and often requires a wider view of the estate.
A practical focus for clients
In practice, the key is to ensure that the legal structure of property ownership aligns with a client’s intentions.
This involves more than simply putting a will in place. It requires a clear understanding of how the title to the property is held, whether any features of the title affect succession, and how this interacts with other aspects of the client’s affairs.
Taking a holistic approach at the outset, rather than addressing these issues reactively, can help to avoid uncertainty and ensure that planning achieves the desired outcome.
Contributor
Solicitor
