In Scotland, legal rights guarantee that your spouse and children are entitled to a share of your estate, whether or not you have a valid will.
These rights, a form of forced inheritance, can influence the distribution of your estate after your death. Taking proactive steps can help manage their impact and ensure your estate benefits the individuals you choose.
Legal Rights: What Are They and Who Can Claim?
Legal rights are an absolute entitlement for a surviving spouse, children, and, in certain cases, grandchildren. Beneficiaries can choose to claim these rights or decline them. If someone has an inheritance outlined in a will, they must choose between the entitlement provided in the will or their legal rights—they cannot claim both.
Legal rights claims must be made within 20 years of death. The definition of "children" includes adopted children and those born outside marriage. A spouse retains the right to legal entitlement even during separation until the divorce is finalized unless a formal agreement states otherwise.
Calculating Legal Rights
Legal rights apply only to the "moveable" part of an estate, which excludes land and buildings owned personally. Moveable property typically includes:
- Bank accounts
- Investments and shares
- Business assets and associated property
The share of the moveable estate varies based on surviving relatives:
- If only a spouse or children survive, they share half of the moveable estate.
- If both a spouse and children survive, the spouse is entitled to one-third, while the children equally share another one-third.
- The remainder of the estate is distributed according to the will or intestacy laws.
Why Legal Rights Matter
Legal rights claims can disrupt the intended distribution of an estate and lead to family disagreements. In many cases, these claims are waived because the will provides for the beneficiaries, or children agree that the estate should pass entirely to the surviving spouse. However, if someone does claim their legal rights, it can reduce other beneficiaries’ shares and create financial and emotional conflict.
Such claims may also impact tax efficiency. For example, if an estate was structured to minimize inheritance tax, a legal rights claim could increase the tax burden, reducing the amount available for distribution. Claims can also affect the inheritance tax nil-rate band, potentially limiting the amount a surviving spouse can inherit tax-free.
In complex estates with business or agricultural assets, legal rights claims can pose additional challenges. These claims might require selling or restructuring business assets to provide liquidity, risking the loss of tax reliefs or even the viability of the business itself.
How to Manage Legal Rights
Reducing the impact of legal rights on your estate may be complex, but it’s possible with proper planning. Seeking legal advice can help identify potential issues and provide practical solutions tailored to your circumstances.
Options include:
- Structuring your estate to balance fairness and control while minimizing claims.
- Considering lifetime asset transfers, trusts, or other strategies to protect your estate.
- Reviewing your family’s needs and circumstances to develop a tailored plan.
By addressing potential legal rights claims early, you can better safeguard your estate and ensure it benefits those you intend. Take action now to protect your estate. Seek professional advice to navigate legal rights and ensure your wishes are honored.