Legal rights in Scotland act as "forced heirship," guaranteeing spouses and children a share of the deceased's net moveable estate, regardless of the will's contents. Here's an overview of how they work.
What Are Legal Rights?
Legal rights entitle certain family members to a share of the deceased’s net moveable estate, which includes all assets except for land and buildings. Moveable estate typically covers items like cash, investments, vehicles, and personal possessions. After debts and specific expenses are deducted, the remaining value is divided according to legal entitlements.
Land and buildings are excluded from legal rights unless they are part of a business, such as when property is owned by a company or used in a partnership.
How Are Legal Rights Divided?
The distribution of legal rights is determined by who survives the deceased:
- Spouse and children: The spouse is entitled to one-third of the net moveable estate, while the children collectively share another one-third. If there are multiple children, their share is divided equally among them. For instance, if there are five children, each would receive one-fifth of the children’s portion.
- Spouse only: The spouse is entitled to half of the net moveable estate.
- Children only: The children collectively share half of the net moveable estate, divided equally among them.
Options for Planning Around Legal Rights
For those concerned about the impact of legal rights on their estate, several strategies may help manage or minimize potential claims:
- Renunciation of Legal Rights: You can request that your spouse or children give up their legal rights during your lifetime. If they refuse, you will be aware of the challenge and can plan accordingly.
- Lifetime Gifts: Transferring assets to your intended heirs while you are alive can reduce the size of your estate. However, consider affordability and potential tax implications before gifting.
- Setting Up a Trust: Establishing a trust can allow you to transfer assets for the benefit of your heirs while still providing for yourself. Tax considerations are crucial in this approach.
- Building Alternative Assets: Accumulating additional assets specifically to meet legal rights claims, such as through life insurance, can help ensure your primary wishes are honored.
- Pension Protections: Pensions are typically excluded from legal rights claims, making them a secure option for preserving wealth for your intended beneficiaries.
- Wills as an Incentive: Legal rights claimants cannot simultaneously accept their legal entitlement and any bequest left to them in the will. Including tempting provisions in the will might encourage them to forego their legal rights.
- Land and Buildings in Business: If land and buildings are part of a partnership or company, they are vulnerable to legal rights claims. Professional advice can help protect these assets.
- Invest in Land and Buildings: While the Scottish government has considered extending legal rights to cover land and buildings, they have not yet implemented such reforms. For now, these assets remain outside the legal rights pot unless linked to a business.