The Succession Act paves the way for a more radical overhaul, writes Alexis Graham
Death and divorce are not popular topics, but given the inevitability of one and the relative frequency of the other, recent changes are certainly to be welcomed by the public and practitioners alike.
The Succession (Scotland) Act 2016 is the first significant amendment of Scottish succession law in over 50 years. The Act implements certain technical modifications and paves the way for a potentially more radical overhaul of the laws relating to inheritance which the Scottish Government is currently considering taking forward.
The new Act provides a number of long overdue changes and brings some aspects of rights in succession more into line with the needs of today.
The experience of lawyers is that most people assume the end of a marriage also signals the end of any entitlement under a will. This is not currently the case but the new Act will go a long way to align the law with general public perception. All too often the terms of the will were over looked post-divorce, leading to unexpected consequences.
Once the changes take effect, any provisions in favour of a former spouse/civil partner will be treated as having been automatically revoked when the relationship comes to an end. In fact, the ex-spouse or civil partner is to be treated as having died before the testator for the purposes of interpretation of the will. Now an ex-spouse/partner will only benefit where the will specifically and deliberately provides for them following the split.
In the same way, a property held in joint names can currently pass automatically to a surviving spouse or civil partner (regardless of what is said in a will).
Most people are surprised to learn how the law can operate in relation to such joint assets and lawyers often have to deal with disappointed beneficiaries who did not appreciate how the property would be treated. Again, the new Act deals with any automatic transfer of a jointly owned property (known as a ‘survivorship destination’) and says this automatic treatment will not apply post-divorce.
Courts will also have limited power to rectify the terms of a will where it does not reflect what the deceased had wanted. Surprisingly, this was not previously the case.
In future, there are big plans for Scottish succession law after this first phase of changes has been implemented. The second phase, which has already been consulted on in 2015, will look at matters such as the rights of cohabitants, protection from disinheritance for spouses and children and how estates should be dealt with where there is no will in place. The proposals are specifically designed to bring the law in line with the expectations of modern society.
For example, most people simply assume that their spouse will be the sole beneficiary of their estate, but this is not case. Some of the proposals, if implemented, will have a significant impact on the rights of children and the succession to land and farming businesses, in particular.
In a nod to the historic succession rules, there is currently a distinction between ‘heritable’ and ‘moveable’ assets. In Scotland, we currently have protection against disinheritance for spouses and children but these rights (known as ‘Legal Rights’) only apply to moveable assets such as bank accounts. They do not include the value of houses or land and the current proposal recommends that heritable property is brought into the mix.
The proposed changes around Legal Rights are not straightforward and there are indications that not everyone is in agreement that the entitlement should be opened up to include heritable property.
There is suggestion that it could have a negative impact on family farming businesses, which may need to be broken up after a death to satisfy the claim.
The next few years will see major changes to an area of law which has been stagnant for some time.
• Alexis Graham is a partner in the Private Client & Charities practice with Maclay Murray & Spens LLP