Long-running court battle shines light on life and death issues for families

The long-running battle over Melita Jackson's estate, in which she cut her daughter out of her will and left almost £500,000 to animal charities, reached the UK Supreme Court this week. The case should settle this dispute for good and, perhaps more importantly, provide guidance for charities on legacy income and highlight the importance of individuals planning ahead to ensure wealth is passed to preferred beneficiaries.

Heather Ilott went to court after her mother, Melita Jackson, left a £486,000 estate to the RSPCA, RSPB and Blue Cross when she died in 2004. In 2007, a court awarded Ms Ilott £50,000 and, on appeal, it was later decided that she should receive one-third of the estate, £164,000, despite her mother’s intention that she should receive nothing. The charities are now appealing Ms Ilott’s increased share.

This case is governed by English law, which allows individuals to ask the courts to give them a share of the estate, or increase the amount specified in a will. Importantly, the rules in Scotland are different; except on matters such as doubtful capacity of the deceased at the time a will was made, there is no scope for challenging a will. A Scottish court would not be able to alter a will to change the sharing of the estate like in the Jackson case. Rather, in Scotland spouses/civil partners and children have a fixed, automatic entitlement.

A child who has been cut out of a will or believes they have not received a sufficient share of an estate has the fall-back of their legal rights, though these do not extend to land and buildings. Under current rules, these can be passed under a will to whomever you wish. However, investments, cash, private company shares, land and buildings owned through a company are part of the legal rights entitlement as they form part of the deceased’s “moveable” estate.

If there are children, a spouse/civil partner is entitled to a cash amount equal to one-third of the moveable estate and the children, as a group, are also entitled to a one-third share. If there are no children, a spouse/civil partner is entitled to a cash amount equal to one-half of the moveable estate. It is a cash entitlement based on value and a child enforcing their legal rights has no entitlement to a share in any particular asset..

There has been a consultation on changing the rules to potentially include land and buildings in the legal rights entitlement and also changing the legal rights of children. The proposals for children include restricting legal rights to those dependent on their parents, essentially up to 18, or 25 if in education or training. Individuals and families with land and rural businesses and interests should keep abreast of these developments.

As Scotland gives fixed entitlements rather than the opportunity to go to court, those who wish to limit the inheritance of, for example, a particular child, can look to take steps during life (remembering legal rights apply over and above, irrespective of the terms of a will). This could include gifting assets, using trusts, carefully considering how assets are held, what assets are held and by whom as well as looking at terms and conditions of investment portfolios and bank accounts. Also bear in mind other “assets” that can be easily overlooked but are potentially very valuable – pension death benefits, death in service through employment and life policies. Only action and planning during life will give an individual more control over who receives what.

Alan Eccles is a partner in the personal & family/charities teams of Brodies LLP