The new Succession (Scotland) Act 2016 came into force in March last year (although many of its provisions are relatively new and didn’t come into effect until November 2016). The Act aims to modernise and clarify some of the technical aspects of the Scottish laws of succession that have been in place since the mid-1960s. So what are the key reforms and how may they impact you?
- Effect of divorce, dissolution and annulment
Under the previous law, a Will that makes provision for the spouse or civil partner of the deceased was still valid following the breakdown of the relationship. However, the new Act states that any provisions in a Will in favour of a former spouse will be treated as having been revoked when the relationship ends on divorce, unless the Will expressly states otherwise. Furthermore, if the former spouse has been appointed as trustee or executor, these appointments would fall on divorce, subject to any provision to the contrary. It should, however, be noted that these provisions do not apply in the case of the appointment of a former spouse or civil partner as a guardian to minor children under a deceased’s will.
The new Act has a similar effect on survivorship destinations (provisions that are often written into title deeds stating that the title is owned in joint names and that the property shall pass directly to the survivor of them).
- Rectification of a will
The Act introduced the process for the Courts to rectify a deceased’s will where it is clear that, as drafted, it does not reflect the deceased’s wishes.Previously, there was no procedure to rectify a Will, which meant that any errors that had gone unnoticed until after the deceased passed away couldn’t be corrected. Now, the Courts are able to rectify a Will if certain conditions are met.
- Death of beneficiaries
Where a beneficiary, who is a direct descendant (child or grandchild) of the testator (the person who made the Will), has predeceased the testator, their children will automatically inherit their legacy, unless the Will expressly excludes this.
- Uncertainty re survivorship
Previously, where spouses died simultaneously it was presumed the younger survived the elder. This rule has now been revoked for spouses and the Act now provides that neither is presumed to have survived the other.
- Protection for trustees and executors
There is now additional protection where trustees or executors of a deceased distribute assets to the wrong beneficiary provided that this happened in good faith and the trustees or executors made reasonable enquiries as to the correct beneficiaries.
The changes contained within the Act certainly appear to only be the start of a full scale reform of the laws of succession in Scotland. Significant changes in policy matters are anticipated based on the 2015 Scottish Government consultation paper, particularly in relation to the laws of intestacy (how an estate should be divided when the deceased did not have a Will) and disinheritance.
The current laws of intestacy are quite complex and outdated – the Scottish Government is looking to simplify these by recommending that a surviving spouse should receive the whole estate if there are no children and the children should receive the whole estate if there is no spouse.
The Scottish Government has also recommended simplifying “legal rights” – rights which give a spouse and children a right to claim a proportion of an estate, notwithstanding the terms of the Will. Currently, spouses and children are only able to claim a proportion of a deceased’s net moveable estate (everything which is not land and buildings). However, the Scottish Government is now considering the abolition of the distinction between moveable and heritable property and proposing a new “fixed share” of the whole estate. These changes would have a major effect on how legal rights are calculated, particularly for those whose estates are asset rich but cash poor (such as farm and estate owners).
Lastly, cohabitants can currently only make claims on an estate when the deceased did not have a Will – the Scottish Government has suggested expanding this to include estates where the deceased did have a Will. In light of the new changes and those that are anticipated to take place, reviewing your Will is important to assess whether it clearly reflects your intentions. In particular, consider whether you wish for the children of your beneficiaries to inherit should their parent predecease you and whether your Will or title deeds need to be changed in light of a recent divorce.
It is also worth bearing in mind the new changes that may occur when carrying out current estate planning. A Will is a ‘living’ document governing the most important and sensitive parts of your personal business – it should be regularly reviewed as your circumstances change to ensure that your personal wishes for your estate are properly and tax efficiently implemented.