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Significant changes to Scottish Succession law are on the way with the enactment of the Succession (Scotland) Act 2016 (“the 2016 Act”) due to come fully into force on 1 November 2016. One area of reform relates to the effect of divorce on Wills.  Here, we summarise the changes and also examine other common succession issues arising for clients who have been married more than once.

Where we refer to the term “marriage”, this includes Civil Partnerships and “divorce” includes the dissolution of Civil Partnerships.

Succession (Scotland) Act 2016

Under current Scots law, where a Will makes provision for a spouse and the couple subsequently divorce, any benefit or legacies given to the former spouse remain valid and enforceable, notwithstanding the divorce.

Section 1 of the 2016 Act changes this position so that following a divorce, the former spouse will be treated as having died before the person making the Will, meaning that any benefits or legacies given to the former spouse will effectively be revoked and will pass elsewhere in accordance with the remaining terms of the Will.  Equally, if a former spouse has been named as an executor under the Will, this appointment will become ineffective upon divorce.  There is one exception to this change – any appointment of the surviving spouse as a guardian for children will remain effective post-divorce.

Existing Wills must be checked to ensure they include suitable substitute beneficiaries in order to prevent a partial intestacy, with default legal rules then potentially passing the estate to persons the testator may not have intended to benefit.

Alternatively, a person may wish the terms of his or her Will regarding any provision for a former spouse to continue, regardless of a divorce.  In such a case, it is essential that the Will expressly confirms this.

Second Marriages

If, following divorce, a client remarries, he or she may be faced with the dilemma of how to ensure that the new spouse is properly looked after while also ensuring that any children’s inheritance is safeguarded.
 
An effective way of supporting the new spouse while protecting the children’s inheritance is provided through the use of trusts.  For example, a Liferent Trust can be established under the Will to provide a surviving spouse with an entitlement to income generated by the estate and the use of any property, such as the family home. The Trust can remain in place for the surviving spouse’s lifetime, and on the death of the surviving spouse the trust fund could pass to the children from the previous relationship.  If the trust is flexibly drafted the trustees may also be given the power to advance capital from the trust to either the surviving spouse, or the children.

Clients are sometimes concerned that if legacies or lifetime gifts are passed to a child of their first marriage, then the child may share their gift with their other parent, contrary to the wishes of the client.  Successive Trusts may be considered in this situation to hedge against the possibility of a former spouse benefitting from the individual’s estate, by preventing assets from passing outright to the children.

Structuring Wills in such a way does not remove the possibility that the children will instead opt to claim their Legal Rights entitlements instead of any benefits given to them under a Will. Where the deceased is survived by a spouse, the children would collectively be entitled to a one-third share of the net moveable estate (being generally all assets after debts are deducted, excluding land and buildings).  The risk therefore remains that the children may claim their Legal Rights and then share their entitlements with their other parent. If this is a concern, consideration will need to be made to minimising the children’s Legal Rights entitlements, perhaps through a combination of lifetime gifting, negotiation and Will planning.  It should be noted that the Scottish Government is currently consulting on reform of Legal Rights, potentially with a view to extending them to land and buildings. The implications of such reform are likely to be wide-reaching.  We are monitoring this situation closely and will provide updates as soon as anything further is known.

Cohabitation

It is becoming increasingly popular for couples to live together without getting married, whether as an alternative to marriage or as a precursor.  Where clients elect to cohabit, whether or not they intend to marry in the future, an additional set of considerations arise.

Unlike marriage, cohabiting couples are not afforded the same level of protection as married couples when it comes to succession. The surviving cohabitant has no automatic rights on the estate.  He or she can apply to the Court for a share of the deceased’s estate, but only in the event that the deceased had not made a Will. The Court has complete discretion on whether to make an award and may consider various factors including the size of the estate and the extent of any other claims/rights on the estate before making a decision.  The option to apply to the court is not available if the deceased died with a Will and putting in place a Will is therefore crucial if cohabiting couples wish to ensure that their estates pass in accordance with their wishes, whether this involves making provision for each other, or otherwise.

Conclusion

The 2016 Act brings many welcome changes to the law of Succession in Scotland. The best way to take advantage of these changes is to take advice, particularly in the context of a relationship breakdown.  Legal issues surrounding such arrangements can often be complex and so obtaining specialist legal advice is essential.  If you wish to discuss any aspect of this in more detail, please contact any member of Stronachs’ Private Client Team.

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