In 2015 the Scottish Government published a consultation on succession law in Scotland. It’s generally agreed that the rules need to be updated, and many of the proposed changes on intestacy, disinheritance and cohabitants will usefully simplify the current law.
However, some proposals could have serious implications for the rural sector. Put very simply, the problem arises from a recommendation to remove the distinction between heritable property (land and buildings) and moveable property (livestock, machinery and money).
At present, if someone dies, their children and spouse (or civil partner) have a claim on the moveable property in the estate, their ‘legal rights’, regardless of the terms of the Will. But they have no claim on the land and buildings, meaning these can be passed on intact to one family member.
With the distinction between heritable and moveable property removed, the legal rights of the spouse and children would include the value of land and buildings as well. For some families, this could be the difference between a claim to tens of thousands and hundreds of thousands.
If there are insufficient assets available to cover the legal rights, a farm might have to be broken up to pay the claims. Or a farm might have to support multiple owners, making it financially unviable and causing family fallouts. Though there has been a call to exempt agricultural units from the proposed arrangements, the Scottish Law Commission recommended against the exemption.
At present, the proposals are not yet law but they are expected to be included in the next phase of the Succession (Scotland) Bill. The impact of the changes on a farming family will vary depending on the circumstances of each family but if the difficult discussions haven’t been had yet, they are likely to become more difficult in the future.
The changes proposed will remove the testamentary freedom of farmers and landowners, and may necessitate new provisions or restructuring of the family business. However carefully you have planned your current succession arrangements for your farm or estate, they may be open to challenge if the changes come into force.
We therefore recommend keeping a close eye on developments in the new law, and taking advice on whether any changes will affect your family. It’s not just the progress of the Land Reform Bill that farmers and landowners need to follow.
