Disinheriting your children: Ilott v Mitson, succession policy and Scottish law reform

I thought I might take advantage of the surprising (to me anyway) media interest in the English Court of Appeal decision in Ilott v Mitson to raise a couple of questions about the current Scottish succession consultation. The key question here is: should parents be able to disinherit their children? Your answer could be: (a) Always; (b) Never; or (c) the very lawyerish In Certain Circumstances.

England plumps for option (c). The default position is that a parent can disinherit their child if they so wish. However, the Inheritance (Provision for Family and Dependants) Act 1975, ss1-2 allows a child to ask the court for money from her parent’s estate where “reasonable financial provision” has not been made for her. The Act lists various factors the court should take into account in determining whether “reasonable financial provision” has been made, and if not, how much money the child should receive to make up for it. That list includes the child’s current and future financial needs and resources, and the needs and resources of any competing beneficiary.

In Ilott, the appellant was the adult child of the deceased Mrs Jackson. Mother and daughter had been estranged for 26 years prior to the death, three attempts at reconciliation proving unsuccessful. Mrs Jackson had left her £486, 000 estate almost entirely to three charities with which she had no particular connection in life – the Blue Cross Animal Welfare Charity, the RSPB and the RSPCA. Her daughter, who by this point had raised five children, lived with her husband in a council house, dependent on benefits.

Awards under the 1975 Act tend to be made to a disinherited child where: (i) the child is under the age of majority on her parent’s death; (b) an adult child has remained dependent on her parent as a result of disability, or; (c) a particular moral obligation is deemed to have arisen, for example, where an adult child has taken care of her parent in old age. The fact that none of these circumstances arose in the Ilott case seems to be the source of the consternation about the decision in the media reports, but the legislation does not restrict awards to these circumstances. The court found an award to Mrs Ilott “reasonable” because of her straitened financial situation, which seemed likely only to deteriorate as she grew older, in combination with the fact the competing beneficiaries – the charities – had no needs and resources to be taken into account. The court did not consider it relevant that part of Mrs Jackson’s estate was made up of money inherited from the appellant’s father on his death, and gave little weight to the fact that Mrs Jackson had been (in the finding of the judge at first instance) “unreasonable, capricious and harsh”. According to Arden LJ, the wishes of the deceased, although obviously relevant, are limited by the discretion Parliament chose to give to the court when introducing the 1975 Act.

The interest of all this for Scotland is that the Government is currently consulting on whether to remove the protection from disinheritance that children in Scotland have enjoyed since the 1300s. As I explained in more detail in another post, children’s current non-discretionary entitlement to one third of their deceased parent’s moveable estate could be replaced, either by a non-discretionary “legal share” of 25% of what they would have received on intestacy, or by an entirely discretionary award available only to dependent children under 18 (or under 25 in full-time education or training.)

I recently had a discussion with my Glasgow colleagues @dotreid, @culbokster, @jilljrobbie and @stephen_bogle about responses to the consultation paper. We asked a lot of the same questions that the media have been asking in relation to the Ilott decision. When should children be protected (or not)? Why? What about the wishes of the deceased? What does this mean for our understanding of “family”? What about intergenerational social justice? (I haven’t seen the media ask that last question yet, to be fair.)

The consensus in our discussion was that there are substantial policy issues surrounding reform of the law of succession that have not been addressed or even acknowledged in the consultation paper. Family law policy in Scotland and the UK recently tends towards the idea that law should facilitate the choice to enter or leave intimate adult relationships, but the parent/child bond is for life. Current low wages and high housing costs mean even fully employed adult children will struggle to save the deposit required to buy a house – does intergenerational fairness require that parents who have benefitted share the wealth of the house price bubble? If adult children can always inherit, should they also take responsibility for the care of elderly parents, perhaps relieving some of the financial burden on the state? Should our succession reforms aim towards social justice more broadly in the same way as our land reform policy arguably does, making it more difficult for wealth to be concentrated in the hands of a small number of families? Should our succession policy be more actively pro-business, taking care to ensure that, whatever the rules, family businesses should not have to be dismembered to ensure satisfaction of inheritance claims?

Whatever view you take on questions like these, it’s hard to avoid the fact that succession policy is an acutely political issue. And yet, avoid it the consultation paper does. The reforms are cast as essentially technical, aiming to simplify the law and make it “fair”, that most nebulous of concepts. It seems unlikely that Mrs Jackson would find the Court of Appeal’s decision fair, but in Scotland, Mrs Ilott’s entitlement would have been automatic.

I think my response to the consultation paper is likely to include a preamble raising this broader policy point: what are we even trying to do here? An answer to that question might help us decide whether Mrs Ilott was deserving, or Mrs Jackson (and the RSPB etc) disrespected.

Scottish Government Consultation on the Law of Succession – Part 2

Earlier this week, I blogged about the proposals on intestacy and protection from disinheritance in the Scottish Government’s Consultation on the Law of Succession. The third major area covered in the consultation is succession rights of cohabitants.

Ten years ago, cohabitants in Scotland had no rights in respect of the estate of their deceased partner (subject to a couple of caveats that we don’t need to be concerned with here.) The Family Law (Scotland) Act 2006, s 29 enables a cohabitant (defined in s 25) to apply to court for a share of an intestate deceased’s estate. The section lists some factors the court should take into account when considering whether to make an award, and specifies that the total amount cannot exceed what a spouse would have received in the same circumstances. What the section does not do is clarify the purpose the court should be trying to achieve when making its decision. Should it be aiming to protecting financially vulnerable bereaved cohabitants? Or making sure contributions to the relationship by the cohabitant are repaid? Should the court be trying to do what the deceased would have wanted? It’s not clear. Sheriff Janys Scott QC pointed out the difficulty here in Windram, applicant, a case where the deceased left behind both a long-term cohabitant and a couple of kids. The greater the award to the cohabitant, the less the children would receive, so while it’s fine to say any award should be “fair”, the question is “fair to whom”?

The Commission propose repealing s 29 and replacing it with an entirely new two-stage process. At stage one, the court will determine whether the claimant was cohabiting with the deceased based on a list of indicative criteria – whether they shared a home, the stability of the relationship, the existence or not of a sexual relationship, whether they raised children together and whether they appeared to others to be a couple. If the claimant passes this test, the court will then determine the share of the estate they should receive as a percentage of what a surviving spouse would have received in the same circumstances. The “appropriate percentage” will be assessed based on three factors – the length of the cohabitation, the nature of the couple’s interdependence during that time and the contribution made by the surviving cohabitant to their life together. Where a couple have cohabited for 25 years, run a business together and raised two children (as in the Windram case), the cohabitant would receive 100% of what a spouse would have received in the same circumstances. In a shorter relationship, where perhaps the couple kept their finances largely separate and did not parent together, the percentage would likely be much less. Some examples are given in the consultation paper, and more in the original Commission report (pages 71-73).

The Commission also suggested that this right should be available whether the deceased left a will or not, which is a significant change from the current position.

I am generally positive about the Commission’s recommendations here, so much so that I have encouraged New Zealand to adopt a similar approach. (They don’t seem to have taken me up on that so far, oddly.) There is certainly space to argue about the particular factors to be taken into account at both stages of the proposed system, but the “appropriate percentage” idea would introduce much greater clarity into the law whilst still allowing for some exercise of discretion, inevitably necessary when dealing with the huge variety of relationships that fall under the banner of “cohabitation”. It is worth bearing in mind that in most situations of this type, the impartial judgment of the court will not be employed. Claims will actually be resolved “in the shadow of the law” by parties or lawyers negotiating a settlement. More defined parameters as to what a cohabitant can expect to receive are especially welcome from that perspective. I am also lucky enough to be supervising a research student, Ellyn Fyvie, who is writing her Masters thesis on succession rights of cohabitants at the moment – her work will be a great help in figuring out my own views on this, although I will be encouraging her to submit a consultation response of her own.

Scottish Government Consultation on the Law of Succession – Part 1

The launch of the Scottish Government’s Consultation on the Law of Succession was somewhat overshadowed by the Land Reform (Scotland) Bill appearing earlier last week (on which see discussion here and here). Succession reform has been on the agenda for a long time, however, with the proposals contained in the consultation paper dating back to a Scottish Law Commission Report from 2009. Although some of those proposals found their way into a fairly technical Succession (Scotland) Bill introduced earlier in June, the meat of the Commission report has been held over until now. The reforms suggested by the Commission are in some ways considerably more radical than anything in the current land reform discussion, aiming as they do to sweep away legal rules that have been in place since the 1300s. Laws of that vintage might usually be arcane and unheard of in practice, but for succession rules, nothing could be further from the truth. Unless our parents die penniless, and we do the same ourselves, succession is the one area of law that will inevitably touch all of our lives.

So what is proposed? The consultation paper sets out three main areas of reform, with a gallimaufry of “additional matters” covered in chapter 5. This blog post will focus on the first two (intestate succession and protection from disinheritance), with consideration of the third area (succession rights for cohabitants) to follow in a later post.

First up is potential reform of the law on intestate succession – in other words, what happens to someone’s property when they die without making a will. The headline proposal is that the distinction made between inheritance rights over land/buildings and other types of property should be removed, so that succession would no longer be “property-specific”. This is significant in land reform terms since, under current rules, land/buildings do not form part of the property over which all children have protected inheritance rights: as Lallands Peat Worrier put it, there is nothing to stop a father leaving his country estate to his first son, who leaves it in turn to his first son, and so on forever. Curiously, the consultation paper makes no mention of the land reform agenda in this connection, the proposal being tied rather to the broader policy aims of simplifying succession rules and achieving a “fair” outcome for all family members.

If the Commission’s proposals are accepted, the new rules would be:

• Where someone dies leaving a spouse (or civil partner, please take that as read for the rest of the post) but no children (or grandchildren, great-grandchildren etc) , the spouse inherits everything;
• Where someone dies leaving children but no spouse, the children inherit everything;
• Where someone dies leaving a spouse AND children, the spouse receives a threshold value of property, and anything remaining after that is split in two, with half going to the spouse, and the other half divided between the children.

The value of the “threshold sum” is a matter of some discussion in the paper, with suggested figures ranging from a minimum of £335,000 to a maximum of £650,000, justified by reference to recent Scottish house prices and the current regime of prior rights claimable by a spouse in intestacy. The government support the Law Commission policy objective that a surviving spouse should generally be able to retain the family home (also an objective of current succession law), and some time is spent considering the correct approach where the family home is worth more than the threshold sum. Since 94% of Scottish properties are valued lower than even the minimum proposed threshold sum, however, and many of those worth more than £335,000 will actually be owned in common by spouses, the number of estates where the threshold sum prevents the surviving spouse remaining in the family home is likely to be extremely small.

The second main area of consultation relates to protection from disinheritance. This is relevant where the deceased has left a will, but it contains no provision (or relatively meagre provision) for their spouse and/or children. At present, the spouse of a deceased is always entitled to inherit at least one third of the moveable property (anything that isn’t land and buildings) even where the deceased has specifically excluded the spouse in the will. This proportion rises to one half of the moveable property if there are no surviving children. The same rules apply for children – entitled to share a third of the moveables as the “bairn’s part”, rising to half if there is no surviving spouse, regardless of their exclusion from the will.

Following on from the proposals on intestacy, the Commission again propose that succession rights here should no longer be property-specific. A surviving spouse would instead be entitled to a “legal share”, calculated as 25% of what they would have received on intestacy. So far, so non-controversial, assuming you are on board with removing the property-specific aspect of inheritance claims (a bold assumption.) In respect of children, however, there is more scope for argument. The Commission offer two models, without offering an opinion on which is preferred.

In option one, children, like spouses, would be entitled to a “legal share” of 25% of what they would have received on intestacy. Two potential problems have been raised here. Agricultural stakeholders have pointed out that where the huge majority of a deceased’s estate is made up of one asset, such as a farm, parcels of land may need to be sold off to pay a legal share claim, and this may compromise the viability of the business as a whole. This difficulty arises from the proposed abolition of the property-specific nature of children’s inheritance rights. Specific consideration is given to this issue in chapter 3A of the paper, including consultation on whether agricultural units should be exempted from the legal share regime. The other potential problem is that under the proposed new intestacy rules, where the deceased’s property as a whole is worth less than the threshold sum, the legal share to which children are entitled would amount to zero. Children could effectively be disinherited.

That concern is amplified in relation to the considerably more radical option two. Here, the inheritance rights of adult children would be abolished entirely, with dependent children (those under 18, or under 25 in full-time education or training) given a right to claim a capital sum calculated on the basis of what is required to maintain that child until they are no longer dependent. In other words, the claim would amount to posthumous payment of a parent’s obligation to aliment their children under the Family Law (Scotland) Act 1985. Straightforward disinheritance of adult children as a matter of law is a significant break with Scots legal tradition, and this proposal caused some consternation when the Commission’s report was originally published. The government adopt the Commission’s argument that what is needed here is a balance between protection of the family and respect for the autonomy of a deceased to do what he likes with his property after death. How much respect should be accorded to each of these objectives is primarily a matter of political debate, although it might be worth noting that anecdotally, in my discussions of these proposals with students since 2009, virtually-adult children usually support the right of parents to do what they want with their money – it is the parents I have discussed it with who are horrified by the idea of children being disinherited entirely just because they have “grown up”.

The consultation is open until Friday 18^th September, for those of you looking for some way to occupy yourself during the long summer evenings. There is quite a lot of interest in the topic from my colleagues at Glasgow – I imagine we’ll be submitting a response (or maybe several).