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Q: My wife and I own a company which we wish our daughter to inherit, as she assists us with running it. Our son has no involvement with the business. Would he be entitled to make a claim on our estates? If so, would the company need to be sold to fund a claim?

A: In Scotland a person’s spouse and children are entitled to ‘legal rights’ to prevent them from being completely disinherited on death. This means your son could make a claim on your estate.

Presently, your children could claim one third (one sixth each, since you have two children) of your ‘net moveable estate’. This increases to one half if there is no surviving spouse. Net moveable estate comprises the net value of your estate, less the value of any land and buildings. However, if the company owns land and buildings, their value will form part of your shares and will be treated as moveable estate.

Legal rights do not have to be claimed. It is possible for children to discharge these during their parents’ lifetimes. I suggest having a conversation with both of your children concerning business succession. If you make it clear you are not seeking to disinherit your son, he may be quite happy to discharge his legal rights. Perhaps there are other assets that he could inherit instead? Alternatively, you could consider insurance to cover the risk of a claim.

Planning is essential to ensure the company does not have to be sold. This area of law is complex and is currently under review. While it is unclear what any future legal rights replacement may look like, it has been strongly suggested there would be no distinction made between moveable and non-moveable property. You should seek legal advice so that your situation can be discussed fully. The article is for information purposes only and should not be interpreted as investment advice.