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Legal rights claim

Our client approached us to consider how best to deal with his family succession position, including the passing of his farming enterprise to his farming daughter.  The client’s wife had passed away a number of years ago, and as part of the discussion, it became apparent that the client had a son that he no longer had any contact with and was concerned that he would be able to make a claim on the assets that he wanted to pass onto his daughter.

How we helped our client

The client’s assets were as follows:

Heritable assets

Heritable assets total£350,000

Moveable assets

Partnership current account£200,000
Partnership capital account£750,000 (farmland)
Cash at bank£50,000
Moveable assets total£1,000,000
Combined total£1,350,000

As the rules stand the heritable assets would be able to pass to the daughter without any claim from her estranged brother, however this is not the case with the moveable assets. The brother would be able to make a legal rights claim on the value of the moveable property of 25% of the value or £250,000 (50% of the children’s proportion of 50%.)

Our client did not want his daughter to have to sell any land or borrow money to pay out her brother, nor did he want to pass over the assets to his daughter at this point in time.  We therefore considered our options, and along with help from his financial advisor, took out a life assurance policy to the value of the legal rights claim that the son could make. The policy had a relatively low cost and allowed our client to have peace of mind that his daughter would be able to take on the business without any additional burdens.

For more information or if you have any succession planning issues, please contact the Private Client Taxperts.


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