Succession: Scottish Prior and Legal rights: Example of legal rights calculations - scenario 2
In this scenario Molly has not discharged (IHTM12229) her legal rights (IHTM12221) during George’s lifetime and accepts the testamentary provisions in her favour in George’s Will. Mary renounces her entitlement shortly after George’s death. John claims legal rights and does not have to collate (IHTM12228) his £150,000 gift. No decision can be taken for Jack and Jill at this stage, but an election (IHTM35215) under IHTA84/S147 (3) is received for the application of IHTA84/S147 (4). (IHTM35213)
The consequences of this are that as Molly was entitled to claim legal rights, the fund available for the calculation and settlement of legitim (IHTM12221) claims is £800,000, being a third of the moveable estate. The £150,000 gift to John is left out of the calculation to establish how much each claimant is due.
This fund is divisible among those entitled to claim legitim - namely Mary, John, Jack and Jill. Mary and John are due a third each while Jack and Jill share the remaining third equally.
John is due a third of £800,000 (£266,667), in settlement of his legitim claim.
Mary is also due a third, amounting to £266,667, as shown, but as she has renounced her entitlement, this amount remains part of the estate divisible according to the provisions of the Will.
Jack and Jill are entitled to share equally the remaining third share, amounting to £266,666, but in view of the election that S147(4) should apply, the tax calculation is prepared on the basis that they have renounced their claims, subject to review (and, if necessary, revision of the tax charge) after Jack and Jill reach 18.
The IHT position on George’s death in this scenario would be broadly as follows:
- Lifetime gift to John Chargeable £150,000
- George’s Estate Legacy (free of tax) to Joan Chargeable £100,000
- Legitim claim John (bearing own tax) Chargeable £266,667
George’s father’s trust would be aggregable with the estate, the husbands’ fund of the ante nuptial settlement would be covered by spouse or civil partner exemption.
The calculations above ignore the consequences of interaction (IHTM26101) and grossing up (IHTM26001). Both are applied after values payable as a consequence of the legal rights claims and discharges have been determined.