The immediate emotional turmoil of losing a loved one is always testing. The grieving process can challenge even the most stoic among us but, in time, we can look back on the fond memories of a dearly departed. While we can learn to manage the emotional turmoil of losing someone close to us, the administrative exercise of dealing with an estate presents many with an ongoing and unwelcome challenge. Most will instruct a solicitor, some choose to go it alone. Here, I will set out the 3 key regimes for administering an estate.
If the total value of the deceased’s estate is less than £36,000 then the executor can contact the local sheriff clerk’s office for assistance in preparing the inventory of the estate, which is, simply put, a list of the assets and liabilities of an estate. In calculating the value of the estate for the purpose of determining whether it is in fact a small estate, the deceased’s liabilities should not be included. While you should always consider seeking legal advice, a small estate may not require the executor to instruct a solicitor and the process will be outlined by the local sheriff clerk.
Large estate with a will (a “testate” estate)
If the estate’s value exceeds £36,000 then the option above is not available to the executors. While there is no legal obligation to seek legal advice in administering an estate, it should always be remembered that executors are legally responsible for any errors or omissions.
The first stage is to find out the terms of the will. So long as the will is valid and the clauses are not contrary to public policy or illegal, it will guide the distribution of assets at the end of the administration process. Of course, the procedure involved is not as easy as closing bank accounts, selling the house and writing cheques to those mentioned as beneficiaries in the will.
Once the face value of the estate is clear, the executor must consider any gifts made by the deceased during their lifetime. At this stage, an executor will visit the HMRC website and look for the guidance notes on gift allowances, the transferable nil rate band, the residence nil rate band, potentially exempt transfers, chargeable lifetime transfers, gifts with reservation of benefit, and… the list goes on. In order to complete the various forms required for an application for Confirmation, a solid understanding of the various inheritance tax reliefs is usually required.
Once you have untangled the knot created by a lifetime of acquiring, disposing and gifting of assets, you can complete the forms, apply to the court and expect a grant of Confirmation in your favour. Well, not quite. You will find that the standards of those reviewing such applications are fastidious. Slight errors will result in your application being returned and typically the source of errors is simply not knowing the desired wording of certain sections.
In the event that Confirmation is granted, you must then write to the various asset holders and begin to draw down funds. Thereafter, you will settle any lifetime tax due to date of death and also calculate the estate’s tax liability. Once you have distributed the assets, settled the debts and tax liability, you may wind up the estate.
Large estate without a will (an “intestate” estate)
Here we must deal with the laws of intestate succession or intestacy. The bare facts of the requirement to apply for Confirmation are the same but, unfortunately, dying without a will leaves layers of complexity for the DIY executor to peel away.
The person wishing to be an executor must request permission from the local sheriff court to act as executor. Once granted, the executor will apply for an insurance policy known as a Bond of Caution (pronounced “Kay-shun”) and thereafter, the executor must begin to complete the application for Confirmation. If all goes well and Confirmation is granted without issue, the observant readers will realise a critical issue: in the absence of a will, who inherits what?
In such a circumstance, the division of the estate is controlled by an Act of Parliament, namely The Succession (Scotland) Act 1964. The division is complex and quite often not entirely logical which can lead to significant delays and administrative costs. Yet another good reason for ensuring that you have a professionally drafted will in place!
In addition, unmarried couples have no automatic right to inherit under the laws of intestate succession. Any such claim for inheritance by an unmarried partner of a deceased person is dealt with by application to the court.
So, you’ve made it this far, which means you would like an answer to the problem of administering the estate. Clearly, the solution to the problem of administering a loved one’s estate is to appoint a solicitor to advise you. We offer expert professional and customer-centric advice that balances practicality with empathy.
In order to protect yourself from leaving behind a complex estate without a will to guide your executors, you should contact our Private Client department to arrange a full review. We take into account your own set of circumstances to design a legal and financial solution around you. In collaboration with our team of financial advisers, we will present you with a solution that exemplifies holistic thinking and reaches beyond the confines of the transaction.
Whether you would like our assistance with the administration of an estate or wish to discuss your own goals, please contact our Private Client team in Edinburgh, Glasgow or North Berwick.
Direct Dial: 0131 285 4804
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.