When an individual dies, their estate must be distributed in accordance with Scottish law. The deceased may have made estate planning a priority in their lifetime and left a will detailing their wishes for succession of their estate which should be carried out by the will executor. In the case that a will has not been left, the distribution process will become more complicated.
Applying for confirmation
Confirmation’ is a legal document from the court giving the executor(s) authority to uplift any money or other property belonging to a deceased person from the holder (such as the bank), and to administer and distribute it according to law.
When dealing with a deceased’s estate, you may be asked to obtain ‘confirmation’ before any money and other property, belonging to the deceased, can be released. In most cases either a bank, building society or insurance company will ask for this.
Check for a will
Sometimes the family of the deceased are aware that they are an executor of a will and will be able to contact the solicitor who helped the deceased to draft the will. If not, an individual may have left details of their will amongst paperwork. An announcement can also be made in a local paper or solicitor’s journal.
For those planning the distribution of estate, be sure to let your family know how to contact the executor of your will and where to find your will, as this will make this process significantly easier for them.
Distribution of an estate if a will exists
When the deceased leaves a will, their estate is known as ‘testate’. The executor of the will is likely to have already been appointed in the will; this is the individual or individuals responsible for winding up the estate and distributing it amongst the beneficiaries.
The first step in the distribution process is ascertaining the value of what the deceased owned or owed at the time of their death via an inventory. Banks, building societies and credit card companies are just a few of the third parties that may have to be contacted by the executor in order to notify them of the deceased’s death and ask for details of their assets. Once complete, the inventory must be signed by the executor.
The executor must apply to the Sheriff Court for a Grant of Confirmation, which gives them the authority to uplift property which belongs to the deceased. The grant of confirmation makes it possible for the executor to sell or transfer assets in accordance with the requests of the deceased in the will, and close bank accounts when money transfer has been completed.
Distribution of an estate if a will does not exist
If the deceased has not made a will, their estate is known as ‘intestate’ and it falls to succession law to determine who is entitled to the estate. Succession law gives certain prior rights and legal rights to the surviving spouse or civil partner and the deceased’s children. Individuals who are entitled to the estate will be entitled to act as executors.
For large estates, worth over £36,000, the executor of the will must be formally appointed via a petition to the Sheriff Court. The individual, or individuals, applying must show the Sheriff Court that they are legally entitled to act as executor.
Once the appointment is finalised, the inventory must be compiled in the same way as with testate estates. Then, the executor must obtain a Bond of Caution from an insurance company, which acts as a guarantee to beneficiaries and creditors of the estate that the Scottish Laws of Succession will be followed to distribute the estate. It acts as protection for the beneficiaries and credits of an estate in the instance that the estate was incorrectly distributed.
Once the Bond of Caution has been obtained, the distribution process remains the same as above; the executor applies for a Grant of Confirmation in order to make selling and transferring property possible, and the estate is distributed in accordance with Scottish Succession Law.
If a will exists, but only accounts for part of an estate
In some instances, an individual may draw up a will to plan for the succession of only parts of their estate. If this is the case, executors must deal with the distribution of the estate both in accordance with the will and Scottish Succession Laws.
How to value the size of your estate
Scotland defines the distribution procedure of an estate according to its size. A small estate is one in which the total value of the estate, including money and property, is £36,000 or less. If the value exceeds this amount, it is classed as a large estate.
In valuing the estate, you should:
– Include interest of bank accounts up to the date of death
– Not deduct debts such as funeral costs and utility bills
– Not deduct balance of mortgage still owed by the deceased
For small estates, the sheriff clerk can assist the executor in the preparation of the inventory. A Bond of Caution is not needed for a small estate. However, a Grant of Confirmation may still be required from the Sheriff Court in order to allow the deceased’s assets to be transferred by the executors.
Tax returns and inheritance tax
If tax is payable on the estate, executors are responsible for filing tax returns to the Sheriff Court at the same time as confirmation forms are submitted. The laws on inheritance tax are somewhat complicated, and establishing whether inheritance tax is owed is best done by a solicitor. For example, the rate of inheritance tax is 40%, but this is only paid on estates valued over £325,000. However, transfers of money or assets made within the seven years prior to death must be added onto the total value of the estate to work out if inheritance tax is payable.
It’s also important to note that inheritance tax is not payable on any money or assets passing to the deceased’s spouse, or a registered charity. There are also certain assets which are ‘relieved’ from inheritance tax, for example Agriculture Relief or Business Relief. In order for executors to take advantage of inheritance tax exemptions or reliefs, they should consult a solicitor.
The benefits of using executory solicitors
Estate planning and distribution can be a complex and time-consuming process, particularly when estates are large, and for family members coping with the loss of a loved one, the extra stress of estate succession is highly unwelcome. Executors therefore often choose to appoint solicitors to act as legal agents, which can remove a great deal of stress from the situation.
Executory solicitors can write to all the deceased’s asset holders to compile the inventory, apply for confirmation, and act as the agent which holds and releases funds during the distribution process. We can also provide legal advice on inheritance tax. By taking the responsibility for all of these tasks, we can ensure that distribution is handled accurately and with minimum stress and worry for the executors.