LAMONTS

    PRIVATE CLIENT & BUSINESS LAW



Estates

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What requires to be done when someone dies?

The death must be registered at the local Registrar's Office. The GP or Hospital who attended the deceased will issue a Medical Certificate of Death which will be required by the Registrar, together with personal details of the deceased. This allows the Registrar to issue an Extract Registered Death Certificate for use by the Funeral Director and Solicitor.

Once the funeral has taken place, collect all paperwork relating to the affairs of the deceased and make arrangements to meet with the Solicitor who will attend to the administration involved in the winding-up of the Estate.

What happens if there is a Will (Testate Estate)?

The Will may contain funeral instructions and it is therefore important to consult the deceased's Solicitor regarding the Will as soon as possible after the death. The Will will specify the appointed Executors whose duty it is to carry out the instructions contained in the Will under the guidance of the professional services of the Solicitor handling the Executry Estate. It is therefore advisable that the Executors instruct a Solicitor to act in the winding-up of the Estate as quickly as possible after the death. The Solicitor will deal with the in-gathering of the Estate funds, determine Estate liabilities and inform the beneficiaries of their entitlement in terms of the Will.

What happens if there is no Will (Intestate Estate)?

The Estate is then referred to as "intestate" and is governed by the Law of Intestate Succession. Certain categories within the family, that is surviving spouse, children and more distant relatives may have rights to which they are entitled to claim in the Estate of the intestate party. A Solicitor will be able to give advice regarding the procedures involved, including the appointment of an Executor who would normally be the closest relative having an interest in the Estate. The Solicitor would prepare and lodge a Petition with the local Sheriff Court and have that party appointed Executor. Given the additional administrative work and the extra time involved in such a procedure, it is certainly advisable that clients do, in fact, make out their Wills and avoid their Estate falling into the category of intestacy.

What is the role of the Executor?

The Executor is an administrator who assists the Solicitor in the compiling of information for the Estate Inventory, i.e., listing of assets and liabilities as at the date of death. The completed Estate Inventory is signed by the Executor in the presence of the Solicitor and where there is a Will in existence, the Inventory and Will are lodged in the local Sheriff Court with the request that the Sheriff Clerk issues a Grant of Confirmation (otherwise known in England as Grant of Probate). This Grant of Confirmation gives the Executor express authority to instruct the Solicitor to uplift the moveable assets of the deceased and to deal with the transfer or sale of heritable property.

When is Inheritance Tax payable?

The nil rate band for inheritance tax is £325,000 per person as at April 2017 and that will remain frozen until April 2021 unless government policy changes. Transfers between spouses or civil partners are exempt for inheritance tax purposes and the nil rate band of £325,000 enjoyed by each individual is transferable between spouses and civil partners. Married couples and those in a Civil Partnership therefore have a combined nil rate band of £650,000 conditional upon the estate of a spouse or civil partner passing to the survivor of that union. The nil rate band is broadly the amount of your Estate which is exempt from Inheritance Tax although there are exceptions and reliefs in addition to the nil rate bands. On 6.4.17 an additional residence nil-rate band [RNRB] of £100,000 was introduced, increasing by £25,000 each year to £175,000 from 6 April 2020, and rising in line with Consumer Price Index annually from 6 April 2021. The RNRB is in addition to the existing nil-rate band of £325,000. The RNRB will be gradually withdrawn, or tapered away, for an estate valued at more than £2 million even if a home is left to direct descendants. The RNRB will be reduced by £1 for every £2 that the value of the estate is more than the £2 million taper threshold.

  • The RNRB will only apply to transfers on death and will be transferable between married couples and civil partners to the extent that it is not used on first death. The RNRB will not be available to use in relation to assets other than the family or main home, nor is it available where the home is left to family members other than direct descendants (i.e. children, step children, foster children, and their direct descendants). The RNRB only applies to one home where it’s both included in your estate and lived in at some stage by you before your death. If you owned more than one home, your personal representatives [executors] can nominate which one should qualify for the RNRB. The home doesn’t have to be a person’s main home or have been lived in, or owned, for a minimum period. It can be any property that you lived in as long as it’s included in your estate on death. A property that you owned, but never lived in, such as a buy-to-let property, won’t be eligible for the RNRB.
  • For married couples and civil partners any unused RNRB can be transferred when the surviving spouse or civil partner dies after 5 April 2017. It doesn’t matter when the first of the couple died, even if the death occurred before the RNRB was available. The RNRB can’t be transferred to a ‘partner’ who’s not the spouse or civil partner of the deceased. This is still true even if they lived together and jointly owned the home.
  • If the RNRB wasn’t fully used when the first of the couple died, the unused percentage can be transferred to the surviving spouse or civil partner’s estate. This is transferred in a similar way to the nil rate band.The RNRB will also be available when an individual downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil rate band, are passed on death to direct descendants. This should avoid the unintended consequence of persons continuing to hold onto large homes to retain the benefit of the new Inheritance Tax rules.

There are many other exemptions and reliefs within this complex area of taxation and taking into account only the nil rate band and the RNRB is an over simplification of this area of tax law. It is not possible to cover in detail within the confines of this section all aspects in relation to inheritance tax. Needless to say, clients should always monitor the extent of their assets and should consult with Lamonts in relation to possible inheritance tax liability and possible mitigation measures which may be available. The drafting of even a basic Will can often assist in mitigating inheritance tax liability.

What is the charge for winding-up an Estate?

The charges involved will broadly depend on the size of the Estate, the amount of the work carried out in the administration of the Estate, the responsibility involved and the complexity of the Estate. The solicitor attending to your file will charge for time expended, together with additional charges in relation to letters/emails etc, and is also allowed payment based on the amount of funds handled (often referred to by law accountants or auditors as ‘a commission’). Executry files are usually submitted by us to either the Auditor of the local Sheriff Court where possible, or to a private Law Accountant, for the assessing of charges.

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