Wills & Executries

Introduction

Wills and ExecutriesThe trust and executry department within Peterkins Aberdeen office comprises one partner, a consultant, an estates manager, a legal executive, a law accountant and support staff. Their combined skills and extensive experience ensure clients receive the highest quality advice reinforced by an efficient yet friendly service.

Wills

"You can take steps in your Will to make sure that there is as little Inheritance Tax payable as possible thus leaving more for your beneficiaries."

A Will, properly draw up by a solicitor, ensures that on your death your estate will be dealt with in accordance with your wishes with the minimum of delay or distress and without unnecessary expense. There are many reasons why everyone should make a Will. These are just a few:

You can ensure that your estate will pass to your intended beneficiaries. It is a popular belief, for example, that on the death of a husband his whole estate will pass automatically to his wife. Not necessarily so! On intestacy (which is where there is no Will) a widow has certain prior and legal rights but after they are paid the remainder of the estate will go to any children or even to parents and siblings of the deceased in preference to the widow.

In your Will you will appoint an Executor or Executors of your choice. Your Executors may be family, your solicitor or someone else. It is the duty of the Executors to see that the terms of the Will are carried out and to deal with any legal formalities. If you have not made a Will an Executor will have to be appointed by the court. This will incur delay and expense that can be avoided if there is a Will.

Where your beneficiaries are children you can incorporate in your Will Trust provisions to deal with their shares until they come of age.

You can take steps in your Will to make sure that there is as little Inheritance Tax payable as possible thus leaving more for your beneficiaries.

You can appoint legal guardians for your children.

If you do not make a will, and there is no surviving spouse, it will be necessary to obtain a Bond of Caution - a type of insurance indemnity - before the estate can be administered. The single premium for this is usually several hundred pounds.

If you marry or divorce, under Scots Law, your existing Will remains valid. It is therefore important to update your Will if circumstances change.

Executries

Whether or not there is a Will, when someone dies there are legal procedures to be followed in dealing with his or her estate. Where there is no Will, and therefore no Executor appointed, the Court will appoint an Executor, called an Executor Dative. An Executor appointed by a Will is known as an Executor Nominate. Both types of Executor have legal obligations in dealing with a deceased person's estate. It is important that they take advice from a solicitor.

The Executors' duties include:

In most cases applying to the local Sheriff Court for a grant of Confirmation.

Calculating and paying any Inheritance Tax on the estate.

Making sure any Income Tax matters up to the date of death are dealt with.

Ingathering all the estate and paying the deceased's funeral expenses and any debts. Should the Executor omit to do so he or she may be personally liable for such debts.

Settling any claims for legal rights. Under Scots Law, irrespective of the terms of any Will, a surviving spouse and children are entitled to legal rights out of the estate.

Settling the remainder of the estate by paying or transferring to the beneficiaries in terms of the will, or if there is no will, in terms of intestate succession.

Trusts

Trusts can be set up by Wills as a mechanism to deal with a person's estate after death or can be set up to operate during the creator's lifetime.

Reasons for the establishment of a trust include:

  1. To provide for children while they are under age
  2. To preserve the family wealth
  3. To provide an income for a person while preserving the capital to pass to another person at a later date
  4. To transfer wealth in a tax efficient way
  5. To provide for people who are incapacitated
  6. To administer funds for charitable purposes

While many people think that establishing trusts is something only of interest to the very wealthy, there are in fact many situations where families with quite modest assets might find them advantageous. We have wide experience of creating and administering various types of trust. The most usual types of trust are:

Liferent Trusts

Liferent trusts allow a beneficiary the use of or income from the trust estate during his or her lifetime. For example, you might, on your death, want your spouse to be able to live in your house for the rest of his or her life but also want to ensure that at the end of the day it passes to your children. The way to deal with this is to create a liferent trust in your Will. There is no inheritance tax saving with this type of trust.

Discretionary Trusts

In a discretionary trust your trustees decide who should benefit from the assets allocated to the trust. Discretionary trusts can be built into a Will in a number of ways, for example:

  1. Nil rate band Discretionary Trust
    The Will contains a bequest in trust of the Inheritance Tax nil rate threshold usually for the benefit of the surviving spouse and children. This means that the fund will be available to the spouse should he or she need it but if not it can be passed to the children in a tax efficient way.
  2. Two Year Discretionary Trust
    This gives the trustees a period of two years within the date of death to decide how to apportion an estate among beneficiaries. This allows them to take into account the circumstances of the beneficiaries at the time and the tax situation then prevailing where these cannot be anticipated at the time the Will is made.

Bereaved Minor Trusts

These are created by a lifetime trust or by a Will for the provision of beneficiaries under the age of 18. Provided strict criteria are met these trusts attract certain tax advantages.

Charitable Trusts

Various types of trust may be set up for charitable purposes. Trusts that have charitable status have many tax advantages, but also many legal obligations under recent legislation. Peterkins have substantial experience in dealing with the administrative, fiscal and legal requirements incurred by such trusts.

Marcia Johnstone 01224 428258 mj@peterkins.com
and
Michael Crawford 01224 428257 mgc@peterkins.com

Inheritance Tax

Inheritance Tax (IHT) is a combination of a gift tax and a death duty. It can apply to gifts made by an individual during his lifetime and to his estate on death. The threshold at which Inheritance Tax (IHT) becomes payable is changed annually in the Budget. The threshold for the tax year 2010/2011 is £325,000 and any estate larger than this may be subject to tax, currently 40%. While this may seem a large sum, the combination of owning a house and life assurance policies alone means that the estate of many people of quite average means may become subject to the tax.

With good planning, however, there are many ways to reduce the liability of an estate to IHT. Many pension and life assurance policies, for example, can be written in trust so that any lump sum benefits fall outwith the deceased's estate and are therefore free of IHT. Also, gifts made during a person's lifetime, provided certain conditions are met, are "potentially exempt transfers" (PETs). These gifts become actually exempt only if the donor survives for seven years, although life insurance may be available to protect the estate against the cost in the event of an early death.

There are various other exemptions that may be part of Inheritance Tax planning, the main ones are:

  • Gifts (or legacies) to spouse
  • Normal expenditure out of income
  • £250 small gifts exemption
  • Annual £3,000 exemption
  • Exemption for marriage gifts
  • Gifts (or legacies) to charities

50% and 100% relief from IHT is also available for both business property (business property relief) and agricultural property (agricultural property relief) where certain conditions are satisfied.

It is also useful to consider a Deed of Variation or Deed of Family Arrangement after a person's death to vary the terms of a Will in order to take advantage of available exemptions.

When you are considering your tax affairs, or those of a trust that you are setting up, you should also bear in mind Income Tax and Capital Gains Tax, (CGT), both of which are relevant during your lifetime as well as after it. Good professional advice is essential.

Power of Attorney

By granting a Power of Attorney in favour of a solicitor or a family member you can ensure that your affairs are managed efficiently should the day arrive when, due to mental or physical incapacity, you are no longer able to do things for yourself. The time to grant a Power of Attorney is while you are still fit and able.

Peterkins look after many clients' affairs where we have a Power of Attorney ensuring that their investments are looked after, tax returns made and bills paid. Powers of Attorney may also be used to allow a representative to act for you in your absence, e.g., if you are about to be posted abroad for a long period, or even if you are going on holiday.

The law concerning Powers of Attorney was radically amended by the Adults with Incapacity (Scotland) Act 2000. Powers of Attorney, granted after 2nd April 2001 will only survive the incapability of the granter provided they comply with the requirements of the Act.

Charity Will Month

Do you have a Will?

Is your Will up to date?

For one month only, during November 2016, we are offering people the opportunity to have a simple Will professionally drawn up and we will not be earning a penny.

All we will ask for is a donation* in aid of our 2 nominated charities – Charlie House and Mrs Murrays Cat & Dog Home.

Charlie House is a new, locally based childrens's charity which engages in activities and projects to support children with complex disabilities and life limiting conditions. By supporting them you will help many local children with chronic or life limiting conditions engage in new activities, make friends and socialise. More information can be found at www.charliehouse.org.uk.

Mrs Murrays Cat & Dog Home are another locally based charity, founded in 1889 by Mrs Susan Murray, that care for lost and stray dogs and cats, and help rehome animals whose owners can no longer care for them. The home sometimes also caters for a variety of small animals who have been abandoned and need to be placed in loving new homes. It is the only place of it’s kind in the North East and each year over 1500 animals pass through their gates. Again more information can be found at www.mrsmurrays.co.uk.

For further information or to make an appointment at any one of our five offices please contact us on the details below.

* The minimum recommended donation is £120 for a Single Standard Will and £180 for Joint Standard Wills.