How to leave the residue of your estate

Lawpack on March 27, 2020

OK. So you are thinking about making a Will. And you’ve decided who you would like to leave ‘specific gifts’ of your property to. (Read more about making specific gifts when you make a Will in our article.)

What you have left of your property after your gifts is known in legal jargon used for will writing as the ‘residue of your estate’. The ‘residue’ is the term used to describe what property of yours is left over after the deduction of specific gifts, debts, legacies, tax and the expenses of administration.

If you decide not to make any specific gifts when making a Will, but instead give all of your property to one person alone, then this gift is known in Will-writing legal jargon as a ‘residuary gift’ (i.e. they will receive the whole of your residuary estate) and this person will receive whatever is left after the necessary deductions (i.e. debts, etc.) have been made.

You must make a residuary gift when making your Will, otherwise you will die partially intestate.

This means that any specific gifts and legacies can be distributed according to your wishes, but the remainder of your property, which makes up the residue, will be distributed under the rules of intestacy (outlined in our article 8 Reasons Why You Should Make a Will). This could result in a property distribution you may not have wanted.

Your residuary estate can be given to more than one person in your will but if you do so, you must state the share of the residue that each person is to receive, whether equal or otherwise.

DIY Will examples:

‘I give the residue of my estate to David Peter Ross, Susanna Hill and Nigel Jones in equal shares.’

or

‘I give the residue of my estate to my wife Gillian Ross (two-thirds share) and to my brother Richard Ross (one-third share).’

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Probate: Where do I start?

Lawpack on March 27, 2020

When someone dies and before you start the probate process, it’s important to complete some initial tasks to secure the deceased’s property and check on their correspondence.

These tasks should be attended to as soon as possible, in preparation for dealing with the assets and liabilities of the estate.

Your first tasks as executors are as follows:

1. Redirect the post

Change the deceased’s postal address to that of the first applicant – the executor who is to handle day-to-day business and personal affairs.

2. Check on the property

If the deceased’s home is now left unoccupied, ensure that it’s securely locked; that water, electricity and gas supplies have been turned off (if appropriate).

3. Check the insurance policies

Ensure that there are both current buildings and contents insurance policies on the home.

The executors may be held liable by any beneficiary who receives less from the estate than they should have because of a burglary, fire or other loss.

4. Notify the insurers

The insurers should be notified of the death and given the names and addresses of the executors.

5. Remove any valuable items

If there are particularly valuable items at the deceased’s home and it is to be left unoccupied, it may be better to remove them for safekeeping.

6. Open an executor’s bank account

You will eventually deposit the proceeds of assets into this bank account. From this account you will also pay the liabilities and expenses of the estate and distribute the monies under the Will or intestacy.

7. Find the probate documents

Make a thorough search of the deceased’s papers and online records for the documents that will be needed to do probate. These will include:

  • Cheque books
  • Bank statements
  • Savings certificates and other National Savings assets
  • Outstanding bills
  • Share certificates and stockbroker’s details
  • Car registration documents
  • Mortgage papers
  • Insurance and pension documentation
  • Information on jewellery and collectables; for example, insurance valuations
  • Tax assessments, returns and other Tax papers

Once you have completed these tasks, the next task of executors is to identify the deceased’s assets.

You may also need to apply for a grant of representation (in England & Wales) or for confirmation (in Scotland) from the Probate Service.

Whether you require a grant of probate depends not only on the size of the deceased’s estate, but also on the kinds of assets in it.

Find out more on whether you need a grant of representation.

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Executors: what to do if there is a Will

Lawpack on March 27, 2020

How to probate an estate when someone dies and what to do if you’re nominated as executor in the Will.

Many executors may have been made aware of their duties before death and know where the Will is kept should the worst happen. But if there hasn’t been an opportunity to prepare before the death, then the Will must be located to determine who has been named its executor(s).

Locating the Will

If no Will is found at the deceased’s home, it may have been sent to the deceased’s bank, solicitor or Will storage company for safekeeping or to Lawpack’s Will Storage Service.

In England and Wales, the Will may have been deposited at the Principal Registry (formerly Somerset House), in which case a deposit certificate will have been issued on receipt of the Will; the Will can be reclaimed by sending the certificate to:

Record Keeper’s Department
Principal Registry of the Family Division
First Avenue House
42–49 High Holborn
London WC1V 6NP
Tel: 020 7947 7022

If a Will is found, it must be ascertained that it is the deceased’s last Will by making enquiries at, for example, the deceased’s bank and solicitor.

It must bear the signature of the deceased (in Scotland, it must be signed on every page) and of an appropriate witness or witnesses.

Find out more on what to do if the deceased hasn’t made a Will.

What to do if you find a copy of the Will

In England and Wales, probate may be granted on a copy of the Will so if you can’t find the original, you should notify the Probate Registry as soon as possible that the original cannot be found.

The Probate Registry will tell you what evidence is needed to prove that the original Will hadn’t been revoked by being destroyed before death.

In Scotland, if only a copy of the signed Will can be found, it may be possible for the executors to treat the estate as ‘testate’ and proceed to wind up the estate in accordance with the copy Will, but it will be necessary in the first instance to raise an action in the Court of Session in Edinburgh to ‘prove the tenor’ of the original signed Will using the copy.

If this fails, the estate must be treated as intestate and wound up accordingly.

What if there is more than one executor named in the Will?

If the Will appoints only one executor, or if only one person is able and willing to act, a grant of probate can be issued to one person.

If the Will appoints more than four executors, only four of them will be allowed to apply for the grant of probate.

In any estate, some of the executors may renounce their right to apply for probate. Or they may decide not to apply for the time being but to reserve their right to apply in the future so that if, for example, one of the acting executors dies before the estate has been fully administered, the executor with ‘power reserved’ may take his/her place. The same applies in the scenario where the deceased didn’t leave a will.

In England and Wales, if only one executor is taking out the grant of probate, it’s prudent to have ‘power reserved’ for the other executor(s), even if it’s not anticipated that they will want to apply at any stage.

The Probate Registry provides a power reserved form to be completed and signed by the executors who intend to reserve the right to apply for probate.

In Scotland, confirmation is always issued in favour of all executors who have been nominated and who haven’t declined office. An executor appointed in accordance with the terms of a Will is called an ‘executor-nominate’.

No matter how many executors are named, for practical purposes it’s usually easier if one of the executors undertakes the administrative tasks on behalf of them all.

The executors should meet to discuss the practical side of carrying out their executor duties. All official paperwork must be signed by all executors, even if they agree that one of them will deal with the day-to-day administration. This isn’t the same in Scotland where the application for confirmation (C1 Account) only needs to be signed by one executor.

Get expert help with applying for a grant of probate with our Probate Assist service.

 

Other information

 

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How to appoint an executor and trustee in your Will

Lawpack on March 27, 2020

An executor is a person named in your Will who has the responsibility of managing your property after your death and distributing that property according to the terms of your Will.

The executor will have to collect in and preserve your assets, pay all relevant taxes and liabilities, obtain a grant of probate, sell those assets that need to be sold, and finally distribute your assets to your beneficiaries.

In some instances, money may not be paid directly to all your beneficiaries and may be held for their benefit. This is most common where the gift is to minor children or to someone pending their fulfilment of a condition, such as reaching a certain age.

If this happens, the money will be paid to the person or persons you appoint as trustee.

We recommend that you appoint the same person or persons as both executor and trustee when writing your Will.

Trustees are then responsible for holding the monies and looking after them for the benefit of the beneficiaries. They are entrusted with investing the monies and generally safeguarding them.

In some instances, trustees have the ability to distribute all or part of the monies to the beneficiaries or use them for their benefit, if they think that this is in the interest of the beneficiaries.

You must appoint at least one executor to carry out the instructions in your Will and it’s usual to appoint two. Two executors should be appointed if the Will contains a gift to children, some of whom may be under 18 when you die.

You should also appoint a replacement executor in case one of the named executors is, for any reason, unable to act.

The primary concern in selecting executors for your Will is that they should be reliable and trustworthy in carrying out your wishes. It’s also desirable that at least one executor should know the beneficiaries of the Will personally.

Often the best way is to appoint the person who stands to benefit most from your Will as one executor, and another relative or close friend as the second executor to assist or to take over should the first be unable to act.

A person cannot act as executor for your Will while under 18. The duties of an executor need not be difficult and your executor can use a solicitor to process the necessary probate forms.

Always check with your proposed executors before making your Will to be certain they are willing to act; a template letter to an executor is provided with Lawpack’s Last Will & Testament DIY Will Kit.

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How to name guardians for your children

Lawpack on March 27, 2020

Making a Will is not just about passing on property. If you have children, you can use your Will to ensure that they are looked after by who you wish in the event of your death.

A guardian is someone you appoint to act in your place as a parent. Guardians are given both the responsibility of caring for, and the powers to make decisions about, your children (i.e. parental responsibility). You can appoint a guardian by using Lawpack’s Last Will & Testament Kit.

Guardians are usually appointed to look after children in the event of the parents’ death, but it’s not a requirement of them being a guardian, as their task is to make decisions about where the children live, with whom, and what school they go to, etc.

The guardian is often, but doesn’t have to be, the same person as the executor and trustee of your Will. Their responsibilities are different: an executor deals with, and has responsibility for, the financial arrangements, whereas a guardian makes decisions about the wellbeing of the children.

If the guardian isn’t the same as the executor, they should be able to co-operate with the executor of the Will.

The appointment of a guardian is only effective if both parents (or all persons with parental responsibility) are no longer alive.

If you have minor children, you should name a guardian to care for them in the event of them being left without any parents.

Minor children are under the age of 18 in England, Wales and Northern Ireland, and under the age of 16 under Scottish law.

Since a guardian takes the place of a parent, you should choose someone in your Will who can offer the best care for your children, such as a close relative who is willing to accept the responsibility.

The guardian can be (but need not be) one of your executors.

Always check with your proposed guardian in advance to be certain that they are willing to act as a guardian before making your Will.

There are complications in making a Will which names a guardian if:

  • you were not married to the other parent when the child was born;
  • you and the other parent have already been or are (after making the will) divorced from each other; or
  • a court order already exists, or is made in the future, relating to where the child is to live or to parental responsibility for the child.

In these cases, we advise that you take legal advice.

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What to do when someone dies in Scotland

Lawpack on March 27, 2020

When you’re named as the executor of a Will, you’re being asked to take responsibility for administering the estate of the person who made the Will, called the testator, after they have died.

After someone dies, executors are expected to begin their administrative duties immediately; long after other mourners’ lives have returned to normal, the executors will still be administering the estate.

The duties of an executor include taking an inventory of the deceased’s possessions and debts, collecting the assets, paying the bills and distributing the legacies (whether specific items, cash sums or residue) and following the testator’s wishes as closely as possible.

You may consider your duties as an executor to be a daunting task, but don’t panic. To help you, here is a summary of what you need to do when someone dies in Scotland, taken from Lawpack’s DIY Probate Kit.

 

  • Register the death and obtain copies of the death certificate.
  • Attend to the funeral.
  • Find and review the deceased’s will or establish if they died intestate (i.e. without a will).
  • Identify the beneficiaries.
  • Find out who the will’s executors are and whether they are able and willing to act. If not, or if the deceased didn’t leave a valid will, determine who will act as executors of the estate. Get the agreement of the executors in writing.
  • Apply for confirmation (the Scottish equivalent of probate) to the Commissary Department of the Sheriff Court serving the area in which the deceased was domiciled at the time of death. The application forms – along with expert guidance on completing them – are available in Lawpack’s DIY Probate Kit.
  • Secure the house and/or other property of the deceased, insuring the house, car and any other valuable items as necessary.
  • Organise yourself for valuing assets, corresponding with others, keeping financial records and receiving the deceased’s mail. Open an executors’ bank account.
  • Write to all financial and business organisations in which the deceased had an interest. Include a copy of the death certificate and request the necessary information for the confirmation application and the returns to HMRC.
  • List the deceased’s assets and liabilities. Review them. Is it necessary to apply for confirmation? If the estate appears to be insolvent or there are other complexities, take professional advice.
  • Raise funds to pay inheritance tax, if the estate appears to be worth more than £325,000 (or where it exceeds the higher value available after application of a predeceasing spouse’s available inheritance tax allowance). Raise the money, for example, by borrowing or selling some of the deceased’s personal property. Inheritance tax must be paid before confirmation can be issued. Consider raising the funds from the deceased’s own account using the Inheritance Tax Direct Payment Scheme.
  • Fill out the confirmation forms as information is collected and return them to the Sheriff Court concerned. The form of application for confirmation is Form C1. Complete Form C5 if the estate is either excepted or exempt and excepted. However, if the estate is neither an excepted estate nor an exempt and excepted estate, then it’s necessary for Form IHT400 to be completed and submitted to HMRC prior to applying for confirmation.
  • The Sheriff Court concerned sends confirmation to you by post along with any certificates of confirmation.
  • Send copies of the appropriate certificate of confirmation to each appropriate organisation (bank, etc.) to show the executors’ entitlement to deal with the deceased’s assets. In return, the organisations will release the deceased’s assets to the executors and close or transfer the deceased’s accounts and files.
  • Advertise for creditors, if necessary. If any large or unexpected claims result, you should consider seek professional advice.
  • Respond to any queries raised by HMRC concerning the values of assets or liabilities of the estate. Agree final figures with them. Report any additional assets or liabilities that have come to light since confirmation was granted.
  • When all the assets are collected, pay debts, including any unpaid income tax and capital gains tax relating to the deceased’s income up to the time of death.
  • Ask HMRC for an income tax return or repayment claim form and complete it with details of the income of the estate to the end of the tax year during which the deceased died. Pay any tax due. A tax return may also be needed for each subsequent tax year if the administration of the estate isn’t complete within one tax year.
  • Ask the HMRC for Form IHT30 (Application for a Clearance Certificate). Complete it and have it signed by all the executors and in due course receive the signed discharge certificate from HMRC.
  • Check that there have been no claims against the estate under the Inheritance (Provision for Family and Dependants) Act 1975 during the six months following confirmation and that there were no claims made by cohabitees in a Scottish estate in the six months after the date of death. Settle any claims for legal rights; if legal rights are to be renounced by the entitled parties, obtain formal discharges, to be placed with the estate papers. Barring any such challenges, the estate can be distributed.
  • Distribute the legacies, when all the assets have been accounted for and debts paid. Get a receipt from each beneficiary.
  • Draw up estate accounts. Get approval of the accounts from all residuary beneficiaries (or those entitled under the intestacy laws) and send them copies. Make payment of the final balance of residue due to beneficiaries. Issue HMRC Form R185 (Estate Income) to the residuary beneficiaries showing their shares of the income of the estate and the tax deducted from it during the tax year.
  • Close the executors’ account, when all cheques have cleared.
  • Administration of the estate is now complete. All accounts should be saved indefinitely, along with the other principal estate papers.

 

Get more detailed information and advice on your duties as an executor – plus what confirmation forms to use – in our DIY Probate Kit.

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How to witness and sign your Will properly

Lawpack on March 27, 2020

Witnesses to Your Will

To make sure that your Will is legally valid, it’s important to ensure that your will is properly witnessed.

When you’re making a Will you need two witnesses who must be over 18 and preferably neither very old nor hard to trace, in case a question should arise later concerning the validity of your Will. A blind person cannot witness a Will

Making a Will Warning:

If a person is inheriting something in your Will (called a ‘beneficiary’), it’s vital that they are not a witness to the same Will. Also, you shouldn’t use someone as a witness to your Will if they are married to a beneficiary of your Will. If either of these people do witness your Will, they will lose the benefit of their gift, but the Will itself will remain legally valid.

An ‘executor’ (someone you have named in the Will to manage your estate) or their spouse can safely act as a witness to your Will – unless they are also a beneficiary, in which case another witness must be found.

Signing Your Will

You must sign your Will in the presence of two witnesses and they must then both sign in your presence and in the presence of each other as witnesses to your signature. Neither you nor any witness to your Will should leave the room until your Will is both signed and witnessed, and you should all see each other sign the Will .

When signing your Will, use your usual signature, write in ink and date your will. Be sure that the witnesses complete their names, addresses and occupations on the Will.

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Debts aren’t written off when someone dies

Lawpack on March 27, 2020

Many relatives end up in a very difficult situation when a loved one dies leaving debts, especially if the death is unexpected.

At such a painful time, many people are reluctant to think about dealing with the debts of the deceased and how to make repayments.

Many people assume that the deceased’s debts will be written off, but this is generally not the case and the debts continue.

Dealing with a person’s assets and debts when they die

When someone passes away, a person name in the deceased’s Will – called an ‘executor’ – or the next of kin if the deceased didn’t make a Will – called an ‘administrator’ – will have to oversee the collection of the deceased’s assets to form their estate.

Whether a Will is made or not, any outstanding debts are paid out of the estate.

As part of their duties, the executor (or administrator) must collect in any money or property the deceased has left behind and cover and outstanding debts from the estate.

What to do if the debts can’t be covered from the deceased’s estate

If there are not enough assets to cover all the debts, the bills will need to be paid in order of priority, as follows:

  1. Secured debts (e.g. mortgage company) are paid first because they get their money from the security
  2. The costs of administering the estate along with funeral costs are then paid in priority to everything else.
  3. The remainder is divided in proportion to the value of the debts, i.e. if someone is owed 80% of the total they are paid 80% of the remaining assets.

The beneficiaries will only inherit what they have been left in the Will once all the accumulated debts have been repaid.

Who is liable for the debts?

No one else is required to pay for the debts unless they are already liable under the terms of the original agreement; for example, if the debt is in joint names or someone has signed as a guarantor. 

If the money left in the estate isn’t enough to cover the outstanding debt and you jointly owned a house with the deceased person, for example, you may have too sell the property to meet creditors’ demands.

What about money owed to the deceased?

It’s the executor’s (or administrator’s) responsibility to decide in cases when there is money owed to the deceased person, especially when there is a written agreement in place.

But if the borrower and the lender have agreed on the debt on a casual basis, it will likely remain irrecoverable since it could be impossible to prove.

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