When someone close to you has passed away, dealing with their estate can be traumatic. There are lots of legal terms used in the days, weeks and months after a death. These aren’t easy to understand if you don’t have any experience of being an executor.
We’ve compiled the glossary of terms below to help you understand the process and language used when administering someone’s estate.
#1 – Beneficiary
A beneficiary is a person entitled to receive money or assets from a person’s estate after they die – the beneficiary might be nominated in the person’s will or entitled under the laws of intestacy where there is no will. A beneficiary can also be an organisation (most commonly a charity).
#2 – Bond of Caution
A Bond of Caution (pronounced ‘kay-shun’) provided by an insurance company is a guarantee (for the benefit of creditors and beneficiaries) that the estate will be distributed correctly. This bond is required in most estates where there is no will (and occasionally where there is a will, but the will hasn’t nominated an executor) before an application can be made for confirmation on the estate.
#3 – Confirmation
One of the first things you must do after someone has passed away is to ‘obtain confirmation‘. This is legal permission, granted by the court, to allow you to wind up the estate.
#4 – Creditor
A creditor is a person or organisation that is owed money by a person’s estate. For example, this could be an outstanding council tax bill or credit card debt.
#5 – Death Certificate
Every death in Scotland needs to be formally registered. On receipt of the relevant documents, the registrar will issue the death certificate. This is required for arranging the funeral and sending to organisations such as banks, insurance companies etc. where the deceased held accounts.
#6 – Deed of Variation
A deed of variation allows the beneficiaries of an estate to amend how the assets are distributed and can sometimes be used in order to make the estate more tax efficient in terms of inheritance and capital gains tax. Additionally, a deed of variation may be used to pass the estate to a different beneficiary than one named in the deceased’s will, where the original beneficiary is in agreement.
#7 – Executor
In Scotland, a person responsible for administering an estate is known as an executor.
#8 – Inheritance Tax
Inheritance Tax (IHT) is tax which is payable on an estate when someone dies. In addition, IHT is payable on certain transfers made during a person’s lifetime – gifts and trusts made up to 7 years before death are liable to income tax.
#9 – Intestacy
Intestacy is the legal term for when someone has passed away without leaving a valid will.
#10 – Inventory
As part of the application for Confirmation the executory must compile an inventory, or list, of the deceased’s assets at the date of death, which includes the date of death values.
#11 – Legacies
A legacy is an amount of money or particular asset left to someone in a will. The executor of an estate must ensure that any legacies are only paid out once all the debts and expenses of the deceased have been settled.
#12 – Liabilities
There are certain potential liabilities associated with becoming an executor, so you should think carefully before agreeing to be named for this role by a friend or family member. For example, if you fail to pay the necessary taxes due on an estate, you will be personally liable when the issue comes to light.
#13 – Personal Representative
A personal representative of an estate is a term used in England to refer to the administrator or executor of an estate. When a will has been left, an executor will look after the estate, and where no valid will exists, an administrator will wind up the estate. In Scotland, the term “executor” is used for both scenarios.
#14 – Residue
The term ‘residue’ describes what is left over once funeral expenses, debts, legacies, tax, and administration expenses have been deducted from the value of the estate.
#15 – Succession
The Rights of Succession set out who is legally entitled to the estate in what order when someone dies without a will. These can also apply where there is a will but, for instance, it does not deal with the deceased’s entire estate.
#16 – Testate Estate
A testate estate is one where a person has died and had a valid will in place.
#17 – Winding Up
Winding up an estate refers to carrying out all the necessary legal steps to gather and correctly distribute the deceased person’s estate.
Our personal law team has a wealth of experience in winding up estates. If you have any questions about the process or need help with being an executor, get in touch with Lindsay using the details below.
Lindsay Maclean is a member of the Society of Trust and Estate Practitioners having obtained her STEP Diploma for Scotland (Trusts and Estates) with distinction. If you’d like to learn more about Wills and Estate planning, please contact Lindsay using the details below.