The first thing that may come to mind when thinking of an asset may be a property, bank account or perhaps even your car. However, for Executors dealing with the administration of an estate, an ‘asset’ may have a much wider meaning and it is important that Executors be mindful of this to ensure that all of a deceased’s assets are administered correctly.
Depending on the type, and value, of assets held at death, the Executors may require to make an application for Confirmation (the Scottish equivalent of “Probate”) in the estate. Confirmation is the legal authority by which Executors can ingather, and subsequently distribute, estate funds in accordance with the terms of Will or, if there is no Will, the Intestacy rules. Executors require information regarding all of the assets owned by the deceased to make the application for Confirmation, so it is crucial that they have a good understanding of what exactly constitutes an ‘asset’.
The most obvious type of asset would a person’s home. If someone owns their own home, this is classed as ‘heritable property’ and, when they die, their home is detailed as a ‘heritable’ asset in their estate. Even when there is a mortgage or loan secured over the property, the whole property (or the deceased’s interest in the property) is detailed as an asset, with any outstanding debt also noted. Similarly, if the property is owned in joint names with someone else, it must still be detailed as an asset irrespective of whether the home is held in ‘pro indiviso’ shares or in joint names ‘and to the survivor’ (for further details on the difference between these types of ownership, see our blog ‘Joint title to heritable property – implications for estate administration’).
Moveable assets essentially cover any asset that is not considered to be heritable property. This would include, for example, cash, bank accounts, shareholdings, premium bonds and so forth. Personal possessions and contents within a home must also be considered. Executors are generally advised to consider the extent of any contents belonging to the deceased person and, in certain cases, it is acceptable for them to simply provide an estimated valuation of those contents. In some cases, however, contents and personal possessions will require a formal valuation if, say, there are any items of particular value and the estate may be liable to Inheritance Tax.
Executors must also consider whether the deceased made any gifts out of their estate in the seven years prior to their death. If they did, the value of the gifts, depending upon the specific circumstances of the gift, may be added back into the deceased’s estate and detailed in the relevant Inheritance Tax paperwork. Certain gifting allowances are available and these are noted in our blog ‘Six lesser known IHT allowances’.
Executors must also consider any gifts the deceased made whilst reserving some form of benefit. For example, a parent may gift the family home to their children during their lifetime but retain the benefit of living in the property, rent free. There are reasons someone may choose to enter such an arrangement (even after careful consideration of the associated pitfalls) but, from an Inheritance Tax perspective, there is nothing to be gained and the property would still be considered as forming part of their estate.
The Executors must consider all assets the deceased held no matter where they are located (for example, holiday homes and cash held in a foreign bank account etc.) and include their value in the Inheritance Tax paperwork. The fact that the deceased owned foreign assets can often complicate an estate administration and Executors should always seek professional advice on such matters
Of course, there are many other types of assets to consider such as business assets, digital assets and agricultural land and buildings etc. and it is essential for Executors to consider all assets held by a deceased person.
If you would like advice on this or any other matter involving estate planning or executry administration please contact the Blackadders Private Client and Executries teams working in Aberdeen, Dundee, Edinburgh, Glasgow, Perth and across Scotland.
Fiona Knox, Trainee Solicitor
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