A guide for first time executors

What is an Executor?

An executor is the person responsible for administering an individual's estate on death. The executor will investigate the extent of the assets, pay any debts and funeral expenses, settle any inheritance tax bill, ingather the assets and then distribute them to the entitled beneficiaries either under the terms of the will or in accordance with the rules of intestacy (where there is no will).

Executors are either appointed in the deceased's will or, if there is no will (or no valid appointment is made in the will), by the sheriff court.

An executor can choose to accept or resign office. As such, before appointing someone as your executor in your will, you should discuss this with them and ensure that they are willing to act.

Executors hold a position of trust and when they are carrying out their role, they must act: -

1. In the interests of beneficiaries always; and
2. Reasonably and ensure that they exercise the same standard of care that a person of "ordinary prudence" would exercise when managing their own affairs.

What are the key duties of an executor?

1. Ascertain if there is a will

A will is an important legal document which sets out how the estate is to be distributed on the death of the testator. It is not uncommon for a will to include funeral instructions and so, if possible, it should be located before the funeral is organised to ensure that the deceased person's final wishes are upheld.

The will also usually includes directions to the executor regarding how the estate is to be distributed including whether any legacies should be paid as well as instructions about how to divide the "residue" of the estate (everything that is left over after debts, funeral costs, tax, expenses of administration and legacies are paid).

2. Investigate the value and extent of the deceased persons estate & report the estate to HMRC and pay IHT where applicable.

Before an executor can ingather the estate, they must first know what is in it. Therefore, a key part of an executor's role is to investigate the value and extent of the estate. The executors (usually with the help of their solicitor) will write to all asset holders to obtain date of death values for all assets held by the deceased.

Once valuations for all assets have been received, an inventory to the estate can be prepared along with an application for confirmation (probate).

If the estate is chargeable to inheritance tax (or if there is no tax to pay but a report is still required to HMRC), then the draft application for confirmation must be sent to HMRC along with the IHT400 account and accompanying schedules within six months of the date of death. The IHT400 account will be signed by the executor(s) confirming that the account gives a true and accurate reflection of the value of the estate as at the date of death. If tax is due to paid on the estate, then payment must also be made at the point that the IHT400 is submitted. This account will then be reviewed and approved by HMRC who will provide the executor with an "authorisation code" that then allows them to apply to the relevant sheriff court for confirmation.

3. Apply for and obtain confirmation (probate) to the estate.

Once the inheritance tax has been paid (or approval has been provided from HMRC where no tax is payable), an application for confirmation can be submitted to the relevant sheriff court for processing. The grant of confirmation gives the executor the power to deal with the estate assets and debts.

4. Ingather the estate and settle debts

When confirmation has been granted, the next step for the executor is to ingather the estate funds. This may involve: -

• Encashing or uplifting assets (for example, closing bank accounts and uplifting the cash).
• Realising or selling assets (for example, selling a property or investments).
• Paying the deceased's debts and the costs of administration of the estate.
• Transferring assets into the names of the beneficiaries (for example, where the deceased person has left an asset as a specific legacy to someone).
• Distributing what is left of the estate (known as the residue) to the correct beneficiaries in accordance with the will (or if there is no will, in accordance with the rules of intestacy).

5. Executry accounting

The executor has a duty to account to beneficiaries for their dealings with the estate. To comply with this duty, the executor will prepare an account showing all their intromissions of the estate. This will show the assets received, any gain or loss made on those assets and list the debts and expenses that have been paid. The executor will also be liable for payment of income tax during the period of administration as well as capital gains tax if assets are realised for more than their date of death value.

The final account will also show the balance available for distribution to beneficiaries. A copy of the account will be approved by the executor and provided to beneficiaries. When receiving final distributions from the estate, the beneficiaries will often be asked to sign a document acknowledge receipt of sums from the estate and formally discharging the executors from their duties.

In summary, being an executor carries a degree of responsibility. If you are appointed as an executor and fail to carry out the functions and duties associated with your role, you may be held personally liable for any losses to the estate or beneficiaries. For these reasons, it is important you are aware of your duties and seek appropriate professional advice and assistance where necessary. You do not need to instruct the same firm that holds the will. The personal team at Brodies are here to guide you through every step of the process and support you in your role during what is a difficult time.