Handling Confirmation for High-Net-Worth Estates

Administering High Net Worth Estates

There is no legal definition for “high-net-worth estates” in Scotland but they are generally understood to be estates that have a significant financial value which necessitate the executry solicitor applying for the correct relief in order to minimise any potential Inheritance Tax burden. 

Inheritance Tax (IHT) is not a devolved matter and is legislated for at a UK-wide level. Currently, every individual in the UK (and therefore also in Scotland) has a Nil Rate Band (NRB) of £325,000.00. This means that – subject to any available reliefs and exempt beneficiaries, of which more will be said below – an estate pays IHT at a rate of 40% on all value over and above the NRB. For example, an estate worth £400,000.00 with no reliefs available and that does not pass to any exempt beneficiaries would pay IHT of £30,000.00. This is because we would take our £400,000.00 figure, subtract the NRB of £325,000.00 and be left with a taxable estate of £75,000.00. This £75,000.00 would be taxed at 40%, which is £30,000.00.

Spouses, civil partners and charities are the most common exempt beneficiaries. This means that tax is not charged on assets or value left to them, regardless of their value. To return to the example above, if the £400,000.00 estate was left entirely to a spouse, a civil partner or a charity, then there would be no IHT to pay. If £200,000.00 was left to a spouse, civil partner or charity and £200,000.00 was left to other non-exempt beneficiaries (for example any other friend or family member) then there would still be no IHT to pay for the reason that the first £200,000.00 is exempt and therefore does not affect the NRB and the remaining £200,000.00 is less than the NRB of £325,000.00.

The primary reliefs that are utilised to mitigate IHT are the deceased’s own NRB (described above), a predeceasing spouse’s Transferable Nil Rate Band (TNRB) and Residential Nil Rate Bank (RNRB).

The TNRB is an important additional relief. Ordinarily, when a spouse or civil partner dies, they leave everything to the surviving spouse or civil partner. As they are also exempt beneficiaries, this means the spouse or civil partner who dies first has a NRB that is completely untouched and this NRB* can then be claimed and transferred (hence Transferrable Nil Rate Band) upon the death of the second spouse or civil partner. This means that a married couple can therefore have a combined Nil Rate Band of £650,000.00.

Next, if there is a property owned by the deceased and the property is passing to direct descendants (children, grandchildren, stepchildren etc.) then the Residence Nil Rate Band (RNRB) can reduce tax up to £175,000.00, but only if the property is worth that amount- i.e. if it’s worth only £100,000.00, then you can only use £100,000.00 of it and the excess £75,000.00 could not be used against other assets. This means that in theory, depending on the nature of estate and the beneficiaries, parents can pass £1,000,000 of assets tax free to their children or direct descendants.

It should be borne in mind that any estate over £2,000,000.00 can be considered high net-worth not only because it is a large seven figure sum, but also because such estates begin to lose the RNRB. The RNRB tapers at a rate of £1 of RNRB for every £2 over £2,000,000.00.

Here is an example to put this into perspective:

As you can see, the RNRB rule serves little to no benefit for High Net Worth (HNW) estates, making tax-efficient estate planning with the help of estate solicitors crucial.

Additionally, there is:

Who Manages High-Net-Worth Estates In Scotland?

In testate cases (situations where the deceased left a Will), the executor of the Will is responsible for administering estates in Scotland. This is typically a surviving spouse or civil partner but could be another family member, close friend or a firm of solicitors acting as professional executors and trustees, rather than just acting as agents in the administration of the estate on behalf of executors.

In intestate cases (situations where the deceased did not leave a Will), someone has to be appointed as executor by the court. The only person who can be appointed is someone who has a beneficial interest in the estate. There is a hierarchy that is set out in, but usually this responsibility falls to surviving spouses, children and grandchildren.

What is the role of an Executry Solicitor in Scotland?

Executry solicitors play a crucial role in high-net-worth estates, ensuring efficient estate administration, utilising all available IHT reliefs and dealing with both HMRC and the Sheriff Courts. Our Executry solicitors are here to guide you through the legal process.

Here are a few key responsibilities of our probate team:

Initial consultation

Our legal team will meet with the executor(s) of the Will to discuss the deceased’s assets, liabilities, and wishes as expressed in the Will. If there is no Will, we will meet with someone who has a beneficial interest in the estate as mentioned above, have them appointed executor and guide them through the intestate process.

At this initial consultation, we will gather as much information as we can about the deceased, such as information about all their assets, their liabilities and their family. We will also gather all relevant documentation, such as the death certificate, the Will (if there is one), and identification for the Executors.

Estate Valuation

Part of our estate administration services involves helping the executor value the deceased’s estate at date of death. This is because the IHT position of the estate is determined by the net value of the estate at the date of death. This includes calculating values for assets such as:

These values bring us to the gross figure. We can then deduct debts and liabilities such as:

This brings us to the net value of the estate. At this point, we would see if there are any exempt beneficiaries and/or if there are any reliefs we can utilise to then ascertain the IHT value of the estate.

Tax planning

Before applying for a Grant of Confirmation you must complete C1 and IHT400 forms to accompany your application. Jones Whyte will assist you in both regards.

Obtaining Confirmation

Next, our Executry solicitors will help you obtain a Grant of Confirmation from the local Sheriff Court. You cannot manage the estate without this legal document. Confirmation costs as at this year are £684 for estates worth £250,000+.

Dealing with debts and liabilities

Once confirmation is granted, we would then begin the process of ingathering all assets of the estate. When we have ingathered said assets, we would then pay all debts and liabilities mentioned above.

Asset distribution

Once debts and taxes are settled, our executry solicitors facilitate the distribution of assets to the respective beneficiaries in line with the Will or the laws of intestate succession.

Legal compliance

Jones Whyte is accredited with the Law Society Scotland, ensuring our estate administration services are above board and compliant with Scots Law. We have extensive experience in managing high-value estates in Scotland, as well as expertise in related services regarding wills, trusts, and intestate estates.

Handle complex issues

High-net-worth estates are more complex than simple estates and therefore require experienced probate services regarding complex inheritance taxes and fair asset distribution.

Dispute Resolution

It’s safe to say that high-valued estates can come with their fair share of challenges, especially when family disputes arise. Jones Whyte Law has a separate dedicated Dispute Resolution department with specialist expertise in dealing with contentious estates.

The Benefits of Using Jones Whyte’s Executry Services

Here are the advantages of choosing Jones Whyte to handle all your high-net-worth estate matters in Scotland: