Debt Advice Handbook Scotland - 1st editionChapter 18: Debt when someone dies3. The estate Dealing with the estate
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Dealing with the estate
The executor must ingather the estate. They make a list of all the deceased’s estate consisting of assets and liabilities, referred to as the ‘inventory of estate’. The inventory should contain everything the deceased owned, less debts due and bring out a final amount due to be distributed.
Once ingathering has started the executor can start paying off the debts due, including funeral costs. The debts must be paid off in an order of priority.
Debts such as funeral and administration expenses are ‘privileged’ and will be paid first. Any tax due to HMRC is payable; this is important as if the executor fails to pay the correct tax, they become personally liable for any shortfall. Legal advice is strongly recommended.
The estate should not be distributed until six months has passed since the date of death to allow anyone with a claim on the estate to make their claim known.
There is a service that you can use, called ‘Tell us once’, where you can enter the client’s details once and this will be shared with HMRC, DWP, Social Security Scotland, the local council and others. You can find more information at gov.uk/after-a-death/organisations-you-need-to-contact-and-tell-us-once.
Hierarchy of debts
The priority for payment of unsecured debts becomes relevant when there are insufficient funds in the deceased’s estate to cover all outstanding debts.
The order of priority for payment of debts on death in Scotland is as follows.1thegazette.co.uk/wills-and-probate/what-to-do-when-someone-dies-executor-duties
    •Deathbed, funeral and administration expenses from the deceased’s estates are ‘privileged debts’ and are payable before all other debts.
    •‘Preferred debts’ will be paid next. This will include contributions to pension schemes and payments owed to the deceased’s employees, if applicable.
    •‘Ordinary debts’ are paid finally. These are all other debts which are not secured.
 
1     thegazette.co.uk/wills-and-probate/what-to-do-when-someone-dies-executor-duties »