Probate Guide

Here we will try and take you through some of the frequently asked questions for dealing with Probate.

If there is a Will

If the person who has died leaves a Will, it usually names one or more people to act as the executors of the Will, which means to administer their estate.

If you are named as an executor of a Will, you may need to apply for a grant of probate.

A grant of Probate is an official document which the executors may need to administer the estate. This will be issued by the Probate Registry section of the court.

If there is no Will

If someone dies without a Will, it’s known as dying intestate.

In these situations, the process is more complicated. The Administration of Estates Act 1925 sets out who can act as administrator i.e. who has the legal right to deal with the affairs of the person who has died.

The chosen administrator will usually be a close relative of the deceased, if there is one. There could be more than one person who has an equal right to do this.

Anyone who has this right can apply to the probate registry for a grant of letters or administration. This is an official document, issued by the court, which allows administrators to administer the estate.

There are some cases where the law says that more than one person must act as administrator e.g. when the person who benefits is a child.

Legal terms that might come in handy

Personal Representatives (PRs) - This means executors or administrators. If there’s more than one PR, they must work together to decide matters, but disagreements between PRs can cause delays.

Beneficiaries - People who eventually benefit from the estate. They are either named in the Will of the deceased person or are entitled to benefit under intestacy laws. Beneficiaries don’t come to own anything until it is passed on to them by the PRs. The rights of the beneficiaries at this stage are to have the estate properly administered for their benefit.

Grant of Representation - This includes both grants of probate (when there is a Will) and grants of letters of administration (when there is no Will). Although, people often just refer to a ‘grant of probate’ even if there is no Will.

Grant of Representation

When is a grant of representation needed?

Usually, a grant of representation will be needed when the person who has died left:

  • More than £5000
  • Stocks or shares
  • A house or land
  • Certain insurance policies

A grant of representation may not be needed sometimes, for example it is not needed when the person who died:

  • Has left less than £5000 in total
  • Owned everything jointly with someone else

In other cases, some financial organisations, such as banks, may agree to pay funds to a Personal Representative without a grant of representation if the estate is very small. It’s always worth asking!

Obtaining the Grant

We will apply for the grant of probate on your behalf, through the post. You will not need to attend at the court.

When full details of the estate are known:

  • The Personal Representatives must swear on oath in front of an independent solicitor, which WE will arrange for you.
  • There’s a small fee for this - usually £5-£10.
  • The oath and the Will are then sent to the Probate Registry for probate to be granted.
  • There’s a court fee of £155 for this, and 50p extra for each office copy of the grant of probate.
  • An inheritance tax form is completed, and this will either be short-form or long-from, depending on the size of the estate. This is then signed by the Personal Representatives. This form gives the HM Revenue & Customs information such as; valuations of all assets and debts of the estate and a calculation of any inheritance tax liability.

It is very important that the Personal Representatives carry out full investigations into the deceased person’s estate and that all assets are declared in the inheritance tax return. Failure to make complete disclosure can lead to precise financial penalties being imposed on the Personal Representatives.

Responsibilities of Personal Representatives

The PRs have a heavy responsibility, they must:

  • Safeguard the assets in the estate
  • Collect the assets into their control
  • Correctly distribute the assets to the beneficiaries named in the Will, or those entitled to benefit under intestacy laws.

Inheritance Tax

The Personal Representatives are also responsible for finding out whether or not inheritance tax (IHT) is due upon the death of a person. If so, it is down to the PRs to make sure that it’s paid to HM Revenue and Customs.

Whether IHT needs to be paid may depend on:

  • The value of the property and belongings owned by the person when they died.
  • The value of certain trusts which the dead person benefitted from.
  • The value of any gifts that they gave before they died, and who these gifts were given to.
  • Which people are due to benefit by the Will or intestacy rules e.g. gifts passing to the deceased person’s spouse or to charity will be exempt from IHT

Inheritance tax is payable when the grant of probate is applied for, but funds from the estate can’t always be used for this purpose because all the assets are frozen at the date of death.

Some banks and building societies will release funds just to pay IHT, but if this isn’t possible or the available cash is insufficient, it may be necessary for the PRs to arrange a short-term loan from the deceased person’s bank to cover the IHT figure.

What happens after grant of probate has been obtained?

Once grant of probate has been obtained, the Personal Representatives are then able to deal with:

  • Any sales of assets
  • Collection of assets
  • Payment of any outstanding debts

This may include the following examples:

  • Closing bank accounts
  • Selling the house or transferring it into the names of the beneficiaries
  • Selling shares or transferring them to beneficiaries
  • Claiming any money which is due under life insurance policies
  • Collecting pension arrears
  • Checking or transferring insurance cover
  • Selling personal effects
  • Refunds on season tickets
  • Cancelling subscriptions
  • Cancelling passport
  • Dealing with uncashed cheques

The collection of some assets can be more difficult than others. It may be wise to get some advice when dealing with shares in a private company, family business or assets situated abroad.

Payment of Debts

The PRs are responsible for paying all debts owed by the deceased before distributing the estate to the beneficiaries. The PRs may be personally liable for any debts if they distributed the estate without making sure that the creditors have been paid first. You should use the statutory notice procedure to advertise for creditors - if you need help with this, get in touch with us.

If the deceased person’s debts are insufficient to cover the debts, the estate is insolvent and special rules apply - we can also advise you on this.

HM Revenue and Customs will agree the extent of any liability for IHT after examining the IHT return that was filed by the Personal Representatives.

This might take many months because HMRC may wish to negotiate with us over values. However, we will always do our best to keep things moving forward as quickly as possible for you. Once the IHT liability is agreed and paid, a clearance certificate is issued by HMRC.

Any income that the assets earn during the administration period (period between day after death to the day the Personal Representatives finish distributing the assets) will need to be declared for income tax purposes. If any assets are sold, there could be capital gains tax to pay.

Once all of the assets have been realised and the debts, administration expenses and tax have been paid, the rest of the estate can be transferred to the beneficiaries. The PRs should also prepare certificates for the beneficiaries, displaying the income received during the administration period and the resulting income tax which has been deducted from it.

If the beneficiary is a non-taxpayer, they can recover all or part of the tax paid by the Personal Representatives.

If the beneficiary is a higher-rate taxpayer, they will have to pay additional tax via their own tax return.

Likely Timescales

Dealing with the affairs of someone who has died can take a long time. It’s not unusual for the process to take as long as a year, possibly longer if things aren’t straightforward. Several organisations may be involved in the process e.g. banks, insurance companies, building societies and HMRC.

The estate cannot be dealt with until all claims on it have been received. If individuals wish to make claims against the estate, they have six months from the date probate was granted.

These are some things that may affect the time it takes:

  • Whether the financial affairs of the person who died were in order
  • Whether the person who died had an interest in a business or a farm
  • What the person who died owned and where it is
  • What the Will or intestacy rules say
  • Whether there are any legal disputes e.g. claims against the estate or claims by the estate
  • Whether the estate is insolvent
  • Whether inheritance tax needs to be paid
  • Ensuring that all HMRC files are closed and also making sure that matters relating to income tax, benefits agencies and pensions have been sorted out.

Arguments between family members, beneficiaries or Personal Representatives can also cause delays. Any disagreements must be sorted out before the affairs of the deceased can be settled.

Costs

Professional costs in probate matters are based on the Law Society’s current guidelines.

The scale of charges is calculated based on past experience in dealing with estates of certain sizes, considering the nature of the assets held and what would be required to administer the estate.

The estimate may be subject to variation from the scale of charges if the estate comprises only a few assets and the work involved would be considerably less.

Another reason that the costs may vary is because of unforeseen complexities which may arise, including;

  • Missing assets
  • Missing documents
  • Missing beneficiaries
  • Tax calculations and returns
  • Protracted correspondence with Registrars
  • Incorrect supply of details by institutions and rectification
  • Tax saving/planning issues
  • Disputes between executors, administrators or beneficiaries
  • Deeds of Variation
  • Disputes with asset holding institutions
  • Charity-related requirements

Charges will vary depending on what is involved in administering the estate. It isn’t usually possible to know straight away what may be involved and how much help and advice is required. However, when a matter is completed, the overall amount charged is reviewed and ensured that it is fair and reasonable in the circumstances. This will give consideration to a number of aspects, including the complexity, the number and value of assets that have to be dealt with, and the level of responsibility involved.