Probate and Administration of Estates
Probate: a comprehensive guide
This guide has been prepared for the benefit of people who find themselves with the responsibility for winding up an estate. It is hoped that this outline will assist in guiding you through the process.
It summarises the more usual aspects of administering an estate and not all of it may be relevant to the particular estate with which you are dealing. Likewise, the estate may in fact be more complex and the guide may not provide you with enough information. Please do not hesitate to contact us for further information or to arrange a consultation.
Initially, the death must be registered with the Registrar of Deaths and the funeral arranged. If there is a will then you should locate the original and check it for any funeral directions or specific wishes of the deceased. The will may be lodged with a solicitor, bank or other professional adviser or may be with their own papers. The will appoints one or more executors who will be responsible for putting into effect the wishes of the deceased expressed in the will. If there is no will administrators are appointed by the court to deal with the estate. They are usually the persons entitled to the estate under a set of rules laid down by law that take the place of a will known as the Rules of Intestacy. If the appointed executor has died or was unwilling or unable to act, then administrators are again appointed to carry out the terms of the will in their place. n this guide, “executor” is used in all cases unless the distinction is important.
Ascertaining details of the estate
The deceased’s personal papers need to be examined to find out what they owned. Their last income tax return is a very useful source of information. Unless the estate is small, the executors will not be able to gain control of the assets without producing the Grant of Probate or Letters of Administration. This is the legal confirmation of the validity of the will and the right of the person(s) to whom it is granted to deal with the estate, commonly referred to as “probate”.
Before probate is granted, the executors are required to make a return of capital assets to the tax authorities for the purposes of inheritance tax. It is necessary to ascertain the value of each asset, such as bank and building society accounts, insurance policies and stocks and shares, or in the case of freehold or leasehold property and furniture and jewellery a professional opinion as to its value. This can be done very quickly, although in some cases may take several months. It depends on the types of assets and also the liabilities involved. During this time the assets are frozen, with the exception of joint accounts, which can be immediately transferred to the surviving co-owner on production of the death certificate.
It is also necessary to consider financial transactions made during the deceased’s lifetime because if gifts have been made they may need to be disclosed for inheritance tax purposes. Similarly, any jointly held assets or other property in which the deceased had a financial interest, such as partnership or trust assets, must be considered as they may need to be included when inheritance tax is assessed.
Anything owed by the deceased such as household bills, mortgages, loans and funeral expenses are liabilities of the estate and allowable deductions against Inheritance. Banks will usually arrange for the funeral account to be paid from the deceased’s account before probate is granted, on the basis that sufficient funds are available on the account.
If there is a property that is unoccupied, steps should be taken to ensure its security and that adequate insurance is in place during the administration period.
Once the assets and liabilities of the estate have been established, the application for probate can proceed. If inheritance tax has to be paid on the basis of the return completed then some of this will need to be raised on submission of the return, except any tax on any land and certain other assets which may be deferred. Banks and other financial institutions are usually prepared to release the deceased’s own funds for this purpose, although it may sometimes be necessary for the executors to arrange a loan.
When HM Revenue & Customs provide an appropriate receipt then the issue of the Grant can proceed which involves the executors swearing an oath and marking the will where appropriate. The probate court will then issue a grant of probate (in the case of a will) or letters of administration (if there is no will and the estate is being administered under an intestacy). “Probate” is used in this guide to cover all cases, unless the distinction is important. Probate is typically obtained within three to four months of the date of death, although this can be earlier for estates of lesser value, and longer for some more complex estates.
Any wills or codicils are retained by the court and become a matter of public record, and the executors are advised to obtain sufficient sealed copies of the grant of probate so that they can proceed with the administration of the estate. This will depend on the number of assets in the estate.
Collecting the assets
Once the grant has been issued, it has to be registered with the financial institutions e.g. the banks and building societies, insurance policies etc. Once the assets have been released and paid into a designated “estate account” then the liabilities of the estate can be paid.
If there is a property in the estate and it is to be sold then this will probably involve the appointment of estate agents to handle the sale. There is no reason why this should not be arranged prior to the grant, although the grant of probate is needed before completion of the sale can take place.
Trustee Act Notices to Claimants
If executors mistakenly pay money to the wrong people (e.g. because they did not know of a debt or a legacy under a later will or codicil) they must usually pay the right people out of their own pockets and then try to recover the money from the persons who had been wrongly paid. The law allows executors to advertise for claimants and, provided certain conditions are met, then to distribute the estate. This only protects the executors in that capacity, however, and so if anyone has a valid claim against the estate he can still pursue this against the beneficiaries direct. Sometimes executors may feel it is not appropriate to advertise for claimants, as this may invite burglary of an unoccupied property, but in others, that is the most important. Generally, executors can advertise immediately after the death, but administrators should only do so after obtaining letters of administration.
These are the people entitled to share in the estate either in accordance with the terms of the will or under the Rules of Intestacy. There are various types of beneficiaries (sometimes called legatees) and depending on whether they are entitled to a fixed cash sum, a particular item such as jewellery or a share of what is left (residuary beneficiary).
It is normally considered courteous and good practice for the executors or professional advisers on their behalf to notify beneficiaries of their entitlement. Residuary beneficiaries should be given a copy of the will and details of the assets and liabilities of the estate as ultimately the executors have to account to them for what has happened to the estate.
An estate liable to inheritance tax would normally take several months longer to wind up than a non-taxable one.
Whether an estate is taxable, and if so the amount payable, can depend on a number of factors including whether the deceased held an interest under a trust or settlement at any time during the seven years prior to the date of death, or had made any lifetime gifts. The executors must fully investigate these points and should ensure that they apply any exemptions and reliefs that may be payable against the estate.
The deceased’s income tax affairs have to be completed and this is a matter that should be initiated at an early stage. If an accountant or other adviser had been employed by the deceased, it is usually practical to arrange for them to complete this.
Assets abroad can often involve legal formalities in the country concerned, including tax as well as the succession of these assets. It is usually necessary to appoint lawyers or other agents in that country to deal with such aspects and this can lead to considerable delay in finalising the estate.
Completion of the administration
Once all the assets and liabilities have been established and the income tax position finalised, a final return can be made to HM Revenue & Customs, who may in the meantime have raised queries on what has previously been submitted. Once paid, a formal Certificate of Clearance will be issued and the distribution of the estate can then be finalised and payment made to the residuary beneficiaries. The executors should then prepare a full statement of account showing how they have dealt with the estate and the residuary beneficiaries are entitled to a copy of this.
If the estate is not to be distributed because some or all of it is held in trust under the terms of the will or intestacy rules or because there are minor beneficiaries, then it is at this stage that the duties of the trustees commence. The trustees will usually be one and the same as the executors.