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Your Guide to Probate and Estate Administration

August 19, 2022 ryma Comments Off

At Jarmans Solicitors, we understand that dealing with the death of a loved one can be a difficult and often stressful time. Our experienced Private Client team can advise and support you along the way, providing an efficient service and minimising the distress for you.

It can often be bewildering to understand the legal and tax issues when someone dies, and the procedure can sometimes be long and complex. We have produced this guide to provide a general overview of the process involved and how we can support you.

  1. Who is this guide for?

This guide has been produced to provide personal representatives with a general overview of their responsibilities and the services we offer.

Beneficiaries under a Will or Intestacy may also find this guide useful for a general understanding of the work personal representatives are required to undertake before distributing the funds in the estate.

Please be aware, however, that this guide is not designed to be a substitute for legal advice. Every estate is different, and it is important you get appropriate advice specific to the estate you are dealing with.

2. Who is responsible for administering the estate?

When someone dies, their personal representatives are responsible for dealing with their estate.

If there is a valid Will, this usually appoints executors. They take on the role of personal representatives.

If there is no Will, then those who inherit the estate under Intestacy usually administer the estate and are known as administrators. In most circumstances, only one administrator needs to apply for the Grant, but sometimes two administrators are required. The administrators take on the role of personal representatives.

In both situations, the responsibilities of the personal representatives are broadly the same: to investigate what assets and liabilities there are in the estate, to account to HMRC for Inheritance Tax, to apply for a Grant of Representative, to gather in all assets and settle all liabilities, and then to distribute the estate to the beneficiaries.

3. What are the first steps?

The first steps are to register the death and organise the funeral. These steps are not required to be undertaken by the personal representatives and often take place before the Will has been obtained.

However, when making the funeral arrangements, it is important to note that there may be specific wishes regarding the funeral mentioned in the Will or in a letter stored with the Will. Some people may also take out a pre-paid funeral plan during their lifetime and may have kept details of this with their Will.

Many personal representatives and family members are concerned by the cost of the funeral. Funeral expenses are payable by the estate and, although accounts will be frozen once a bank has been notified of the death, most will release funds for funeral expenses on production of the funeral director’s invoice.

4. What is the estate comprised of?

The estate consists of all assets owned by the person who has died. This can include property, bank accounts, shares, personal effects, etc. There may also be liabilities such as mortgages, credit cards, loans, outstanding utility bills, etc. Assets and liabilities may be held in the sole name of the person who has died, or in joint names with others.

Personal representatives are required to advise all companies of the death and obtain valuations for all assets and liabilities. The Inheritance Tax return must provide valuations at the date of death, including any accrued interest which has not yet been added to the account, but the value of any asset or debt may rise or fall during the administration period.

Debts are not automatically written off after death, but it is only the estate which is liable to repay them. Family members or beneficiaries do not need to repay any debts out of their own pocket. However, if a debt was in joint names with someone else (for example a joint mortgage), the surviving debtor will still be liable for the debt.

Once advised of the death, all sole accounts will be frozen, and each financial institution will have its own requirements for releasing the funds. Except for small balances, most will require sight of a Grant of Representation.  However, banks will usually release some of the money being held to cover funeral expenses or an Inheritance Tax bill. Joint accounts will usually be transferred into the name(s) of the surviving joint owner(s) without needing to produce a Grant of Representation.

A property held in the sole name of the person who has died will always require a Grant of Representation in order to be sold or transferred. There are different steps to be taken for jointly owned property depending on whether the property was held as joint tenants or tenants in common and if there was a mortgage.

5. Should you obtain a financial profile?

If you are unsure of the assets and liabilities in the estate, we can obtain a financial profile on your behalf.

A financial profile is a search which can be undertaken to discover any unknown financial accounts. This includes comprehensive enquiries with institutions including banks, building societies, share registrars, National Savings & Investments, life insurance providers and pension providers. It also includes enquiries with the Unclaimed Asset Register and a full credit report to identify any unknown credit accounts. Obtaining a financial profile ensures you have fully discharged your duties as the personal representative in investigating the extent of the estate and, even if you believe you know all of the assets and liabilities already, may uncover assets which the person who has died may have forgotten they had.

Inheritance Tax

An estate with a total value of more than £325,000 will usually be required to pay Inheritance Tax (IHT). IHT is charged at 40% of the value exceeding this £325,000 threshold. For example, if the estate is worth £425,000, only £100,000 is taxable and the amount of IHT due would be £40,000.

IHT is paid by the estate, not by any individual beneficiary, and should be settled within six months of the date of death. HMRC do not issue penalties for late payment of IHT, but they do charge interest. If it is necessary to sell a property before the IHT bill can be settled, it is usually possible to pay some or all of the amount due in instalments.

Some gifts made during the seven years before death may still be subject to IHT, while some estates qualify for exemptions which increase the tax-free amount. These include gifts to spouses or charities, or a gift of a residence to a direct descendant of the person who has died.

Whether IHT is payable or not, personal representatives must accurately report the assets and liabilities of the estate to HMRC when applying for a Grant of Representation. Some or all of the IHT bill will usually need to be paid before the Grant of Representation is issued.

6. What is a Grant of Representation?

In order for the personal representatives to be able to access, sell or transfer the assets in the estate, it will usually be necessary to apply for permission. Applications are made to a division of the court known as the Probate Registry. They review all applications and, if they are satisfied that the person or people applying are entitled to deal with the estate, they will issue a court order known as a Grant of Representation.

Most estates will usually only require a simple Grant of Probate (when there is a Will) or Grant of Letters of Administration (when there is no Will). However, some estates may be more complex and require a different or several types of application, while other estates may not require a Grant of Representation at all.

7. How long does it take to get a Grant of Representation?

Before an application for a Grant of Representation can be made, the personal representatives must investigate the assets and liabilities in the estate. The amount of time this can take can vary considerably depending on the number of different assets and liabilities, their nature and the financial institutions involved. In very simple estates, this may only take a matter of weeks, but in more complex estates, this can take several months.

Once the application for a Grant of Representation has been submitted to the Probate Registry, they can take up to eight weeks to process the application. In more complex applications, for example where an application is not being made in the name of the executors or where there are any issues with the Will, they may take considerably longer.

It is therefore difficult to provide an estimate for how long it will take to obtain a Grant of Representation. In very simple estates, it may be as little as three months, whereas in more complex estates, it may take six months or more.

If you instruct Jarmans Solicitors to obtain a Grant of Representation on your behalf, we will give you an informed estimate based on our experience and the nature of the estate you are dealing with. We will also keep you updated if it becomes apparent there are likely to be any delays with any third parties.

8. What do I do once I have received the Grant of Representation?

Once the Grant has been applied for and received, personal representatives should begin to lodge the document with the various banks, etc., together with any additional forms required to close the accounts. Once you have started to receive funds into the estate, you should settle any liabilities promptly, unless you believe there will not be sufficient funds to pay all of the debts.

The amount of time this process takes will depend on the complexity of the estate and how quickly third parties respond. It is also important to ensure personal representatives fulfil all of their legal obligations before they distribute the estate, otherwise they could become personally liable for any claims made against the estate after it has been distributed to the beneficiaries.

You should keep all estate funds in a separate account so that they can be accounted for separately from your own finances. If you instruct Jarmans Solicitors to deal with the administration of the estate on your behalf, we will keep the funds in our dedicated client account.

9. Who are the beneficiaries?

If there is a Will, the beneficiaries should be clearly identifiable. They may be gifted a specific cash sum, an item (for example jewellery or a car), or a property. Once all specific gifts have been made and expenses paid, the remaining funds are known as the residuary estate. Again, the Will usually states which beneficiaries receive this.

If there is no Will, the person who died is deemed to have died intestate. In these cases, the law sets out who is entitled to inherit the estate. If the person died intestate, it is important you seek legal advice to ensure all of the beneficiaries are correctly identified.

Unmarried partners will not receive anything under Intestacy, unless joint assets pass to them by survivorship or if all of the beneficiaries agree to vary the distribution by signing a Deed of Variation.

If you are unable to locate a beneficiary or are unsure how many people are entitled under Intestacy, it might be necessary to instruct specialist tracing agents to locate the beneficiary or build a comprehensive family tree. It may also be possible to obtain a special insurance policy to protect yourself from any future claim by a missing beneficiary.

10. How soon can I pay the beneficiaries?

Once you are sure all assets have been collected in and all liabilities have been settled, you can distribute the estate. If there is a delay in obtaining funds from any assets, for example if you are waiting to sell a property, it may be possible to pay any cash gifts and make an interim payment to the residuary beneficiaries.

You must be sure you have settled all liabilities and that no claims will arise before distributing the estate, otherwise you could be held personally liable. Claims against the estate by family members can be brought within six months of the date of the Grant of Representation, but service of such claim can take a further four months. Claims against the estate by creditors can be made beyond this, but there are steps you can take to protect yourself against creditors’ claims, such as placing legal notices or obtaining special insurance.

Beneficiaries are not entitled to inherit until they reach the age of 18, although the Will may stipulate a higher age or allow the personal representatives to make part or all of the funds available to them before that age. Some Wills may contain trusts which can last for many years. These usually involve property or beneficiaries who are unable to manage their own affairs.

If there are minor beneficiaries or trusts involved, it is important you seek legal advice to understand your responsibilities.

11. What happens if the liabilities total more than the assets?

If the total assets are insufficient to cover all liabilities, then the estate is known as an insolvent estate. Personal representatives are still responsible for administering the estate, but there is a strict order of priority for repaying debts which must be followed in all cases.

If you believe the estate may be insolvent, it is important you seek legal advice to understand your responsibilities.

12. What should I do if there is a dispute?

As with any matter, there is the potential for disputes to arise between executors, beneficiaries or third parties. Disputes may relate to the way the personal representatives are administering the estate, the validity of a Will, the distribution of the estate under the Will or family members who have been excluded from the estate.

Although claims have the potential to run for several months, it is important personal representatives keep the assets in the estate safe and do not distribute any funds to any beneficiaries until the claim is resolved, in case there is an agreement or court order to vary the distribution of the estate from the terms set out in the Will.

If there is a dispute, it is important you seek legal advice as soon as possible to understand your responsibilities as a personal representative.

13. What should I do if I don’t want to act as a personal representative?

If you have been appointed as an executor under a Will, or are entitled to take on the role of administrator under an Intestacy, but do not wish to act, then there are various options available. We can talk you through these at our meeting.

14. How can Jarmans Solicitors assist me?

We understand that the death of a loved one can be a difficult time and dealing with the complexities of an estate can be a stressful process. Our experience Private Client team can advise and support you along the way, providing an efficient service and minimising the distress for you.

The services we offer are:-

  1. An initial, no-obligation advice session;
  2. Obtaining the Grant of Representation on your behalf; or
  3. Dealing with the full administration of the estate on your behalf.

However you ask us to assist, we will provide you with all the advice relevant to the estate you are dealing with and explain the steps you need to take, or which we will take on your behalf.

Some Wills appoint the partners in our firm as the executors. In these circumstances, we will deal with the full administration of the estate in accordance with the wishes of the person who has died.

15. What do you need from a solicitor?

Our specific requirements will depend on the work you instruct us to carry out. However, in all circumstances, we will require sight of the Death Certificate and the original Will and any Codicils, or an idea of the family tree if there is no Will. We will also require details of all assets and liabilities.

If we do not have some of these documents, we may not be able to provide you with full advice or there may be a delay in starting work on your behalf.

16. How much will it cost?

An initial advice session will attract a one-off fixed fee.

If you instruct us to assist you with applying for a Grant of Representation only, we will usually charge a fixed fee, which we will advise you of at the outset of the matter.

If you instruct us to assist you with administering the estate, or if we are appointed as executors, we will usually charge for the time spent dealing with the estate plus a percentage of the value of the estate.

In all cases, we will explain how our costs are calculated at your initial meeting and confirm these in writing in our letter of engagement.

In addition to our costs, there may be other expenses which need to be paid, which are known as disbursements. These include the Probate Registry application fee, optional financial profile fee, etc.

In most cases, our fees are payable from the estate and not by any individual personal representative or beneficiary. However, we will usually ask for a payment when you first instruct us to cover any initial expenses (such as the Probate Registry or financial profile fees) and if we are only obtaining a Grant of Representation, we will usually ask for our final invoice to be paid before we pass the Grant on to you. If you need to pay our fees and disbursements out of your own pocket, you can claim them back from the estate before it is distributed.

Any other questions?

Should you have any other questions, or wish to make an appointment to see a member of our Private Client team, please feel free to call us on 01795 472291 or email us on enquiries@jarmans-solicitors.co.uk.