Probate & estate administration

The administration of an estate involves both practical and legal steps. Those steps can include:

• Arranging for payment of the funeral director’s fees
• Writing to all asset and liability holders to confirm the value of the assets at the date of death
• Ensuring that any property is secured and insured
• Identifying all of the beneficiaries and the terms upon which they receive an asset in estate, either by correctly interpreting any will or by correctly applying the intestacy provisions
• Completing the relevant Inheritance Tax returns, calculating any tax that may fall due, ensuring the appropriate tax reliefs are claimed and arranging for payment of the tax
• Preparing an appropriate application, arranging for it to be signed and, thereafter, for all forms and the appropriate fee to be sent to the probate registry to apply for the grant of representation
• Placing statutory adverts for creditors and other claimants in the London gazette and local newspapers
• Setting up any trusts created within the will or by operation of the intestacy provisions
• Completing any income tax or capital gains tax returns as may be required on behalf of the estate
• Collecting in assets, including arranging to close bank accounts and investments and receiving the closing balances and completing stock and share transfer forms
• Dealing with any agricultural and business assets
• Dealing with overseas lawyers where there are assets in other jurisdiction
• Paying all debts
• Arranging the sale of any estate property or the transfer of it to the beneficiaries

If there is no will, the deceased is said to have died “intestate” and their estate is distributed in accordance with statutory rules. In such cases, a grant of letters of administration is obtained, normally by a close relative.

A grant of representation is a court order issued by one of the probate registries. It confers authority on the personal representatives (executors or administrators) to administer a deceased person’s estate.

There are a number of types of grant of representation but the two that are most common are:

1. Grant of probate
   A grant of probate is issued to the executor, or executors, named in the will and it confirms the authority of the executors appointed by the will.
2. Grant of letters of administration
   A grant of letters of administration is issued where there is no will, where there are no executors appointed in the will or where the named executors do not take up the office. A grant of letters of administration is issued to the persons entitled in law to act as the deceased person’s administrators.

Personal representatives are obliged to administer the estate of the deceased according to law. This involves collecting in all the assets, settling all the liabilities, and distributing what is left in accordance with the will or the rules of intestacy. Usually, apart from joint property which passes automatically to the surviving co-owner(s), a grant of representation has to be obtained before it is possible to gather in the assets and discharge the liabilities of the estate.

There are a large amount of variables, often relating to third parties, that can affect the length of time it takes to administer an estate but, on average, most estates are dealt with within 12 months.  In straightforward cases, it is usually possible to make the application for a grant of representation within three months from the start of the administration.

During the course of the administration, we will provide updates on at least a monthly basis to the beneficiaries and personal representatives (this will be more frequent at times, if there is significant progress to report).

The tax position in relation to a deceased person’s estate can be complicated, but we will ensure that it is resolved and that all tax due is paid as quickly as possible, with a clear explanation provided to the beneficiaries.

The taxes usually relevant are:

Inheritance tax

This is a tax payable on the net value of estates (after the deduction of liabilities) over a certain threshold (known as the nil rate band). The nil rate band available for an individual is currently £325,000, and tax is payable at a rate of 40% on assets exceeding the nil rate band. It may be possible for nil rate bands to be transferred between spouses, and there is also an additional residence nil rate band available in some circumstances where properties are left to children or grandchildren.

There are certain exemptions and reliefs available in respect of inheritance tax. These exemptions and reliefs can arise as a result of the recipient of the estate (such as gifts to spouses or civil partners, or to charities) or the nature of the assets in the estate (such as certain agricultural or business assets).

Any inheritance tax owed must be paid before the estate can be distributed and is usually settled from available estate funds. We will ensure that the appropriate inheritance tax is calculated and agreed with and paid to HM Revenue and Customs, to include the application of all available exemptions and reliefs.

Capital Gains tax

An estate may have to pay capital gains tax if an asset increases significantly in value during the course of the estate administration. We will ensure that any capital gains tax due is calculated and paid from estate funds. Where possible, we will consider passing on assets to beneficiaries for them to sell themselves, so any capital gains will be taxed in the hands of the beneficiaries.

We will also advise beneficiaries of the probate value of any estate asset passed to them, for their own future tax purposes.

Income tax

Income tax will be payable on any taxable income received by the estate, at the rate applicable at the time, and we will ensure that this is paid and the appropriate tax returns submitted

Section 160 of the Inheritance Tax Act 1984 provides that the value of a freehold or leasehold property for inheritance tax purposes is:  “the price which the property might reasonably be expected to fetch if sold in the open market at that time.”

The wording “at that time” means immediately before the death; so the valuation should be the value on that date, and not as at the date the valuation is actually carried out.

It is recommended that a Royal Institute of Chartered Surveyors (RICS) “Red Book” valuation is obtained, particularly where an estate is likely to be subject to inheritance tax.

You can find a RICS surveyor local to you using the “Find a Surveyor” tool.

Alternatively, you could instruct a property management company to assist with obtaining a valuation.

If you are concerned that the person who died may have owned accounts, insurance policies or other assets of which you were not aware, you can consider carrying out a search for missing assets.  There are companies which can assist with these searches, for a fee. At My Lost Account you can carry out a free search for accounts that may have been unused for the last 15 years.

If a will cannot be found, you should consider taking the following steps:

• search the deceased’s property and make enquiries with family members;
• contact firms of solicitors, will writers and banks with which the deceased had an association, to check if they may hold a will or any record as to the whereabouts of a will; and
• consider placing advertisements inviting anyone with knowledge of a last will and testament to come forward.
• consider a search of a national wills register such as the Certainty wills register, but be aware that there is no requirement to register wills, so the fact a will is not registered does not necessarily mean there is no will (or if a will is registered, that it is the last will). There is a fee for the search.

Under section 27 Trustee Act 1925, personal representatives may place advertisements in the London Gazette and a newspaper local to where the deceased owned property or carried on a business, requesting that any persons with a claim against the estate make themselves known to the PRs within a period of at least two months and one day from the date of the notices.  After that period, the personal representatives will not be personally liable to any claimants who come forward after the notices expire, if they have already distributed the estate.

It is important for the personal representative to make sure you have adequate insurance in place for any property owned by the person who has died.  You will need to contact the existing insurance company to advise them if the property has become unoccupied, obtain an updated policy schedule and ensure you comply with any unoccupancy conditions (such as keeping the heating on or draining down water).  If you cannot find the insurance details, you will need to set up a new policy by contacting an insurance company or broker.

If you cannot find a beneficiary who is named in the will or who benefits under the intestacy rules, you may need to instruct a tracing company, or genealogist, to help.

If the person who died left money in a bank account, it is usually possible to arrange for the bank to pay the funeral invoice.  If you provide the bank with a copy of the death certificate, and the funeral invoice, they will usually pay the funeral director direct by bank transfer or cheque.

A personal representative (executor or administrator) has a duty to administer the estate in accordance with the law and the terms of the will. The role involves a high level of responsibility, and personal representatives are personally liable for their actions.

There are numerous duties involved in the role, and these include:

• Propounding the will – this means making an application to the court for probate.
• Maximising the estate – ensuring that the highest possible value for the estate assets is obtained for the benefit of the beneficiaries.
• Paying the correct amount of tax for the estate.
• Preparing an inventory and account for the estate.
• Neutrality – an executor must be neutral and cannot favour one beneficiary over another.
• Identifying, safeguarding and dealing with all the estate’s assets.
• Identifying and dealing with any valid claims against the estate.