When someone close to you dies, you may find yourself with extra responsibility and paperwork just when you feel least able to cope with it. Our legal partner, Ashtons, offers a step-by-step guide to probate and administering an estate.
Working out the assets
If the total assets owned by the deceased at the time they died were less than £5,000 then the process will generally be straightforward. All you will need to do is write to banks, building societies and other bodies with a copy of the death certificate. As a result, they will release the funds to the surviving spouse or, if there is no surviving spouse, to the children.
Some banks and building societies will be flexible on this figure and release up to £15,000 or more if there are no other assets, such as a property. However, you may need a Grant of Representation if there is a property involved, or if you need to sell or transfer shares. If the total assets are higher than this, you will need to obtain a Grant.
What is a Grant of Representation?
- A Grant of Representation is a document issued by the Probate Registry which confirms the authority of the Personal Representatives to deal with the deceased person’s assets. There are two types of Grant: a Grant of Probate, which is issued to the Executors named in a Will; or, if there is no Will, then a Grant of Letters of Administration is usually applied for by the next of kin, who are known as the Administrators. Executors and Administrators are both known as Personal Representatives.
- To apply for a Grant of Representation, you will need to identify all of the deceased person’s assets and find items such as deeds, passbooks, bank books, share certificates and insurance policies. You must also establish the value of the deceased’s assets and details of any liabilities as at the date of their death.
- Once you have established the right person to apply for the grant, they will need to prepare a sworn statement made by the Personal Representatives, giving details including details of the deceased person and the gross and net value of the estate.
Inheritance Tax (IHT)
- Inheritance Tax (IHT) becomes an issue depending on the value of the gross estate and whether or not it exceeds the thresholds set by HMRC. The minimum threshold is £325,000, and different treatments below or above £1 million. There are also IHT exempt beneficiaries (surviving spouse, civil partner, charity). If the deceased made any substantial gifts within the seven years before death then these will also need to be taken into account and may affect the IHT due.
- It is usually possible to use the deceased’s bank or building society accounts to pay Inheritance Tax. If there is insufficient money available the Personal Representatives may sometimes take a short-term loan to pay the IHT and probate fees and then repay this when the assets in the estate are distributed.
- It is sometimes necessary to submit an Income Tax return to the date of death, and perhaps for earlier years. Capital Gains Tax issues may arise, particularly if assets are sold during the course of the administration of the estate for more than the probate value.
What happens next?
- Once the Grant of Representation has been received, this is registered wherever the deceased had any assets and any bank or building society accounts are closed. Any debts are then paid and cheques can be sent in respect of any legacies that were set out in the Will. When everything has been finalised, detailed accounts showing all receipts and payments must be prepared by the Personal Representatives.
- If you are a beneficiary of a Will and would like to give some or all of your inheritance to someone else, this may be possible through a Deed of Variation. There can be significant IHT advantages in doing this.
All in all it can be a time-consuming and demanding role to act as a Personal Representative. You may choose to instruct solicitors to assist with this process and the costs of this can be paid from the estate.
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Probate explained with Jason Butler
In the third episode of the second series of the Age Space Podcast, we take a detailed look at probate with our resident finance guru, Jason Butler. It is a useful listen for those getting to grips with probate, or if you’re just starting to think about the process.