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Understanding Probate

For most people, the probate process is a complete unknown.  This is entirely understandable, after all, how many people put full thought into the mechanics of how their estate will be managed on their behalf?

If you have been asked to administrate a Will, it is important to have a solid understanding of the steps you will need to take, to ensure that matters are conducted in accordance with the wishes of the deceased person, to protect the inheritance to be distributed, and to conform with the legal and taxation requirements of probate.  

22 September 2020
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What is Probate?

Probate is the legal procedure which must be carefully followed in order to distribute the estate of a person who has died.  Regardless of whether a Will has been created or not, probate must still be carried out, with the process being broadly the same for either scenario.  If a person has written a Will, they would have nominated an Executor to handle their affairs, but if no Will exists, the right to administer a Will can be applied for; the appointed person then becomes an Administrator.

An estate may consist of money, assets (e.g. property, investments, or shares), businesses, trusts, and personal possessions.  It is the role of the Personal Representative (PR) (i.e. the Executor or Administrator) to manage and distribute these as part of the inheritance, paying any outstanding debts and taxes due first.

It is essential that probate is carried out correctly as the PR may be liable for mistakes made.  Beneficiaries or creditors may lodge a claim if they have reason to believe they have lost out due to errors during probate, and likewise, beneficiaries may be pursued by creditors if they have no direct recourse against the PR.  As such, it is imperative to carry out the probate process with as much diligence and care as possible.  For this reason, many PRs elect to appoint a probate Solicitor to avoid the potential for any mistakes.

What are the steps it the Probate process?

The immediate priorities will be to ensure the death is formally registered with the local register office, then to review the Will (if it exists) to confirm who has been nominated as Executor, and also the wishes of the deceased for their funeral.  

The PR will then need to:

Step 1: Collate details of the assets and debts of the estate

One of the first tasks of the PR is to collate an up to date list of all assets, cash, and debts.  

Step 2: Notify interested parties of the death

The next stage is to notify interested parties of the death, including:

•    Those holding the assets of the estate
•    Creditors - businesses and individuals who are owed money
•    The Government - using the ‘Tell Us Once’ online service.  
•    Placing a deceased estate notice in the local newspaper to protect against any future claims by creditors

To save time during this process, you can use the online Death Notification Service, which will update the records of 18 different banks and building societies.
We recommend that when completing the notification process, where appropriate, to include a copy of the death certificate, and also request the latest status (i.e. account balance, amount owing, life insurance due, and pension balance), and any other relevant details.

Step 3: Apply for a Grant of Probate

•    If the deceased left a Will, the named Executor will need to apply for a ‘grant of probate’.  
•    If the deceased did not leave a Will, the spouse, civil partner, or child will need to apply for ‘letters of administration.’
Both the grant of probate and the letters of administration can be requested online and will formally confer the right the handle the estate on behalf of the deceased.

Step 4: Calculate and pay Inheritance Tax (IHT) to HMRC

The probate process requires that IHT (the current standard rate being 40%) must be paid before the estate is dispersed to other creditors and beneficiaries.  
There is no IHT due on estates with a value of less than £325,000, or if the deceased passes everything over this value to their spouse, civil partner, a charity or a community amateur sports club – this is the basic IHT threshold.
A married couple may also pool their tax-free allowance if they leave their estate to one another.  So, if one spouse passes on their estate of £650,000 to the other, upon the latter’s death, there is no Inheritance Tax to pay.
Beyond this, under the ‘residence nil-rate band’ (RNRB), if a home is left to children or direct descendants, the tax threshold before which tax is payable is raised by £150,000 (for 2019/2020).  If a married couple combine the basic IHT threshold with the RNRB, inheritance tax may not be payable for Estates worth £800,000 or less.
Having carried out the necessary calculations, if it is determined IHT is due, this will need to be paid immediately.  It is important to note that the grant of Probate will not be issued until the payment to HMRC has been made, meaning you cannot distribute the estate until such time.  You may be able to pay the IHT from the bank account of the deceased, or it may be necessary to take out a loan which can be later repaid from the proceeds of the estate.

Step 5:  Payment of outstanding debts

Once IHT is paid, the next stage is to repay any loans or debts owed.  Depending on the amounts due, there may not be sufficient cash available in the bank accounts of the deceased; hence it may be necessary to liquidate some assets to do so.  There are a number of potential potholes when selling estate assets, including Capital Gains Tax (CGT) liability if property within the estate has risen in value since the death.

Step 7: Distribute the Estate to beneficiaries

Once the grant of probate or letters of administration are available, it is then possible to distribute what is left of the estate, in accordance with the deceased’s wishes (if a Will exists) or according to the rules of intestacy (if no Will exists).  Funds should be placed into a dedicated Executor bank account, and once all creditors are paid, inheritances can be distributed to individual beneficiaries.

Wrapping up

Probate can be deeply intricate, especially where there are complex family arrangements, several types of assets, businesses, and other legal jurisdictions involved.  Given the liability of the PR to get things right, if you are unsure in any way, seek the assistance of a probate Solicitor.  They will remove the burden of the process from your shoulders, giving you the confidence that your duties and responsibilities will be completed according to the wishes of the deceased, without exposing you to personal liability.

Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey.  We have a highly experienced private client law team who can assist you with all Probate matters.  To make an appointment, please call us on 01932 840 111.