Probate – Administering Estates
Administering an estate is the process of winding up someone’s affairs immediately after they have died.
Probate and Letters of Administration
Probate has become an umbrella term for estate administration, but in fact it means obtaining a Grant of Probate and administering the estate where there the deceased left a will. Where there is no will, the same process is called obtaining Letters of Administration.
Both are the legal processes that you have to go through in order to gather in, sell or pass on someone’s property, possessions and money. Administering the estate includes dealing with all the tax consequences of this, and passing the estate to the beneficiaries.
The executors (see below for more information) of the will can apply for probate but as the executors are often relatives of the deceased and in a period of grieving, solicitors are often appointed by the executors to deal with probate on their behalf. Where there is no will, family or friends are often appointed as administrators (the same as executors where there is no will).
The basic steps of estate administration are as follows:
If there is a will:
- Value the estate and report it to HMRC.
- Pay any inheritance tax.
- Make an application for a Grant of Probate at the District Probate Registry
- Collect in the assets of the deceased including money after the sale of property or shares.
- Pay off all debts including utility bills.
- Keep a record of how the estate will be split amongst the beneficiaries of the will
- Pass the relevant assets to the beneficiaries of the will.
- Deal with the tax consequences of the person’s death, including considering Capital Gains Tax, Inheritance Tax and Income Tax for the last period of the deceased’s life, and the administration period.
If there is no will:
- Make an application for a Grant of Letters of Administration.
- Follow the same process as above.
Locating the most up-to-date will
Normally, family members or the executors (often both the same people) will know where to locate the will because they should have been told where to find it by the deceased. However, if it cannot be found after a search of the home of the deceased then you should try and locate their solicitor as it may have been deposited with them for safekeeping. Alternatively, it may have been deposited with the London Probate Department.
If the will still can’t be found, there are various other steps that can be done to ensure there really is no will, and you should seek professional advice on these.
Once the will has been found it should be checked to ensure it is the most up-to-date version.
Executors and Administrators
Executors are the people empowered by the will to undertake the estate administration. They are called administrators where there is no will.
They only receive assets of the deceased if they have been named in the will as a beneficiary.
Depending upon the number of executors appointed, up to four may apply for probate. Each executor applying for probate will need to legally declare that the information in the probate application is true.
The local probate registry may be able to help if it is difficult to locate the other executors.
An executor cannot apply for probate if they do not have mental capacity.
Those executors that do not want to carry out the work of the executor may:
- Give up the right (called ‘renouncing executorship’) to apply for probate by completing a form.
- Apply at a later date by reserving a legal right to do so.
- Appoint an attorney by completing a form. This can be useful if you want your solicitor to sign documents on your behalf, or if you live abroad.
Application for Probate
An executor of the will can apply for probate or the executors can appoint a solicitor with specialist knowledge or a person licensed to provide probate services.
- Value the estate and report to HMRC
Before applying for probate the executors must first estimate the value of the estate as inheritance tax may be payable.
At this stage it is also a good idea to communicate the death of the deceased to utility companies, banks, insurance companies etc so that they do not start sending reminder letters if bills have not been paid on time. If an insurance policy is about to expire, say buildings insurance, the executors may need to apply for a new policy to ensure that an ‘all risks’ insurance policy is in place until the property is sold or passed to a beneficiary. If you ask a solicitor to help, they will do all this for you and ensure that any third parties correspond with them, so it is a good idea to seek professional advice before carrying this out.
- Pay any inheritance tax
At this stage and without a proper valuation it may be difficult to determine the true value of the estate, but based upon the estimate some inheritance tax may be payable before you are able to obtain probate. You can be refunded by the estate or the beneficiaries if you pay inheritance tax out of your personal funds, and there are other ways of paying tax if you cannot personally. This can be complex and it is advisable to seek professional help.
- Make an application for probate
Your solicitor will do this for you as part of the estate administration process.
If you do not appoint a solicitor, you can make an application by post or if the deceased lived in England or Wales and if you have the original will, the original or interim death certificate and have already reported the estate’s value you can make an application for probate online. You will still need to send the original documents by post to the local Probate Registry office together with the applicable fee. A grant of probate (or letters of administration in the absence of a will) should be sent to you within about 20 days.
- Collect in the assets
A copy of the grant of probate is sent to the organisations that hold the assets, for example the bank or building society, National Savings and Investments, pension providers and estate agents if property is to be sold.
Money in a joint bank account automatically passes to the other account holder.
If the deceased held property with another as a ‘joint tenancy’, ownership passes to the other owner. Otherwise, their share goes to the beneficiary named in the will.
If you appoint a solicitor, the monies will be held in their client account until the beneficiaries are paid. If no solicitor is involved, the executors will have to set up a bank account in which to transfer the assets of the estate. This is called an ‘executorship account’.
- Pay off all debts
Once the executors have obtained access to bank accounts and realised the sale of assets they will be able to pay all outstanding debts including utility companies, mortgages, HMRC, online accounts etc.
They can also pay any overpaid pensions, attendance allowance, and settle any income tax or capital gains tax for the last period of the deceased’s life or for the administration period (both these taxes still apply to the estate and the executors are liable to ensure they are paid from the estate).
It may be necessary to place an advert in the Gazette to notify creditors so that they have a chance of claiming any sums owed.
- Record how the estate is being split amongst the beneficiaries.
The executors will need to keep a record called ‘estate accounts’, which record the amount of money that has been realized from the assets, the amount of the debts paid and how any money, property or possessions are being split between the beneficiaries. The accounts should be signed by the executors and in some cases, the beneficiaries.
- Distribute assets to the beneficiaries of the will
Once the estate accounts are agreed, the executors must distribute all the assets to the beneficiaries in accordance with the instructions in the will.
If there is no will the law of intestacy (see separate section) dictates how the assets shall be distributed.