Navigating Probate – A Guide for Executors
Losing a loved one is a challenging time, and if you've been tasked with serving as the Executor or Personal Representative of their estate, you may be feeling overwhelmed. To help, we've created this guide to clarify the steps involved, aiming to provide some support during this difficult period.
First Steps
It can be very difficult to know what to do when a loved one passes away and often, there is not a lot of help readily available for Executors and Administrators (also known as Personal Representatives). After registering the death and planning the funeral, family members and friends frequently find themselves at a loss with what to do with assets such as bank accounts, pensions and even the family home.
Firstly, you must determine whether probate is required. Most financial institutions will usually request sight of a Grant of Probate or Letters of Administration (collectively titled the Grant of Representation)
Probate is not required in certain situations, for example:
- Jointly owned property
- Joint bank accounts
- Estate consisting of mainly cash (bank notes and coins) & personal possessions
- Assets consisting of life insurance policies or pension lump sums which fall outside of the estate
In all other cases, probate is usually required.
To apply for probate, Personal Representatives will need to gather details of all the assets and liabilities of the deceased. In some cases, assets may have been forgotten about but there are tools available to assist Personal Representatives who find themselves in this situation. Asset Searches can be arranged with companies using the deceased’s personal information to locate missing or dormant accounts including bank accounts, pension policies and even unknown debts.
Once you have gathered the initial details of the estate assets and debts, you can begin to contact the relevant financial institutions to request the value of each asset as at the date of death, as well as the amount of any outstanding debts. These details are required to prepare the application for the Grant of Representation.
The next step is to determine the inheritance tax, if any and legal advice should be sought as Personal Representatives may be personally liable for any unpaid tax. The necessary HMRC forms and probate application must then be prepared and submitted to HMRC and the Probate Registry.
Inheritance Tax
Inheritance Tax (IHT) submissions must be made to the IHT department at HMRC by reporting the estate using forms IHT400 and accompanying schedules. IHT must be paid at the end of the sixth month following the date of death before interest begins accruing. Tax must be paid before probate can be issued by the Probate Registry. This can be a big worry for Personal Representatives but there are several options for settling the initial IHT, including available funds within the estate, obtaining an executor's loan or in some limited cases, obtaining a credit from HMRC. HMRC’s instalment option may be available for estates in some circumstances where there are insufficient liquid assets to pay the IHT.
In cases where there is no IHT due, you can usually apply directly to the Probate Registry if the deceased died after 1st January 2022. However, for deaths before 31st December 2021, an IHT205 will also be required.
Probate applications can now be made online or on paper depending on the circumstances of the deceased. Incorrect applications may be rejected by the Probate Registry which may cause significant delay and therefore great care should be taken when preparing the application.
After You Have Received The Grant
Once the Probate Registry has issued probate, you can deal with the estate assets. This includes closing accounts, selling, or transferring investments and property to collect in the funds.
It is paramount for all estate funds to be held in a separate bank account, also known as an ‘Executor’s account’ to ensure estate monies are not mixed with your personal funds, which may be a breach of your obligations as Personal Representative. You will not be required to open an Executor’s account if you have instructed solicitors to act on your behalf, as firms will have their own client account to collect estate funds for you.
When the estate funds have been collected, you must then settle all outstanding debts of the estate. This includes utilities, loans and any additional debts which have arisen during the estate administration. Personal Administrators are entitled to be reimbursed for reasonable out of pocket expenses they may have incurred in their role during the estate administration. There is no conclusive list of expenses as every estate is unique but a precise record of all expenses and receipts must be kept and recorded in the Estate Accounts at the end of the administration period. Unless specific provision has been made in the Will, Personal Representatives cannot claim for the time they have incurred.
Final Steps
Estate Accounts should be prepared by the Personal Representative to account to the beneficiaries for all the estate assets and debts. The Income Tax and Capital Gains Tax position must be reviewed, and the filing of tax returns may be necessary in certain situations.
Lastly, the distributions can be arranged to the beneficiaries. The beneficiaries will either be named in the Will, or they will be the individuals entitled to inherit under the rules of intestacy.
We understand that handling an estate can be a complex and emotional task. We hope this guide serves as a helpful starting point in your journey as an Executor or Personal Representative.
