a guide to probate
INTRODUCTION
“Probate” is the term applied to the general act of winding up the estate of somebody who has died. An estate is wound up by executors – those named in the deceased’s Will – or by administrators – those appointed by statute where there is no will or no appointment made by the Will. Collectively, these people are known as “Personal Representatives” (“PRs”).

The winding up of an estate can generally be broken down into the following steps:
  • establishing the extent of the estate;
  • gathering in the deceased’s assets;
  • paying the deceased’s debts and addressing his liabilities; and
  • distributing his estate according to his Will, or law.
This practice is known by practitioners as the “Administration of the Estate”, which refers to all of the steps which need to be taken before the estate can be completely wound up.

It is the PRs’ responsibility to administer the estate properly and efficiently.

THE GRANT OF REPRESENTATION
The PRs of most estates will require a grant before they can start properly administering the estate. The grant - a document issued by the Probate Registry - is a certificate which proves the personal representative’s right to deal with the deceased’s property. Thus, once the grant is issued, bank and other financial accounts can be dealt with, property transferred or sold, etc.

There are different types of grant:
  • A Grant of Probate - given when the deceased left a Will;
  • A Grant of Administration - given when the deceased died without a Will (“intestate”);
  • A Grant of Administration with Will Annexed - given when the deceased left a Will, but either it is partially invalid, or it does not deal with all of the estate, or the named executors are unable or unwilling to act.
Some assets can be dealt with without a grant. These include:
  • Assets jointly held;
  • Life assurance policies written into trust;
  • Assets of low value (usually those worth less than £5,000 – this is at the discretion of the asset holder);
  • Personal chattels
  • Partnership assets
APPLYING FOR THE GRANT
Where the estate left by the deceased is small, it is sometimes possible for the assets comprising the estate to be gathered in without having to make an application for a grant. The law is permissive on this matter – that is, it is up to the asset-holder to determine whether it wishes to see a grant or not. However, generally if the estate is straightforward and there are not many assets, most institutions (banks, building societies etc) will release the assets without requesting to see the grant.

In most cases however, a grant will be required.

The application process requires an Oath, sworn by the PRs, and accompanying documents to be delivered to the Probate Registry (although applications made by PRs without professional representation are now made on specific simplified forms). The Oath is a document whereby the PRs give various details relating to the deceased and his estate, swear to the validity of any Will or codicil, and affirm that they will administer the estate properly and correctly.

No grant will be conferred until any Inheritance Tax due has been paid to the Inland Revenue’s Capital Taxes Office.

INHERITANCE TAX
Inheritance tax (“IHT”) is calculated by completing Inland Revenue Accounts – which detail the extent of the deceased’s estate for IHT purposes (note that this can differ from its value for the purposes of getting the grant). Sometimes there will be no IHT payable – either the value of the estate will fall within the Revenue’s “Nil Rate Band” (and will accordingly be charged at 0%); or any amounts due will be exempt or subject to reliefs.

However, whether or not IHT is payable, the PRs will have to complete Inland Revenue account forms (although the complexity of the forms varies according to whether tax is due or not). For this to be accurately done, the PRs will have to have a complete and accurate picture of the deceased’s estate, as well details of gifts made during his / her life.

PRs are liable for the payment of inheritance tax, and can become personally liable if the Revenue Accounts are incorrect, leading to an underpayment. If IHT due is not paid within six months after the end of the month in which the deceased dies, the Revenue will also charge interest on the outstanding amount (currently 4%).

HOW TO FUND THE IHT / FUNERAL COSTS / GRANT COSTS
A problem facing many PRs is that they cannot get access to the deceased’s funds without a grant, however they cannot get a grant until they have paid the IHT. Further, there might be difficulties meeting immediate costs facing the estate, such as funeral expenses and the cost of getting a grant.

There are various options available, including negotiating the payment of tax directly from the deceased’s bank, and securing a bridging loan.

POST GRANT ADMINISTRATION
Having received the Grant, the PRs will have full authority to undertake the remainder of the administration of the estate, namely:
  • collecting the deceased’s assets;
  • paying any outstanding expenses and debts;
  • distributing the legacies in accordance with the will or law; and
  • completing the administration and distributing the residuary estate.
Due care and diligence is required in completing these tasks, in particular with regard to the payment of debts and taxes. Generally the residuary estate – that is, what remains of the estate after legacies have been paid – will bear the cost of the estate’s outgoings. However, this is not always the case, and in some circumstances, outgoings will be shared by all beneficiaries.

The gathering in of assets is not without its own problems; the PRs should, before they start distributing the estate, satisfy themselves that all assets have been accounted for. Property manifesting itself after an estate has been “completed” can give rise to enormous complications and logistical difficulties.

The PRs will also have to have due regard to the validity of receipts given for legacies, and the competence of beneficiaries to give good receipts.

ESTATE ACCOUNTS
Before the administration of an estate can be completed, the PRs must get a discharge from the residuary beneficiaries. This will only be valid if there has been full disclosure of the estate assets, the outgoings and expenses, and the balances available for distribution.

To this end, PRs have a duty to maintain estate accounts. These should give a clear and accurate statement of the estate property and income, and contain full details of all receipts and payments. They should be supplemented by accounts for the residuary beneficiaries, detailing the manner in which the bequests to them were met.

CONCLUSION
The role of Personal Representative is an important one, the duties of which must be carried out with care and responsibility.

At Clegg Manuel we understand the demands of the role, and the problems and difficulties which can arise. If you have any queries about your position as Personal Representative, need any advice, or think that you might want to delegate some of your responsibilities, feel free to contact us. We’ll be happy to help.

©Clegg Manuel 2008
 

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