When someone dies, in order for their property, money and possessions (their ‘estate’) to be dealt with, someone else needs to be given the legal right to do so.
If the person who died has left a Will, then the executors appointed in it will have that right. If there are significant assets to deal with, it will be necessary for the executors to apply for a grant of probate to be able to deal with them in practice. The executors will then be obliged to carry out the terms of the Will.
If the person has not made a Will, no one has the right to administer their estate and someone will need to apply for letters of administration to obtain that right. There are rules about who can apply and who has the priority in making such applications. The people granted the letters of administration then have to follow the rules of intestacy in distributing the estate.
The process for applying for probate or letters of administration is very similar.
- The whole estate needs to be valued and reported to HMRC for inheritance tax purposes: accordingly, organisations such as banks or utility providers need to be contacted in order for the person’s assets and liabilities to be valued.
- Depending on the overall value of the whole estate, determines how much inheritance tax (if any) will need to be paid on the estate. If the estate is wholly passed to the deceased’s spouse or civil partner or a charity, then inheritance tax will not need to be paid. Also, if the value of the entire estate (including lifetime gifts) is below the Tax threshold of £325,000 then inheritance tax will not be paid. Alternatively, if the deceased had decided to give their home to direct descendants, then this could make the tax threshold higher.
- Subject to certain exceptions, inheritance tax due in relation to the estate normally has to be paid before a grant of probate or letters of administration can be issued.
- An application to the Probate Registry for the appropriate form of grant is also required and this is increasingly moving online. A fee is payable for this service.
- It is the duty of an executor or administrator, it is their responsibility to pay any inheritance tax due, collect the estate’s assets, pay off any debts and distribute the assets to the named beneficiaries within the Will, or under the rules of intestacy. If they fail to carry out their duties properly, they will be personally liable for any loss to the estate or the beneficiaries of the estate. It is vital therefore not to make distribution of the estate too soon, or in the wrong order, and to know what steps can be taken to protect against the risk of incurring personal liability.
This may sound complicated, but this is something here at Pro-law that we deal with regularly, so we can help. We can take some of the stress away from you. We have detailed the process here for transparency and to increase accessibility to legal information. Do not hesitate to contact us today for help with Probate and Administration.