What is probate and do we need it?
When most people use the word probate they mean the whole process of dealing with the money and property and belongings left behind when someone has died. This is the administration of the estate. A bank which holds money for the estate can ask to see a Grant of probate (when there is a Will or Letters of Administration when there is no Will) to assure themselves that they are handing over the money to the person who is authorised to deal with the estate and can be trusted to pass it on to the person entitled to receive it.
You will also need a Grant of representation when a property is being left after a death to someone who is not the marital or civil partner of the person who has died nor are they a co-owner who is related to the deceased person. Any property owned just by one person will need probate even if they were married and survived by their marital partner. This is often described as a property being ‘in sole name of…’ There are different ways of owning a property and this can influence whether probate is needed.
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You follow similar steps to the probate process described below but without needing to go through the probate application process. This means identifying what money there is, obtaining it, paying any debts and then following the instructions in the Will as to who any belongings and money goes to.
This is the same as when there is no Will – see the preceding section – but follow the Rules of Intestacy for who receives what has been left. If there is no need for probate the value of the estate is usually small so everything will go to a surviving marital or civil partner or if there is no surviving partner, everything is divided equally among the children.
The process of obtaining probate can be broken down into a series of steps which you need to follow in the correct order. If you employ a professional they will do some or all of these steps for you.
- Discover whether or not there is a Will and who will be responsible for dealing with the estate. See also We are not sure if there is a Will or not – how do we find out? and Is the Will valid?
- Find out about all the assets and liabilities (debts). This can take a while and may mean searching through all the paperwork left behind by the person who died especially if they were not very organised. Always note down the date and time of any conversations and who they were with. If you are posting letters you can ask at a Post Office counter for a proof of posting document but consider using services that require a signature on receipt for special items such as death certificates and later on, the grant of representation.
- Keep careful records of all of your actions as well as the details of the different assets and liabilities and the amounts involved.
- If you think there are bank accounts but you cannot find any details visit www.mylostaccount.org.uk which is a free service provided by the organisations representing banks and building societies and it also covers National Savings and Investments. You could also use the Unclaimed Assets Register www.uar.co.uk which is provided by Experian. There is a fee for using this service.
- If not already done, the asset and liability holders need to be formally informed of the death. You need to ask them for ‘the date of death value’ of accounts.
- If there is a property and the estate is below the inheritance tax (IHT) threshold, you can visit on-line property sites to obtain a value by looking at similar properties for sale in the same area. If IHT will be payable we would recommend getting a professional valuation as this will be checked by the tax authorities using the District Valuer.
- You also need to submit a value for any chattels. A round sum can be submitted for ordinary household items but you may need a professional valuation for special collections such as coins and medals, jewellery or paintings or antique furniture. This should be a current value if presented for sale.
- Complete the probate application form which is downloadable from www.gov.uk but cannot be submitted on line. Do download all the explanatory notes as they are very helpful to understanding how to answer the questions especially if you are at all uncertain.
- Complete an IHT form. Even if no IHT needs to be paid for the estate, you still need to complete the form. The forms are also downloadable from www.gov.uk. Read all the notes very carefully and this will guide you as to which forms you actually need to fill in.
- If you need to pay IHT this must be done at this stage to Her Majesty’s Revenue and Customs. Once this process is completed you can apply for the grant of representation. Otherwise you send both the probate application and IHT form to the nearest Probate Registry (addresses are on www.gov.uk). You will be sent an appointment to attend the Probate Registry (actually part of the courts system but you won’t be in a court room with judges or anyone wearing strange robes and wigs). When you are there, personal representatives have to swear to the truth of the information they have submitted and to follow the legal processes required in administering the estate.
- Once you have received the grant of representation you can contact all the banks and other asset holders to ask them to release their funds to you.
- It is then essential you pay creditors before releasing any funds to beneficiaries.
- You then need to finalise what are called the estate accounts. These summarise all the money coming into the estate and what is being paid out. A personal representative can claim expenses such as postage and essential travel but not for their time unless they are acting in their professional capacity e.g. a solicitor.
- You can then distribute the estate to the beneficiaries. Specific legacies such as ‘I give a £1000 to…….’ take priority over the residuary beneficiaries.
- Keep your records of the estate for 13 years.
Although the document issued by the court is called a grant of Letters of Administration rather than probate when there is no Will all the procedures to be apply for the grant are the same as when there is a Will. The person responsible is called the administrator instead of executor and this should be the closest relative. Distribution of the estate is according to the Rules of Intestacy which are laid down in law and which have recently been changed to give a greater share of the estate to a surviving married or civil partner. Unmarried partners inherit nothing under these Rules and if they have been financially dependent on the person who has died, they should consult a solicitor as soon as possible. They can make a claim on the estate for themselves – which would involve a court process, or if they have children under the age of 18 jointly with the person who died they can administer the estate for the benefit of their children using the normal process.
The following are the commonest taxes that may have to be paid when someone has died. Only a fairly small number of estates have to pay tax
- If it seems possible that the person who died may have owed income tax or other taxes from while they were still alive either from their work of investment earnings, contact Her Majesty’s Revenue and Customs (HMRC). It is also possible that HMRC may send an R27 form to the person dealing with the estate. Complete this form or pass it to your probate professional. This form helps HMRC to check if there any outstanding taxes to be paid out from the estate of the person who has died. It will also help them find out if the person is owed a refund of tax that HMRC needs to pay to the estate.
- Inheritance tax (IHT)
Inheritance tax is never paid on an estate that passes from a husband or wife to their surviving marital partner or when an estate is left to a civil partner.
If an estate passes to someone(s) other than a marital/civil partner inheritance tax is only paid on the balance of the estate over a certain threshold, which may be increased or decreased in the Annual Budget of the Chancellor of the Exchequer or announced in the Chancellor’s Autumn Statement. IHT is paid on the value of the estate (the value of everything in the estate) over £325,000. Estates valued below this figure are often referred to as being in the ‘nil rate’ band.
If the entire estate on the death of a husband, wife or civil partner passes to the other spouse, when the second partner dies, the nil rate exemption from the first death can be transferred to the second death which means IHT is only payable on estates worth over £650,000.
Inheritance tax must be paid before probate can be granted. If it has not been paid within 6 months of the death the tax payable has interest added. If the tax has not been paid within a year of the death, fines for late payment are also added. The only exception to this rule is when IHT is payable due to a property in the estate. In this case a first instalment must be paid within 6 months and the remainder spread over a number of years. This is a situation in which it would be advisable to use a probate professional to help with administering the estate.
- Income tax on the estate: If the estate earns money during the period of administration e.g. from rented properties or interest on accounts, this tax will need to be paid at the end of the process before the residual beneficiaries are paid.
- Capital gains tax (CGT): This may be payable if a capital asset such as a property or a painting has increased significantly in value between the date when it was valued for the estate and when it is eventually sold. Seek advice from a probate professional.
You can find out much more about these taxes on the Her Majesty’s Revenue and Customs (HMRC) section of www.gov.uk together with the contact telephone numbers you may need to their specialist probate and tax helplines and to be able to download all the forms you may need. Type probate into the internal search box to bring up the relevant sections.
Except for the funeral bill which a bank will usually pay directly to the funeral director, it is better to keep money from the estate in a separate account. Most banks will allow you to open ‘an executor’s account’ once you have the grant of representation. However one bank may want to release money to you immediately even though banks for other accounts require you to go through probate. It is safest to leave the money where it is until you can transfer everything to the executor’s account.
If a property is to be sold, you can place it on the market before a grant of representation is given but you cannot sell it. Take advice from an estate agent before deciding when to market the property. Do use a legal professional for the process of the sale and transfer of title. If a property is being transferred into the name of a co-owner without the need for probate you can contact the Customer Services Department at the Land Registry who will explain the process to you and any fees involved. You will not normally need to use a legal professional for this.
You do not have to wait until you have a grant of representation to deal with non-valuable chattels. If you have to give notice on a rented property for example, it will be best to clear the property as soon as possible to avoid paying unnecessary rent from the estate. Household items that are not specifically mentioned in a Will may still be significant emotionally for family members, so be careful to check with immediate family members before disposing of anything, whether by sale or other means. Family may also agree to close friends being offered small items as a recognition of their friendship.