Understanding The Probate Process

Probate is the legal process of administering a person’s estate, including their property, money, and possessions, after they pass away. It is sometimes also referred to as ‘estate administration’.

Registering the Death and Arranging the Funeral

On a person’s death, the first action to be taken is to register the death and then arrange the funeral. Whomever registers the death, regardless of whether they are nominated as the Executor in a Will, is the person responsible for arranging the funeral. Please also note that they may be responsible for the initial costs, but as the funeral is the first debt of an Estate, this person can make a claim back from the Estate for the funeral costs as expenses. Alternatively, if there are funds in the deceased’s bank account, the funeral invoice can be submitted to the bank, and they will pay the funeral directors direct.

Establishing the Will and Executors

If there is one, it is important to establish where the original Will is once someone has passed away and note who has been appointed as Executor(s). If held with a firm of solicitors, they will require a copy of the death certificate, the ID of the Executor(s) and written confirmation from them that the Will can be released. Alternatively, solicitors can be instructed to deal with the Estate on behalf of the Executors.

Depending on the drafting of the Will, it is worth establishing who has been appointed as Executors and whether those parties are able and willing to act in that position, which can be onerous.

Executors have three options:-

1. They can act
2. They can have their power reserved
3. They can renounce their position.

If an Executor has their power reserved, then they reserve the right to take a further Grant of Probate at a future date, but they don’t deal with the day-to-day administration nor are they named on the initial Grant.

If they renounce their position, then they completely take a step back from their responsibility as Executor and have no further liability attributed to them in respect of the Estate. Note however that if an individual has intermeddled in an Estate then they are not able to renounce their position, but they may be able to have their power reserved.

Responsibilities of the Executors

Once the Executors have been established, it is their responsibility to find out what assets and liabilities were held in the deceased name. In terms of properties, it is imperative that the Executors either obtain 3 market appraisals from 3 independent estate agents or obtain a RICS valuation (otherwise known as a red book valuation), especially if it is expected that there may be Inheritance Tax (IHT) to pay. All financial institutions must be liaised with, and date of death figures provided.

IHT Considerations

Once this information is collected, the Executors need to establish whether there is IHT payable in the Estate. There are various allowances that can be attributable to an Estate, which may reduce an IHT liability which are as follows: –

Nil-Rate Band (NRB) – Each individual has the initial allowance of £325,000. This NRB is reduced if there are any Potentially Exempt Transfers (PETS) made in the 7 years prior to the deceased’s death. A PET is a transfer of assets (either property, cash or any other asset) which becomes fully exempt from IHT on the 7-year anniversary after the gift is made. If a person dies before that 7-year timeframe, then this transfer is no longer exempt and reduces the value of the NRB, essentially meaning that tax becomes payable on the value of that gift. Please note that certain gifts that are made may be considered to be Chargeable Lifetime Transfers (CLT) which are taxable at the point the gift is made (e.g. if a property worth more than the available NRB is settled into Trust, there would be a 20% charge to IHT). Further, the value of any PETS made over the NRB may be tapered after a certain period of time, which would reduce any IHT liability.

Transferable Nil-Rate Band (TNRB) – If the deceased was a widower, and the deceased spouse or civil partner left their entire Estate (or a proportion of it) to the survivor, then the respective proportion of their NRB left over (up to 100%) can be transferred to the Estate of the survivor. In the instance that the first deceased spouse left 100% of their Estate to the second spouse with no PETS being made by either of them, then £650,000 can be available to be offset against any IHT liability, in the Estate of the second deceased spouse.

Residential Nil Rate Band (RNRB) – If a deceased person owns a property at their death, which they have lived in during their lifetime, and they leave this property to “direct descendants” then they have a further allowance available to be used in their Estate which is currently set at £175,000. The definition of direct descendants includes children, adopted children and stepchildren, and the issue and spouses of those children.

Transferable Residential Nil Rate Band (TRNRB) – As with the TNRB, the RNRB of the first deceased spouse can be transferred to the Estate of the survivor, provided it was not used on their death.

In full, the total amount of £1,000,000 could be applied against the Estate of a deceased person before IHT becomes payable, which unless there are certain gifts made to exempt parties is generally taxable at 40%.

Applying for the Grant of Probate

Once it has been established what the value of the Estate is, what allowances can be applied to an Estate and therefore whether the Estate is liable to IHT or not, it is for the Executors to either pay the IHT or make the application for the Grant of Probate.

If there is IHT to pay (or the RNRB/TRNRB needs to be applied for) then an IHT400 should be completed by the Executors and submitted to HM Revenue and Customs. The tax should be paid at the same time of applicable, and then HMRC will send a code to the Executors after 20 working days (theoretically) which will allow them to prepare the Grant of Probate. Please note that the Estate is liable for the IHT payable, but the Executors are responsible for ensuring that the correct information has been provided to HMRC and that the tax is paid.

Once the code has been received from HMRC, or there was no IHT payable, then the Executors need to make the application for the Grant of Probate. This is now usually done online (especially if there is a Will) and a “Legal Statement” is prepared for the Executors to sign. This then needs to be submitted with the original Will and various other documents being submitted to the Court. After a certain period of time the Court will then issue a formal Court Order called a Grant of Probate (otherwise known as a Grant of Representation if other circumstances apply such as the deceased dying intestate or with a Will that doesn’t appoint Executors), which is the official legal document which allows the Executors to then “call in” the Estate which essentially means collecting in the assets and settling the liabilities and then ultimately distributing the Estate in accordance with either the Will or the Rules of Intestacy.

At Wilson Browne, our Probate specialists can ease the burden of dealing with the Administration of Estates, whether that person died leaving a Will or intestate (without leaving a Will).

We cover all areas of legal advice for individuals and Commercial law, having offices in Northampton, Kettering, Corby, Higham Ferrers, Wellingborough and Leicester and can meet at a location that’s convenient to you

Contact us today or call our Probate team on 0800 088 6004.