When a person dies someone will need to deal with their estate and affairs, this person is known as the Personal Representative and the process of dealing is known as Estate Administration.
There are different rules which apply to Estate Administration. Deciding which rules will apply will depend on whether the Deceased died with a valid Will in place or if he or she died intestate (without a Will).
If a person died having made a valid Will then the Will provisions will determine how the Estate is to be divided and distributed. The Will should appoint persons to act in the Estate Administration and these people are known as the Executors.
When a person dies without having made a valid Will in life then he or she is said to have died intestate and the Intestacy Rules will therefore apply and determine how the Estate is divided and distributed. The persons responsible for the administration of the Deceased’s Estate are known as the Administrators.
When there is a Will
When someone dies having made a Will then the provisions of the Will decide who benefits and in what proportions
If you are named as an Executor of a Will then you are the person responsible to ensure the Will terms are carried out. Your responsibility is also to the Beneficiaries of the Estate.
Strictly as the Executor it is your responsibility to arrange the funeral but in practice this generally falls to the family if there is one.
Your duties as an Executor will include identifying and collecting in the Estate assets. You must ensure that they are maintained and secured throughout the administration period, your actions or omissions must not cause the Estate any loss in value, as you could be held personally liable for any such losses.
You must identify the liabilities in the estate also. Administering an Estate can be a lengthy process and you should ensure you follow the procedures carefully. Distributing an Estate too quickly to impatient Beneficiaries can leave you paying for costly mistakes.
You are responsible as an Executor for clearing the Inheritance Tax position which could necessitate you completing and submitting a tax return. Executors should take great care when completing tax returns as the Revenue can now issue penalties for incorrect and late submissions.
You may need to apply for a Grant of Probate as an Executor. A Grant of Probate is an official document issued by the Probate Registry on production of the Deceased’s Will and the Executors sworn Oath. The need for a Grant will depend upon the value of the Estate which you can ascertain once you have identified the assets and liabilities. For more information on this see Estate administration.
It is also the Executors duty to identify the Beneficiaries in the Estate. Sadly there are many reported instances where Executors have paid out to the wrong person. Requesting evidence of identification evidence and checking that a beneficiary is not an undischarged bankrupt will protect you from being held liable for the loss where funds are paid out incorrectly.
When there isn’t a Will
When a person dies without having made a Will they are said to have died intestate and the Intestacy Rules (set out in the Administration of Estates Act 1925) will govern how their Estate is divided and distributed.
The Intestacy Rules determine who the Beneficiaries are. The value of the Estate and family circumstances will play a large part in how the Rules affect the Estate. As the Rules do not recognise step-children, relatives by marriage or close friends, an intestacy can sometimes bring disappointing circumstances.
The intestacy process is more complicated. Where a Grant of Representation is required to administer the Estate and the Deceased died intestate then you will need to apply for a Grant of Letters of Administration, this is the official document issued by the Probate Registry on production of the Administrator’ sworn Oath.. The need for a Grant will depend upon the value of the Estate which you can ascertain once you have identified the assets and liabilities.
The person to whom Letters of Administration is granted is known as the Administrator. The Administrator has the legal right to deal with the death estate and who acts as the Adminstrator is determined by law which lays down a strict order of person. The Administrator will usually be a close relative of the person who has died, if there is one.
As an Executor or Administrator you are responsible for the administration of the deceased’s Estate. We understand Estate Administration can sometimes be onerous and occurring at a time when you are perhaps experiencing the loss of a loved one.
Estate Administration can involve the following tasks:-
- Identifying the Estate assets and liabilities
- Obtaining valuations for the assets and liabilities
- Preparing and submitting necessary papers for the Court to issue a Grant of Probate or Letters of Administration
- Preparing and submitting the tax forms in relation to death estates to finalise the Inheritance Tax position
- Preparing and submitting tax forms to finalise the Income Tax position on the death estate
- Encashing and collecting in Estate assets
- Discharging liabilities from Estate funds
- Identifying Beneficiaries
- Distributing estate funds to Beneficiaries
- Preparing Estate Accounts to finalise the Estate Administration
A Grant of Representation is a generic term and can refer to a Grant of Probate or the Letters of Administration. A Grant of Representation is not always needed, for example, where the Estate is a low value, less than £5,000 or the Deceased’s assets were all held jointly with someone else.
Financial organizations have different requirements and some may insist on a Grant where others may not.
A Grant of Representation will usually be required when someone dies leaving an estate valued more than £5000, stocks or shares, or a house or land.
Inheritance Tax and Death Estates
On death it is necessary to ascertain whether any Inheritance Tax is payable from the Estate.
When applying for a Grant of Representation to the Deceased’s Estate it will be necessary to submit a return to the Revenue to clear the Inheritance Tax position even where it is obvious the estate is not taxable.
It is the duty of the Personal Representative to ensure that an Inheritance Tax account is submitted to the Revenue and if applicable any Inheritance Tax is paid.
The Revenue can now impose financial penalties where they consider a Personal Representative has submitted an incorrect Inheritance Tax Return which has resulted in a late payment of tax. The Revenue will charge interest on the Inheritance Tax due where a payment is made later than 12 months of the date of death.
Income Tax and Death Estates
When a person dies they may have outstanding Income Tax liability or be entitled to a repayment. It is important to remember a person who has died may have paid tax not only on their wages or pension but on dividends on shareholdings or interest accrued on savings. The Personal Representative will need to complete the Income Tax form so the estate can claim a refund or settle any outstanding income tax liability.
Interpretation of a Will or the Intestacy Rules
As a Personal Representative you are responsible for ensuring the correct Beneficiaries receive the inheritance due. In some cases circumstances may not be straightforward, for example a Beneficiary may die before administration has been completed or they may lack mental capacity leaving you unable to distribute the inheritance funds directly. In more complex situations like these you may need help in the interpretation of the Will, Intestacy Rules or Trustee Act to ensure you distribute correctly. If you are experiencing difficulty in a situation or just require clarification of any point then we can give you straightforward advice to help you.
Dealing with the affairs of someone who has died can take a long time, in some cases up to a year or more if the matter is complex.. In most cases its not just the Solicitor dealing with paperwork but there are a number of other people and organizations involved in the process for example, banks, building societies, insurance companies and HM Revenue & Customs.
Other things that may affect the administration timescales are:
- Whether the financial affairs of the person who died were in order;
- What the person who died owned and where it is;
- Whether the person who died had an interest in a business or a farm;
- What the Will or the Rules of Intestacy say;
- Whether there are any legal disputes (claims against the estate or claims by the estate);
- Whether Inheritance Tax needs to be paid;
- Making sure that all HM Revenue & Customs files are closed and that matters relating to income tax, benefits agencies and pensions have been sorted out.
Charges can vary from matter to matter as some cases are more complex than others. It is often not possible to know immediately what may be involved and how much advice and help is needed but we would give an estimate at the outset and would keep you fully informed of the costs as the matter progresses. The cost of dealing with the estate is usually paid from the estate.
We offer a professional service, the costs for which are both realistic and transparent.
We will provide a clear and concise breakdown of the basis upon which we charge for our services at the outset of any matter.
We are able to provide a fixed fee legal service in some circumstances, please contact us for further information in this regard.
For an initial no obligation discussion regarding any matters, please do not hesitate to contact us or complete our online enquiry form.
If you would like our help in the administration of an Estate then we can handle the whole or just a specific part of the administration process. You can decide the extent to which we act.
In some cases disputes may arise with the Will and or the Administration process.
The Estate cannot be dealt with until all claims to it have been received. Individuals have six months from the date when probate was granted to make claims against the Estate.
Planning ahead will give you the opportunity to make maximum use of the tax reliefs and exemptions that may be available to you for any Inheritance Tax liability you might have.
Inheritance Tax is charged on the net value of the assets passing from one person to another on death. This net value can sometimes include gifts which the Deceased person made in life. .
Every individual has an allowance for Inheritance Tax purposes which is known as the ‘nil rate band’, this is currently fixed at £325,000. .
Any gift to a spouse, civil partner or charity is exempt from Inheritance Tax. .
Where someone dies leaving their entire Estate to their surviving spouse/civil partner then the survivor in effect also inherits the Deceased’s unused nil rate band. The result is that when the surviving spouse/civil partner dies their Estate benefits from a double nil rate band and therefore on current figures that would be a £650,000 allowance. .
The following are some of the ways in which you can act to reduce your inheritance tax liability or its effects upon your estate: .
Small gifts may not be taken into account when calculating the Inheritance Tax liability on death. Currently gifts of £3000 and under can be made and these will fall within the annual exemption. Regular gifts out of income and other one off gifts for family marriages may also be made free of the Inheritance Tax radar. .
Any gifts which you make more than seven years before you die will be exempt from Inheritance Tax. .
There are some gifts however which will not be discounted for Inheritance Tax. If you retain a benefit from a gifted asset then that asset will be included in your Estate for Inheritance Tax purposes. The simplest example of this is when you make a gift of the family home but remain in occupation of it, the value of the family home will remain inside your Estate when assessing the Inheritance Tax position on your death.
If you gift your house and continue to live in it, your Estate or the person you gave your house to might still have to pay Inheritance Tax on its value when you die. .
Reducing your Inheritance Tax bill by giving to charity
From 6 April 2012 if you leave 10 per cent or more of your net Estate to a qualifying charity your Estate may qualify to pay Inheritance Tax at a reduced rate of 36 per cent. .
There are different ways that you can own assets such as money, land or buildings and the way that you own the assets and with who affects the way they’re treated when deciding whether the reduced rate of tax can apply. .
Inheritance Tax reliefs
There are certain types of property that qualify for a full relief from Inheritance Tax or a discounted value for Inheritance Tax purposes. .
The following assets may attract the relief or discounted value: .
- business assets – such as shares in a business partnership, family company shares, land, buildings and machinery
- agricultural property – such as land, working farmhouses, farm workers’ cottages and barns
- woodland timber
- National Heritage property – or famous and important works of art (but only in very rare cases)