What is probate?
Probate is the legal process of managing a deceased’s estate (everything they own) when they die.
You need to apply for a Grant of Probate, so you are legally allowed to deal with your loved one’s finances and sell their property.
When is probate required?
If the person who has died owned property or significant assets in their sole name, then probate will be required.
Probate will also be needed if a financial institution, such as a bank, has asked for a Grant of Probate or Letters of Administration.
If you are not sure whether probate is necessary, contact the financial institutions that hold the deceased person’s assets.
When is probate not required?
There are a few situations when probate is not required:
- The deceased person owned property and financial assets in joint names. In this case property and assets will pass to the joint owner under the law of ‘survivorship’, regardless of what the deceased person wrote in their will.
- The deceased’s debts are greater than their assets, so their estate is insolvent. In this case it is probably not advisable to apply for a Grant of Probate because doing so could make you financially liable for the person’s debts. It is very important to seek legal advice.
- The deceased’s assets are held in a trust. The person may have put assets into a trust as part of tax planning which means the trustees own the assets. Similarly, if the person was the beneficiary of a trust during their lifetime assets are legally owned by the trustees.
- For pension payments. Distribution of money is normally managed by the pension company, so probate is not required. However, if the pension company did not receive instructions on how to distribute the pension from the person before they died then probate may be needed before money can be released.
How do you start the probate process?
To have the legal authority to administer a deceased person’s estate the executor of a will needs to apply to the Probate Registry for a grant of representation. If there is no will then the estate administrator needs to apply instead (see ‘What if there’s no will?’ below).
A grant of representation gives an executor or estate administrator the right to undertake financial tasks such as selling property and other assets, closing bank accounts, and distributing assets.
There are two types of grant of representation: Grant of Probate and Letters of Administration (see below).
What is a Grant of Probate?
A Grant of Probate is a grant of representation issued to an executor named in a will. It gives legal permission for an executor to manage and distribute a deceased person’s property and assets.
An executor must prove a valid will to the Probate court and swear an oath before a Grant of Probate is issued to them.
A Grant of Probate is a legal document that offers security to anyone who distributes assets to an executor or purchases assets from them. If, for example, an executor sold a deceased’s property without a Grant of Probate and the will was found to be invalid the purchaser could lose the property because the executor had no right to sell it to them.
What is the probate process?
When somebody you love dies there are many decisions to make and arrangements to manage. Here is a step-by-step guide to help you if you are the executor of a will:
1. Make immediate arrangements
- Register the person’s death and obtain a death certificate. This must be done within five days of the person dying.
- Find the will. The person who has died may have left instructions for funeral arrangements with their will. If you cannot find their will, contact the Principal Registry of the Family Division. If you still cannot locate the will our wills and probate solicitors can advise you what to do next.
- Make funeral arrangements. You can organise a funeral yourself or go through a funeral director. Check whether the person had taken out a funeral plan to pay for their funeral. Banks do not normally need a grant of representation to release money from a deceased person’s account to pay for their funeral.
- Look after the estate. Make sure the person’s assets are preserved as far as possible because you have a responsibility to the beneficiaries of the will and any creditors.
- If the deceased was the beneficiary of a trust, you need to notify trustees that they have died.
2. Value the estate
The estate must be valued before you can apply for a Grant of Probate. An estate must also be valued so Inheritance Tax (IHT) can be calculated. Debts as well as assets must be recorded.
As an executor you are legally responsible for ensuring a valuation is accurate. Mistakes can mean you are financially liable. To make sure all creditors are identified, a creditor notice (or ‘Trustee Act Notice’) could be placed in a local newspaper.
Executors must keep accurate accounts of all financial transactions throughout the probate process.
At QualitySolicitors Jordans we know that the responsibility of making sure a valuation is accurate can create stress at an already challenging time. We can identify and value assets for you or offer you advice and guidance as you need it.
3. Complete the Inheritance Tax return
An Inheritance Tax return must be filled in once an estate has been valued. Inheritance Tax is due to be paid by the end of the sixth month after the person died. If it is not paid in time, then interest starts to accrue.
IHT is 40% of the value of an estate above £325,000.
No IHT is payable for estates below £325,000. IHT is also not payable above that threshold if assets have been left to a spouse, civil partner, charity or amateur sports club.
Even if no IHT is due, an estate’s value may still need to be reported.
4. Apply for a Grant of Probate
If you are the executor of a will the next step is to apply to the Probate Registry for a Grant of Probate.
5. Pay debts and taxes
Once a Grant of Probate has been issued the deceased’s assets can be collected. All debts must be settled before assets can be distributed to will beneficiaries.
IHT must be paid and, in some circumstances, Capital Gains Tax. If a large asset or a property has increased in value between a person’s death and the sale date, then Capital Gains Tax will be due.
6. Distribute the estate
The final step is to distribute gifts and assets to beneficiaries in accordance with the will.
Who can apply for probate?
Only an executor named in a will can apply for a probate.
What is a personal representative?
A personal representative is the executor of a will who is responsible for estate administration. Where there is no will the personal representative is the estate administrator.
What if there’s no will?
When there is no will a person is said to have died ‘intestate’. When someone dies intestate their personal representative is normally a family member who will inherit the most under the rules of intestacy.
Under the rules of intestacy, a surviving spouse or civil partner receives the first £250,000 of an estate plus half of the remainder. Any children receive what is left. Unmarried partners have no right to inherit under these rules.
A personal representative needs to apply to the local Probate Registry for Letters of Administration. Just like a Grant of Probate this document gives legal permission to manage and distribute an estate including closing bank accounts and selling property and shares.
The probate process is quicker and more straightforward when there is a will. A will also ensures the right people inherit and they receive the maximum financial benefit. Planning assets ahead of time can reduce IHT and Capital Gains Tax.
Do you need probate for a small estate?
Probate is not usually needed for small estates. The problem is that each bank and financial institution has their own definition of a small estate.
Estates valued at under £5,000 are considered small, but the figure can be up to £50,000.
How long does probate take?
Probate proceedings take a year on average. With straightforward estates it can be a few months less than this. When there is no will or there is difficulty valuing an estate, the process can take longer than a year.
Are probate fees payable?
Probate court fees depend on the value of an estate. The probate application fee for an estate valued over £5,000 is £273.
How QualitySolicitors Jordans can help
If you are a personal representative our specialist probate solicitors can guide you through every step of estate administration. Whether there is a will or not, we make sure the process is as fast and straightforward as possible.
Our solicitors understand that managing a loved one’s estate is complex at an emotionally difficult time. We are here to relieve some of the stress by providing you with as much, or as little, help as you need.
We can work alongside you, offering advice when you need it. Alternatively, we can act as a professional executor by managing the entire process from start to finish.
To discuss how we can help, please contact us today on 01909 212103.